EXHIBIT 99.1
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following unaudited pro forma financial information assumes the divestiture
of Panyu No.6 Construction Company Limited in accordance with the definitive
agreements signed on April 16, 2004 by the subsidiary of the Company and the
Vendor. The following unaudited pro forma balance sheet as of March 31, 2004 is
based on the historical financial statements of the Company as of March 31, 2004
after giving effect to the divestiture transaction as if it had occurred on
March 31, 2004. The following unaudited pro forma statements of income for the
six months ended March 31, 2004 and the fiscal year ended September 30, 2003 are
based on the historical financial statements of the Company for such periods
after giving effect to the divestiture transaction as if it had occurred on
October 1, 2003. You should read the information presented below in conjunction
with the financial statements and the notes to the financial statements of the
Company included in the Company's quarterly report on Form 10-QSB for the six
months ended March 31 2004 and the Company's annual report on the Form 10-KSB
for the year ended September 30, 2003. The unaudited pro forma information below
helps to illustrate the financial characteristics of the divestiture under one
set of assumptions, but does not attempt to predict or suggest future results.
Moreover, the unaudited pro forma financial information does not attempt to show
what the financial condition or results of operations of the Company would have
been if the divestiture transaction had occurred at March 31, 2004 or at the
commencement of the period indicated below.
Unaudited pro forma condensed consolidated statements of operations for the year
ended September 30, 2003 and six months ended March 31, 2004 are as follows:
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Year Ended September 30, 2003
------------------------------------------------------
Historical Panyu Proforma
------------------------------------------------------
Net revenues $ 6,960,725 $ 6,960,725 $ -
Cost of sales 6,350,010 6,350,010 -
------------------------------------------------------
Gross profit 610,715 610,715 -
------------------------------------------------------
Operating expenses:
Salaries 145,083 145,083 -
Selling, general and administrative 715,497 226,927 488,570
------------------------------------------------------
Total Operating Expenses 860,580 372,010 488,570
------------------------------------------------------
Loss from operations (249,865) 238,705 (488,570)
------------------------------------------------------
Other income (expense):
Interest income 7,229 7,229 -
Interest expense (60,661) (60,661) -
------------------------------------------------------
Total Other Income (Expense) (53,432) (53,432) -
------------------------------------------------------
Income/(loss) before provision for income taxes (303,297) 185,273 (488,570)
Provision for income taxes (118,490) (118,490) -
------------------------------------------------------
-1-
Loss before minority interest (421,787) 66,783 (488,570)
Minority interest in income of subsidiary (26,713) (26,713) -
------------------------------------------------------
Net loss $ (448,500) $ 40,070 $ (488,570)
======================================================
Loss per Common Share - Basic and Diluted $ (0.01) (0.01)
================== =================
Weighted Average Common Shares Outstanding -
Basic and Diluted 37,299,000 37,299,000
================== =================
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED MARCH 31, 2004
Pro forma
Historical Adjustment Pro forma
Net Revenues $ 5,591,356 (4,959,187) $ 632,169
Cost of Sales (3,869,836) 3,743,403 (126,433)
--------------------------------------------------
Gross profit 1,721,520 (1,215,784) 505,736
--------------------------------------------------
Operating expenses:
Salaries 58,242 (58,242) -
Selling, general and administrative 343,407 (137,796) 205,611
--------------------------------------------------
Total operating expenses 401,649 (196,038) 205,611
--------------------------------------------------
Income from operations 1,319,871 (1,019,746) 300,124
Other Income (Expense):
Interest income 4,573 (4,573) -
Interest expense (45,114) 45,114 0
Acquisition expense (8,126,917) 0 (8,126,917)
Other Income 21,818 (21,561) 257
Gain on disposal of subsidiary 200,798 - 200,798
--------------------------------------------------
Total other income (expense) (7,994,842) 18,980 (7,925,862)
--------------------------------------------------
Loss before provision for income tax (6,624,971) (1,000,766) (7, 625,737)
Provision for income tax (158,620) 158,620 -
--------------------------------------------------
Loss before discontinued operation
& minority interest (6,783,591) (842,146) (7,625,737)
-2-
Discontinued operations:
Gain from sale discontinued operations - 371,186 371,186
----------------------------------------------------
Loss before minority interest (6,783,591) (470,960) (7,254,551)
Minority interest in income of subsidiary (375,455) 339,657 (35,798)
----------------------------------------------------
Net loss $ (7,159,046) $ (131,303) $ (7,290,349)
====================================================
Loss per Common Share - Basic and Diluted $ (0.19) $ (0.19)
Weighted Average Common Shares Outstanding -
Basic and Diluted 38,109,574 38,109,574
===================== =================
The unaudited pro forma condensed consolidated balance sheet as of March 31,
2004 is as follows:
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 2004
Disposal of Panyu Pro forma
Historical Adjustment as adjusted
Current assets
Cash and cash equivalents $ 1,457,183 $ (1,343,810) $ 113,373
Accounts receivable 143,146 433,114 576,260
Inventory of real estate held for sale 1,564,059 (1,446,101) 117,958
Costs and estimated earnings in excess of
billings on uncompleted contracts 8,038,028 (8,038,028) -
Retention receivables 699,995 (699,995) -
Other assets 13,278 (13,278) -
Prepaid expenses and other current assets 1,053,828 (935,201) 118,627
------------------------------------------------------
Total current assets 12,969,517 (12,043,299) 926,218
------------------------------------------------------
Property, plant and equipment - at cost 3,096,375 (2,452,756) 643,619
Less: accumulated depreciation (1,359,382) 1,341,504 (17,878)
------------------------------------------------------
1,736,993 (1,111,252) 625,741
------------------------------------------------------
Other asset
Due from employees 24,925 (24,925) -
-3-
------------------------------------------------------
Total assets $14,731,435 $(13,179,476) $ 1,551,959
======================================================
Current liabilities
Loans payable $ 2,180,995 $ (2,180,995) $ -
Accounts payable and accrued expenses 2,083,653 (1,712,504) 371,149
Customer deposits 5,097,734 (5,097,734) -
Billings in excess of cost and estimated earnings
on uncompleted contracts 162,989 (162,989) -
Due to related parties 143,436 - 143,436
------------------------------------------------------
Total current liabilities 9,668,807 (9,154,222) 514,585
Long-term debt
Due to shareholder 2,207,907 (2,095,128) 112,779
----------------- -------------- -----------
Total liabilities 11,876,714 (11,249,350) 627,364
Minority interest 1,817,342 (1,817,342) -
Stockholders' equity
Preferred stock ($.001 Par value: 20,000,000 Shares Authorized:
no shares issued and outstanding) - - -
Common stock ($.001 Par value:80,000,000 Shares Authorized:
47,188,000 shares issued and outstanding) 47,188 - 47,188
Additional paid in capital 8,712,405 - 8,712,405
Accumulated other comprehensive loss (25,569) 18,287 (7,282)
Accumulated deficit (7,696,645) (131,071) (7,827,716)
-------------------------------------------------------
Total stockholders' equity 1,037,379 (112,784) 924,595
-------------------------------------------------------
Total liabilities and stockholders' equity $14,731,435 $(13,179,476) $ 1,551,959
=======================================================
Notes to the Unaudited Pro Forma Condensed Financial Information
1. Basis of Presentation
The accompanying financial statements have been presented to show the
impact of classifying the results of Panyu No.6 Construction Company
Limited as a discontinued operation. For the purpose of presentation, the
statements of operation have been adjusted to remove various intercompany
charges, and the balance sheet has been adjusted as discussed in Note 3
below.
2. Transaction
As described above, the purchase price was US$2,580,390. US$2,095,128 of
the purchase price was made payable to Mr. Fred Chiyuan Deng, the CEO of
-4-
the Registrant, for the repayment of a loan previously made to Arran for
the investment in the shares of Panyu. The remaining US$485,262 was paid
to Arran.
3. Balance Sheet Adjustments
The balance sheet presented as historical reflects the balance sheet
filed by the Company in its Form 10-QSB for the six months ended March
31, 2004. Adjustment has been made as follows:
(1) To adjust balance sheet accounts to reflect the receiving of net
proceeds and the repayment of shareholder loan for the amount of
US$2,095,128
(2) To eliminate all assets and liabilities of Panyu No.6 Construction
Company Limited
-5-