CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.
Unaudited Pro Forma Financial Information
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(Currency expressed in United States Dollars (“US$”))
(UNAUDITED)
The unaudited Pro Forma Condensed, Combined Statements of Operations for the three months ended March 31, 2008 gives effect to the acquisition of Shenzhen PengSangPu Solar Industrial Products Corporation (“Target”) by China Solar & Clean Energy Solutions, Inc. (“Registrant”). The transaction was valued at fair value. The unaudited Pro Forma Condensed, Combined Statements of Operations was taken from the respective financial statements of Target and Registrant for the three months ended March 31, 2008. The unaudited Pro Forma Condensed, Combined Statements of Operations was prepared assuming that the acquisition described above was consummated as of the beginning of the year presented.
The unaudited Pro Forma Condensed, Combined Statements of Operations are based upon historical financial statements of Target and Registrant. The pro forma adjustments and the resulting unaudited Pro Forma Condensed, Combined Statements of Operations have been prepared based upon available information and certain assumptions and estimates deemed appropriate by the Registrant.
The unaudited Pro Forma Condensed, Combined Statements of Operations are not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of the date indicated, or that may be achieved in the future. Furthermore, the unaudited Pro Forma Condensed, Combined Statements of Operations do not reflect changes that may occur as the result of post-combination activities and other matters.
The unaudited Pro Forma Condensed, Combined Statements of Operations and notes thereto should be read in conjunction with the accompanying unaudited financial statements of Target and Registrant.
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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(Currency expressed in United States Dollars (“US$”))
(UNAUDITED)
Registrant (Historical) | Target (Historical) | Pro forma adjustments Increase (Decrease) | Pro forma combined | |||||||||||||
Revenue, net | $ | 8,300,076 | $ | 393,920 | $ | 8,693,996 | ||||||||||
Cost of revenue | 5,845,016 | 218,350 | 6,063,366 | |||||||||||||
Gross profit | 2,455,060 | 175,570 | 2,630,630 | |||||||||||||
Operating expenses: | ||||||||||||||||
Depreciation and amortization | 149,167 | 44,673 | 193,840 | |||||||||||||
Selling and distribution | 502,563 | - | 502,563 | |||||||||||||
General and administrative | 601,653 | 39,681 | 641,334 | |||||||||||||
Total operating expenses | 1,253,383 | 84,354 | 1,337,737 | |||||||||||||
Income from operations | 1,201,677 | 91,216 | 1,292,893 | |||||||||||||
Other income (expenses): | ||||||||||||||||
Other income | 41,090 | - | 41,090 | |||||||||||||
Interest expense | (33,838 | ) | (43,087 | ) | (76,925 | ) | ||||||||||
Total other income (expenses) | 7,252 | (43,087 | ) | (35,835 | ) | |||||||||||
Income before income taxes | 1,208,929 | 48,129 | 1,257,058 | |||||||||||||
Income tax expense | 346,263 | 323 | 346,586 | |||||||||||||
Income before minority interest | 862,666 | 47,806 | 910,472 | |||||||||||||
Minority interests | 473,015 | - | 473,015 | |||||||||||||
NET INCOME | $ | 389,651 | $ | 47,806 | $ | 437,457 | ||||||||||
Basic income per common share | $ | 0.05 | $ | 0.05 | ||||||||||||
Diluted income per common share | $ | 0.03 | $ | 0.03 | ||||||||||||
Basic common shares | 8,009,713 | 9,571,415 | ||||||||||||||
Diluted common shares | 15,284,770 | 15,675,195 |
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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2007
(Currency expressed in United States Dollars (“US$”))
(UNAUDITED)
The unaudited Pro Forma Condensed, Combined Statements of Operations for the year ended December 31, 2007 gives effect to the acquisition of Shenzhen PengSangPu Solar Industrial Products Corporation (“Target”) by China Solar & Clean Energy Solutions, Inc. (“Registrant”). The transaction was valued at fair value. The unaudited Pro Forma Condensed, Combined Statements of Operations was taken from the respective financial statements of Target and Registrant for the year ended December 31, 2007. The unaudited Pro Forma Condensed, Combined Statements of Operations was prepared assuming that the acquisition described above was consummated as of the beginning of the year presented. The unaudited Pro Forma Condensed, Combined Statements of Operations are based upon historical financial statements of Target and Registrant. The pro forma adjustments and the resulting unaudited Pro Forma Condensed, Combined Statements of Operations have been prepared based upon available information and certain assumptions and estimates deemed appropriate by the Registrant.
The unaudited Pro Forma Condensed, Combined Statements of Operations are not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of the date indicated, or that may be achieved in the future. Furthermore, the unaudited Pro Forma Condensed, Combined Statements of Operations do not reflect changes that may occur as the result of post-combination activities and other matters.
The unaudited Pro Forma Condensed, Combined Statements of Operations and notes thereto should be read in conjunction with the accompanying audited financial statements of Target and Registrant.
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PRO FORMA CONDENSED, COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2007
(Currency expressed in United States Dollars (“US$”))
(UNAUDITED)
Registrant (Historical) | Target (Historical) | Pro forma adjustments Increase (Decrease) | Pro forma combined | |||||||||||||
Revenue, net | $ | 37,072,346 | $ | 3,215,282 | $ | 40,287,628 | ||||||||||
Cost of revenue | 28,772,078 | 1,848,703 | 30,620,781 | |||||||||||||
Gross profit | 8,300,268 | 1,366,579 | 9,666,847 | |||||||||||||
Operating expenses: | ||||||||||||||||
Depreciation and amortization | 282,822 | 132,457 | 415,279 | |||||||||||||
Selling and distribution | 827,839 | - | 827,839 | |||||||||||||
General and administrative | 4,003,973 | 131,673 | 4,135,646 | |||||||||||||
Total operating expenses | 5,114,634 | 264,130 | 5,378,764 | |||||||||||||
Income from operations | 3,185,634 | 1,102,449 | 4,288,083 | |||||||||||||
Other income (expense): | ||||||||||||||||
Other income | 220,057 | 3,982 | 224,039 | |||||||||||||
Interest expense | (65,481 | ) | (73,274 | ) | (138,755 | ) | ||||||||||
Total other income (expense) | 154,576 | (69,292 | ) | 85,284 | ||||||||||||
Income before income taxes | 3,340,210 | 1,033,157 | 4,373,367 | |||||||||||||
Income tax expense | (615,325 | ) | - | (615,325 | ) | |||||||||||
Minority interests | (199,744 | ) | - | (199,744 | ) | |||||||||||
NET INCOME | $ | 2,525,141 | $ | 1,033,157 | $ | 3,558,298 | ||||||||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | 2,525,141 | $ | 1,033,157 | ||||||||||||
Basic income per common share | $ | 0.25 | $ | 0.46 | ||||||||||||
Diluted income per common share | $ | 0.23 | $ | 0.29 | ||||||||||||
Basic common shares | 6,205,290 | 7,766,992 | ||||||||||||||
Diluted common shares | 10,783,026 | 12,344,728 |
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PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF MARCH 31, 2008
(Currency expressed in United States Dollars (“US$”))
The unaudited Pro Forma Condensed, Combined Balance Sheet as of March 31, 2008 gives effect to the acquisition of Shenzhen PengSangPu Solar Industrial Products Corporation (“Target”) by China Solar & Clean Energy Solutions, Inc. (“Registrant”). The transaction was valued at fair value. The unaudited Pro Forma Condensed, Combined Balance Sheet was taken from the respective financial statements of Target and Registrant as of March 31, 2008. The unaudited Pro Forma Condensed, Combined Balance Sheet was prepared assuming that the acquisition described above was consummated as of the balance sheet date.
The unaudited Pro Forma Condensed, Combined Balance Sheet is based upon historical financial statements of Target and Registrant. The pro forma adjustments and the resulting unaudited Pro Forma Condensed, Combined Balance Sheet has been prepared based upon available information and certain assumptions and estimates deemed appropriate by the Registrant.
The unaudited Pro Forma Condensed, Combined Balance Sheet is not necessarily indicative of the financial position that actually would have been achieved had the acquisition been consummated as of the date indicated, or that may be achieved in the future. Furthermore, the unaudited Pro Forma Condensed, Combined Balance Sheet does not reflect changes that may occur as the result of post-combination activities and other matters.
The unaudited Pro Forma Condensed, Combined Balance Sheet and notes thereto should be read in conjunction with the accompanying unaudited financial statements of Target and Registrant.
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PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF MARCH 31, 2008
(Currency expressed in United States Dollars (“US$”))
Registrant (Historical) | Target (Historical) | Pro forma adjustments Increase (Decrease) | Pro forma adjustments Increase (Decrease) | Pro forma combined | ||||||||||||||
ASSETS | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 10,733,793 | $ | 87,316 | A | (2,087,832 | ) | $ | 8,733,277 | |||||||||
Restricted cash | - | 84,304 | 84,304 | |||||||||||||||
Accounts receivable, net | 7,116,825 | 510,269 | 7,627,094 | |||||||||||||||
Inventories | 4,065,773 | 325,429 | 4,391,202 | |||||||||||||||
Lease receivable, current | - | 143,317 | 143,317 | |||||||||||||||
Other receivables and prepayments | 4,959,380 | 217,606 | A | (2,000,000 | ) | 3,176,986 | ||||||||||||
Investment cost | - | - | A | 7,019,483 | B | (7,019,483 | ) | - | ||||||||||
Total current assets | 26,875,771 | 1,368,241 | 24,156,180 | |||||||||||||||
Non-current assets: | ||||||||||||||||||
Goodwill | 1,789,324 | - | B | 5,408,455 | 7,197,779 | |||||||||||||
Intangible assets, net | 1,651,885 | - | 1,651,885 | |||||||||||||||
Net investment in sales-type leases, non-current | - | 823,489 | 823,489 | |||||||||||||||
Property, plant and equipment, net | 9,401,021 | 1,275,287 | 10,676,308 | |||||||||||||||
TOTAL ASSETS | $ | 39,718,001 | $ | 3,467,017 | $ | 44,505,641 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Short-term borrowings | $ | - | $ | 710,668 | $ | 710,668 | ||||||||||||
Accounts payable, trade | 1,254,717 | 908,124 | 2,162,841 | |||||||||||||||
Deferred Revenue | - | 25,903 | 25,903 | |||||||||||||||
Income tax payable | 1,411,384 | - | 1,411,384 | |||||||||||||||
Other payables and accrued liabilities | 6,906,468 | 211,294 | 7,117,762 | |||||||||||||||
Total current liabilities | 9,572,569 | 1,855,989 | 11,428,558 | |||||||||||||||
Long-term liabilities: | ||||||||||||||||||
Deferred tax liabilities | 259,612 | - | 259,612 | |||||||||||||||
Minority interests | 1,454,872 | - | 1,454,872 | |||||||||||||||
Stockholders’ equity: | ||||||||||||||||||
Preferred stock | 1,609 | - | 1,609 | |||||||||||||||
Common stock | 11,136 | 1,598,979 | A | 1,562 | B | (1,598,979 | ) | 12,698 | ||||||||||
Additional paid-in capital | 19,358,497 | - | A | 2,930,089 | 22,288,586 | |||||||||||||
Statutory reserve | - | 74,508 | B | (74,508 | ) | - | ||||||||||||
Accumulated other comprehensive income | 1,140,936 | 276,506 | B | (276,506 | ) | 1,140,936 | ||||||||||||
Distribution to owners | - | (1,190,756 | ) | B | 1,190,756 | - | ||||||||||||
Retained earnings | 7,918,770 | 851,791 | B | (851,791 | ) | 7,918,770 | ||||||||||||
Total stockholders’ equity | 28,430,948 | 1,611,028 | 31,362,599 | |||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 39,718,001 | $ | 3,467,017 | $ | 44,505,641 |
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Notes to Unaudited Pro Forma Combined Financial Statements
Note A Adjustment to reflect the differences between fair values and carrying values of the Target’s assets. The allocation of the excess of the purchase price over the related net assets was determined as follows:
Cash | $ | $4,087,832 | ||
Fair value of 1,419,729 common stock | 2,839,458 | |||
Fair value of 141,973 warrants | 92,193 | |||
Total purchase price | $ | 7,019,483 | ||
Net assets acquired | $ | 1,611,028 | ||
Purchase price: | $ | 7,019,483 | ||
Goodwill in the acquisition of Shenzhen Pengsangpu | $ | 5,408,455 |
Please note that the purchase price allocation is preliminary as the Registrant is awaiting additional information to determine the values to be assigned. The Registrant hired a valuation specialist to value the assets acquired as part of the acquisition of Target. The valuation specialist, engaged to value the assets acquired from the Target in the acquisition, has not yet completed her work. In the absence of a final valuation, management has made a preliminary allocation of the excess of the purchase price over Target’s net assets to goodwill. However, it is possible that the final valuation will include amounts allocated to limited-life intangibles (including related amortization expense) and/or unlimited-life intangibles. As a result, the allocation of $5,408,455 to goodwill in the accompanying pro forma financial information is preliminary and subject to change.
Note B Adjustment to eliminate intercompany investment and equity accounts of Target at the date of business combination.
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