Global Sources LTD /bermuda 6-K Global Sources, Form 6-K

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
	March 31			December 31
	2005			2004
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	86,841		$	41,195
Available-for-sale securities		11,727			10,172
Accounts receivable, net		4,639			5,147
Receivables from sales representatives		6,290			3,407
Inventory of paper		804			750
Prepaid expenses and other current assets		4,401			2,926
Total Current Assets		114,702			63,597
Property and equipment, net		24,660			24,902
Long term investments		100			100
Bonds held to maturity, at amortized cost		675			666
Other assets		3,385			3,260
Total Assets	$	143,522		$	92,525
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	5,347		$	4,798
Deferred income and customer prepayments		35,583			28,775
Accrued liabilities		7,681			5,921
Income taxes payable		471			384
Total Current Liabilities		49,082			39,878
Liabilities for incentive and bonus plans		467			467
Deferred income and customer prepayments – long term		2,175			1,420
Minority interest		4,992			4,910
Deferred tax liability		292			327
Total Liabilities		57,008			47,002
Shareholders’ equity:
Common shares, US$0.01 par value; 50,000,000 shares authorized; 34,853,435 (2004: 31,847,935) shares issued and outstanding		349			319
Additional paid in capital		128,334			86,373
Retained deficit		(32,577	)		(34,577	)
Less: Unearned compensation		(9,871	)		(6,831	)
Accumulated other comprehensive income		279			239
Total Shareholders’ Equity		86,514			45,523
Total Liabilities and Shareholders’ Equity	$	143,522		$	92,525

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 March 31
	2005			2004
	(Unaudited)			(Unaudited)
Revenue:
Online and other media services (Note 1)	$	22,636		$	22,024
Exhibitions		—			1,509
Miscellaneous		131			129
		22,767			23,662
Operating Expenses:
Sales		7,716			7,504
Event production		—			180
Community		3,741			3,392
General and administrative		7,531			7,181
Online services development		984			1,072
Non-cash compensation expense (Note 2)		529			833
Amortization of software cost		296			369
Total Operating Expenses		20,797			20,531
Income from Operations		1,970			3,131
Interest income		51			36
Gain on sale of available-for-sale securities		39			—
Foreign exchange gains (losses), net		144			52
Income before Income Taxes		2,204			3,219
Income Tax Provision		(122	)		(194	)
Net Income before Minority Interest	$	2,082		$	3,025
Minority interest	$	(82	)	$	(397	)
Net Income	$	2,000		$	2,628
Retained deficit brought forward	$	(34,577	)	$	(50,346	)
Retained deficit carried forward		(32,577	)		(47,718	)
Basic net income per share	$	0.06		$	0.08
Shares used in basic net income per share calculations		32,116,557			31,844,012
Diluted net income per share	$	0.06		$	0.08
Shares used in diluted net income per share calculations		32,257,895			31,950,169

Note : 1. Online and other media services consists of:

	Three months ended March 31
	2005		2004
	(Unaudited)		(Unaudited)
Online services	$	13,093	$	12,906
Print services		9,543		9,118
	$	22,636	$	22,024

Note : 2. 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 March 31
	2005		2004
	(Unaudited)		(Unaudited)
Sales	$	148	$	261
Community		29		31
General and administrative		255		463
Online services development		97		78
	$	529	$	833

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

	Three months ended March 31
	2005			2004
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	$	2,000		$	2,628
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		858			993
Accretion of U.S. Treasury strips zero % coupons		(9	)		(16	)
Gain on sale of available-for-sale securities		(39	)		—
Interest income on available-for-sale securities		(2	)		—
Bad debt expense		—			21
Non-cash compensation expense		529			833
Income attributable to minority shareholder		82			397
		3,419			4,856
Changes in assets and liabilities:
Accounts receivables		508			626
Receivables from sales representatives		(2,883	)		333
Inventory of paper		(54	)		(44	)
Prepaid expenses and other current assets		(1,475	)		(1,562	)
Long term assets		(125	)		(1,708	)
Accounts payable		549			(283	)
Accrued liabilities and liabilities for incentive and bonus plans		1,760			(580	)
Deferred income and customer prepayments		7,563			737
Tax liability		52			111
Net cash provided by operating activities		9,314			2,486
Cash flows from investing activities:
Purchase of property and equipment		(616	)		(292	)
Net purchase of available-for-sale securities		(1,474	)		(16,448	)
Net cash used for investing activities		(2,090	)		(16,740	)
Cash flows from financing activities:
Proceeds from the issue of common shares, net of share issue expenses		38,304			—
Amount received towards directors purchase plan		118			92
Net cash generated from financing activities		38,422			92
Net increase (decrease) in cash and cash equivalents		45,646			(14,162	)
Cash and cash equivalents, beginning of the period		41,195			26,227
Cash and cash equivalents, end of the period	$	86,841		$	12,065
Supplemental cash flow disclosures:
Income tax paid	$	70		$	83