Global Sources LTD /bermuda 6-K Global Sources LTD

EXHIBIT 2

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

			At			At
			September 30			December 31
			2003			2002
			(Unaudited)
ASSETS
Current Assets:
	Cash and cash equivalents		$	54,156		$	37,208
	Accounts receivable, net			4,525			4,169
	Receivables from sales representatives			4,065			2,932
	Inventory of paper			524			545
	Prepaid expenses and other current assets			1,708			1,147
		Total Current Assets		64,978			46,001
Property and equipment, net				8,916			14,110
Long term investments				100			100
Bonds held to maturity, at amortized cost				1,230			1,358
Other assets				1,032			1,081
		Total Assets	$	76,256		$	62,650
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable		$	3,248		$	4,284
	Deferred income and customer prepayments			25,881			18,259
	Accrued liabilities			5,696			5,361
	Income taxes payable			696			368
		Total Current Liabilities		35,521			28,272
Liabilities for incentive and bonus plans				912			1,025
Amount due to parent company				11,404			11,404
Minority interest				3,291			2,823
Deferred tax liability				213			604
		Total Liabilities		51,341			44,128
Shareholders’ equity:
	Ordinary shares, US$0.01 par value; 50,000,000 shares authorized; 26,313,949 (2002: 26,308,949) shares issued and outstanding			263			263
	Additional paid in capital			82,163			80,486
	Retained deficit			(52,531	)		(57,680	)
	Less : Unearned compensation			(4,980	)		(4,547	)
		Total shareholders’ equity		24,915			18,522
		Total liabilities and shareholders’ equity	$	76,256		$	62,650

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

			Three months ended						Nine months ended
			September 30						September 30
			2003			2002			2003			2002
			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues:
	Online services		$	13,277		$	13,010		$	38,300		$	38,661
	Other media services			9,565			9,119			27,221			26,144
	Miscellaneous			152			157			509			477
				22,994			22,286			66,030			65,282
Operating Expenses:
		Sales		7,727			7,572			22,155			22,233
		Community		2,898			3,072			8,681			9,364
		General and administrative		7,041			7,270			21,264			21,382
		Online services development		1,256			1,400			3,887			4,085
		Non-cash compensation expense (Note 1)		421			651			1,213			1,999
		Amortization of intangibles/Software development cost		1,484			983			3,533			2,715
Total Operating Expenses				20,827			20,948			60,733			61,778
Income from Operations				2,167			1,338			5,297			3,504
		Interest income		104			134			545			230
		Foreign exchange gains (losses), net		111			(229	)		101			57
Income before Income Taxes				2,382			1,243			5,943			3,791
Income Tax Provision				(114	)		(120	)		(325	)		(597	)
Net Income before minority interest			$	2,268		$	1,123		$	5,618		$	3,194
Minority interest			$	(187	)	$	(81	)	$	(469	)	$	(168	)
Net Income			$	2,081		$	1,042		$	5,149		$	3,026
Retained deficit brought forward				—			—			(57,680	)		(61,987	)
Retained deficit carried forward				—			—			(52,531	)		(58,961	)
Basic net income per share			$	0.08		$	0.04		$	0.20		$	0.12
Shares used in basic net income per share calculations				26,313,949			26,308,949			26,312,887			26,307,887
Diluted net income per share			$	0.08		$	0.04		$	0.20		$	0.12
Shares used in diluted net income per share calculations				26,367,231			26,308,949			26,337,460			26,309,672

Note: 1. Reflects the non-cash compensation expenses associated with the employee equity compensation plans. Non-cash compensation represents the following categories of expenses:

	Three months ended				Nine months ended
	September 30				September 30
	2003		2002		2003		2002
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Sales	$	135	$	115	$	284	$	394
Community		52		61		78		217
General and administrative		159		358		608		961
Online services development		75		117		243		427
	$	421	$	651	$	1,213	$	1,999

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

			Nine months ended September 30
			2003			2002
			(Unaudited)			(Unaudited)
Cash flows from operating activities:
	Net income		$	5,149		$	3,026
Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation and amortization			6,852			6,695
	Profit on sale of property and equipment			(6	)		—
	Accretion of U.S. Treasury strips zero % coupons			(57	)		(77	)
	Bad debt expense			184			587
	Non-cash compensation expense			1,213			1,999
	Income attributable to minority shareholder			469			168
	Property and equipment written off			10			152
				13,814			12,550
	Changes in assets and liabilities:
	Accounts receivables			(540	)		1,214
	Receivables from sales representatives			(1,133	)		(2,532	)
	Receivables from related party sales representatives			—			2,900
	Inventory of paper			21			331
	Prepaid expenses and other current assets			(561	)		(93	)
	Long term assets			49			48
	Accounts payable			(1,036	)		(715	)
	Accrued liabilities and liabilities for incentive and bonus plans			222			(210	)
	Deferred income and customer prepayments			7,622			1,614
	Tax liability			(63	)		276
		Net cash provided by operating activities		18,395			15,383
Cash flows from investing activities:
	Purchase of property and equipment			(1,670	)		(3,123	)
	Proceeds from sale of property and equipment			8			—
	Proceeds from matured bonds			185			160
		Net cash used for investing activities		(1,477	)		(2,963	)
Cash flows from financing activities:
	Amount received towards directors stock option plan			30			50
		Net cash generated from financing activities		30			50
Net increase in cash and cash equivalents				16,948			12,470
Cash and cash equivalents, beginning of the period				37,208			20,236
Cash and cash equivalents, end of the period				54,156			32,706
Supplemental cash flow disclosures:
	Income tax paid		$	388		$	321
	Interest paid			—			—