Exhibit 99.2
Unaudited pro forma combined balance sheet for SmartHeat and Mid-Haven for fiscal year ended December 31, 2017 and income statements for SmartHeat and Mid-Haven for the fiscal years ended December 31, 2017 and 2018, together with footnotes thereto
SMARTHEAT, INC.
AND MID-HEAVEN SINCERITY INTERNATIONAL RESOURCES INVESTMENT CO., LTD (OR "MID-HEAVEN BVI")
Unaudited Pro forma Combined Balance Sheet
As of December 31, 2017
(1) SMARTHEAT | (2) MID-HEAVEN BVI | Pro forma Adjustments | Pro forma Combined | |||||||||||||||
ASSETS | (historical) | (historical) | ||||||||||||||||
CURRENT ASSETS | ||||||||||||||||||
Cash & equivalents | $ | 374,827 | $ | - | $ | 374,827 | ||||||||||||
Notes Receivable | 9,182 | 50,504 | 59,686 | |||||||||||||||
Accounts receivable | 20,440 | 524,932 | 545,372 | |||||||||||||||
Other receivable | 96,321 | - | 96,321 | |||||||||||||||
Advance to suppliers | 30,920 | 125,744 | 156,664 | |||||||||||||||
Advance to related party | - | 2,350,061 | 2,350,061 | |||||||||||||||
Inventory | 301,187 | 134,505 | 435,692 | |||||||||||||||
Taxes receivable | 30,553 | - | 30,553 | |||||||||||||||
Total current assets | 863,430 | 3,185,746 | 4,049,176 | |||||||||||||||
NONCURRENT ASSETS | ||||||||||||||||||
Property and equipment, net | 15,639 | 2,148,830 | 2,164,469 | |||||||||||||||
Construction in progress | - | 1,746,572 | 1,746,572 | |||||||||||||||
Total noncurrent assets | 15,639 | 3,895,402 | 3,911,041 | |||||||||||||||
TOTAL ASSETS | $ | 879,069 | $ | 7,081,148 | $ | 7,960,217 | ||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||||
Accounts payable | $ | 705,302 | $ | 1,432,072 | $ | 2,137,374 | ||||||||||||
Unearned revenue | - | 381,160 | 381,160 | |||||||||||||||
Accrued liabilities and other payables | 8,477,739 | 458,196 | 8,935,935 | |||||||||||||||
Advance from shareholder | 1,253,171 | - | 1,253,171 | |||||||||||||||
Tax payable | 8,645 | 84,261 | 92,906 | |||||||||||||||
Total current liabilities | 10,444,857 | 2,355,689 | 12,800,546 | |||||||||||||||
NONCURRENT LIABILITIES | ||||||||||||||||||
Credit line payable | 2,875,335 | - | 2,875,335 | |||||||||||||||
Deferred income | - | 1,774,510 | 1,774,510 | |||||||||||||||
Total noncurrent liabilities | 2,875,335 | 1,774,510 | 4,649,845 | |||||||||||||||
Total liabilities | 13,320,192 | 4,130,199 | 17,450,391 | |||||||||||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||||
Common stock | 8,683 | - | 106,002 | (A)(B) | 114,685 | |||||||||||||
Paid in capital | 91,630,855 | 1,452,348 | (104,967,345 | ) | (A)(B) | (11,884,142 | ) | |||||||||||
Statutory reserves | 780,682 | - | 780,682 | |||||||||||||||
Accumulated other comprehensive income | 14,817,636 | 146,579 | (14,817,636 | ) | 146,579 | |||||||||||||
Retained earnings | (119,678,979 | ) | 1,352,022 | 119,678,979 | (B) | 1,352,022 | ||||||||||||
Total stockholders' equity (deficit) | (12,441,123 | ) |
| 2,950,949 | (9,490,174 | ) | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 879,069 | $ | 7,081,148 | $ | 7,960,217 |
(1) Source: audited consolidated financial statements of SmartHeat, Inc. as of December 31, 2017, filed with the SEC on November 30, 2018. | ||||||
(2) Source: audited consolidated financial statements of Mid-Heaven BVI and subsidiaries as of December 31, 2017, as filed in this Form 8-K/A filed with the SEC. | ||||||
(A) | Reflection of the issuance of 106,001,971 shares to the shareholders of Mid-heaven BVI, | |||||
resulting in 114,685,370 total shares outstanding of SmartHeat after the reverse merger at December 31, 2017. | ||||||
(B) | Elimination of SmartHeat capital accounts and accumulated deficit as result of recapitalization. |
See accompanying notes to pro forma combined financial statements
SMARTHEAT, INC.
AND MID-HEAVEN SINCERITY INTERNATIONAL RESOURCES INVESTMENT CO., LTD (OR "MID-HEAVEN BVI")
Unaudited Pro forma Combined Statement of Operations
For the Year Ended December 31, 2018
(1) SMARTHEAT | (2) MID-HEAVEN BVI | Pro forma Adjustments | Pro forma Combined | |||||||||||||
(historical) | (historical) | |||||||||||||||
Net sales | $ | 19,189 | $ | 6,029,147 | $ | 6,048,336 | ||||||||||
Cost of sales | 39,223 | 5,147,641 | 5,186,864 | |||||||||||||
Gross profit (loss) | (20,034 | ) | 881,506 | 861,472 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling expense | 76,823 | 294,892 | 371,715 | |||||||||||||
General and administrative | 599,978 | 254,865 | 854,843 | |||||||||||||
Provision for bad debts | (182,649 | ) | -- | (182,649 | ) | |||||||||||
Total operating expenses | 494,152 | 549,757 | 1,043,909 | |||||||||||||
Income (loss) from operations | (514,186 | ) | 331,749 | (182,437 | ) | |||||||||||
Non-operating income (expenses) | ||||||||||||||||
Interest income | 1,528 | -- | 1,528 | |||||||||||||
Financial expense | (287,168 | ) | (8,183 | ) | (295,351 | ) | ||||||||||
Other income | 303,442 | -- | 303,442 | |||||||||||||
Gain on note conversion | 4,619,138 | -- | 4,619,138 | |||||||||||||
Subsidy income | -- | 237,252 | 237,252 | |||||||||||||
Total non-operating income, net | 4,636,940 | 229,069 | 4,866,009 | |||||||||||||
Income before income tax | 4,122,754 | 560,818 | 4,683,572 | |||||||||||||
Income tax expense | -- | 84,123 | 84,123 | |||||||||||||
Less: loss attributable to noncontrolling interest | 78,192 | -- | 78,192 | |||||||||||||
Net income | $ | 4,044,562 | $ | 476,695 | $ | 4,521,257 | ||||||||||
Earnings per share | $ | 0.41 | $ | 0.00 | $ | 0.04 | ||||||||||
Weighted average shares outstanding | 9,855,174 | 106,001,971 | 115,857,145 |
(1) Source: audited consolidated financial statements of SmartHeat, Inc. for the year ended December 31, 2018, to be included in Form 10-K to be filed with the SEC. |
(2) Source: audited consolidated financial statements of Mid-Heaven BVI and subsidiaries for the year ended December 31, 2018, as filed in this Form 8-K/A filed with the SEC. |
See accompanying notes to pro forma combined financial statements
SMARTHEAT, INC.
AND MID-HEAVEN SINCERITY INTERNATIONAL RESOURCES INVESTMENT CO., LTD (OR "MID-HEAVEN BVI")
Unaudited Pro forma Combined Statement of Operations
For the Year Ended December 31, 2017
(1) SMARTHEAT | (2) MID-HEAVEN BVI | Pro forma Adjustments | Pro forma Combined | |||||||||||||
(historical) | (historical) | |||||||||||||||
Net sales | $ | 772,158 | $ | 7,265,955 | $ | 8,038,113 | ||||||||||
Cost of sales | 606,000 | 6,096,248 | 6,702,248 | |||||||||||||
Gross profit | 166,158 | 1,169,707 | 1,335,865 | |||||||||||||
Operating expenses | ||||||||||||||||
Selling expense | 121,437 | 206,290 | 327,727 | |||||||||||||
General and administrative | 1,200,971 | 363,189 | 1,564,160 | |||||||||||||
Provision for bad debts | 1,300,848 | -- | 1,300,848 | |||||||||||||
Total operating expenses | 2,623,256 | 569,479 | 3,192,735 | |||||||||||||
Income (loss) from operations | (2,457,098 | ) | 600,228 | (1,856,870 | ) | |||||||||||
Non-operating income (expenses) | ||||||||||||||||
Interest income | 2,944 | -- | 2,944 | |||||||||||||
Interest expense | (429,007 | ) | -- | (429,007 | ) | |||||||||||
Financial expense | (11,835 | ) | (24,741 | ) | (36,576 | ) | ||||||||||
Other income | 33,421 | -- | 33,421 | |||||||||||||
Subsidy income | -- | 39,989 | 39,989 | |||||||||||||
Total non-operating income (expenses), net | (404,477 | ) | 15,248 | (389,229 | ) | |||||||||||
Income (loss) before income tax | (2,861,575 | ) | 615,476 | (2,246,099 | ) | |||||||||||
Income tax expense | -- | 92,321 | 92,321 | |||||||||||||
Income (loss) from continuing operations | (2,861,575 | ) | 523,155 | (2,338,420 | ) | |||||||||||
Loss from operations of discontinued entities, net of tax | (71,361 | ) | -- | (71,361 | ) | |||||||||||
Total loss including noncontrolling interest | (2,932,936 | ) | 523,155 | (2,409,781 | ) | |||||||||||
Less: loss attributable to noncontrolling interest from continuing operations | (22,655 | ) | -- | (22,655 | ) | |||||||||||
Less: loss attributable to noncontrolling interest from discontinued operations, net of tax | (856 | ) | -- | (856 | ) | |||||||||||
Net income (loss) | $ | (2,909,425 | ) | $ | 523,155 | $ | (2,386,270 | ) | ||||||||
Earnings per share | $ | (0.34 | ) | $ | 0.00 | $ | (0.02 | ) | ||||||||
Weighted average shares outstanding | 8,504,769 | 106,001,971 | 114,506,740 |
(1) Source: audited consolidated financial statements of SmartHeat, Inc. for the year December 31, 2017, filed with the SEC on November 30, 2018. | ||
(2) Source: audited consolidated financial statements of Mid-Heaven BVI and subsidiaries for the year ended December 31, 2017, as filed in this Form 8-K/A filed with the SEC. |
See accompanying notes to pro forma combined financial statements
SmartHeat, Inc. and
Mid-Heaven Sincerity International Resources Investment Co., Ltd
Notes to Pro forma Combined Financial Statements
NOTE 1 - BASIS OF PRESENTATION
On December 31, 2018 (the "Closing Date"), the Company entered into a Share Exchange Agreement and Plan of Reorganization with Mid-Heaven Sincerity International Resources Investment Co., Ltd (“Mid-heaven BVI”) and its shareholders Mao Zhang, Jian Zhang, and Ying Zhao, constituting all of the shareholders of Mid-heaven BVI (the “Mid-heaven Shareholders”).
Pursuant to the terms of the Agreement, the shareholders of Mid-heaven BVI delivered all of the issued and outstanding shares of capital stock of Mid-heaven BVI to SmartHeat, in exchange for the issuance of 106,001,971 shares of SmartHeat’s Common Stock. Mid-heaven, through two subsidiaries, owns 100% of Qing Hai Mid-Heaven Boron & Lithium Technology Company, Ltd. (“Qinghai Technology”). The Acquisition was structured as a tax-free reorganization.
As a result of the share exchange agreement, Mid-heaven BVI’s shareholders own approximately 57% of the combined company. For accounting purposes, the transaction was accounted for as a reverse acquisition of the Company by Mid-heaven BVI. Mid-heaven BVI’s shareholders own the majority of SmartHeat’s shares and will exercise significant influence over the operating and financial policies of the combined entities, The accompanying unaudited pro forma combined results of operations for the Company and Mid-heaven BVI for the years ended December 31, 2018 and 2017 presents the Company and Mid-heaven BVI’s operations as if the acquisitions occurred on January 1, 2018 and 2017, respectively. The accompanying unaudited pro forma combined balance sheet presents the accounts of the Company and Mid-heaven BVI as if the acquisition occurred on December 31, 2017. The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisitions been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.
The following adjustments would be required if the acquisition occurred as indicated above:
a. | Reflection of the issuance of 106,001,971 shares to the shareholders of Mid-heaven BVI, resulting in 114,685,370 total shares outstanding of SmartHeat after the reverse merger at December 31, 2017. |
b. | Elimination of SmartHeat’s capital accounts and accumulated deficit as result of recapitalization. |