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
JUNE 30 DECEMBER 31
------------ -----------
2002 2001
------------ -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................. $ 27,106 $ 20,236
Accounts receivable, net................................................... 4,710 5,710
Receivables from sales representatives..................................... 1,940 709
Receivables from related party sales representatives....................... 1,029 2,900
Inventory of paper......................................................... 512 856
Prepaid expenses and other current assets.................................. 1,424 1,122
-------- --------
TOTAL CURRENT ASSETS................................................... 36,721 31,533
-------- --------
Property and equipment, net................................................. 16,908 19,058
Intangible assets, net...................................................... - 3
Long term investments....................................................... 100 100
Bonds held to maturity, at amortized cost................................... 1,601 1,709
Other assets................................................................ 1,128 1,199
-------- --------
TOTAL ASSETS........................................................... $ 56,458 $ 53,602
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................................... $ 3,117 $ 3,625
Deferred income and customer prepayments................................... 17,169 17,122
Accrued liabilities........................................................ 4,968 5,127
Income taxes payable....................................................... 150 164
-------- --------
TOTAL CURRENT LIABILITIES.............................................. 25,404 26,038
-------- --------
Liabilities for incentive and bonus plans................................... 1,249 1,434
Amount due to parent company................................................ 11,404 11,404
Minority interest........................................................... 2,601 2,515
Deferred tax liability...................................................... 817 610
-------- --------
TOTAL LIABILITIES...................................................... 41,475 42,001
-------- --------
SHAREHOLDERS' EQUITY:
Ordinary shares, US$0.01 par value; 50,000,000 shares authorized;
26,308,949 (2001: 26,303,949) shares issued and outstanding............... 263 263
Additional paid in capital................................................. 80,657 80,196
Retained deficit........................................................... (60,003) (61,987)
Less: Unearned compensation................................................ (5,934) (6,871)
-------- --------
TOTAL SHAREHOLDERS' EQUITY............................................. 14,983 11,601
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................. $ 56,458 $ 53,602
======== ========
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 SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------------- ------------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUES:
Online services (Note 1) ................................. $ 12,750 $ 13,981 $ 25,651 $ 28,369
Other media services (Note 1) ............................ 8,328 9,661 17,025 19,565
Miscellaneous ............................................ 159 212 330 406
----------- ----------- ----------- -----------
21,237 23,854 42,996 48,340
OPERATING EXPENSES:
Sales (Note 1) ........................................... 7,300 7,981 14,661 16,574
Circulation .............................................. 3,091 3,069 5,963 6,122
General and administrative ............................... 7,279 8,330 14,441 18,300
Online services development .............................. 1,244 2,181 2,685 5,312
Non-cash compensation expense (Note 2) ................... 629 885 1,348 1,471
Amortization of intangibles/Software development cost .... 865 869 1,732 1,738
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES .................................. 20,408 23,315 40,830 49,517
----------- ----------- ----------- -----------
INCOME/(LOSS) FROM OPERATIONS ............................. 829 539 2,166 (1,177)
----------- ----------- ----------- -----------
Interest expense ......................................... - (51) - (127)
Interest income .......................................... 48 130 96 220
Foreign exchange gains (losses), net ..................... 358 (122) 286 (85)
Write-down of investment ................................. - (250) - (250)
----------- ----------- ----------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES ......................... 1,235 246 2,548 (1,419)
INCOME TAX PROVISION ...................................... (198) (250) (477) (604)
----------- ----------- ----------- -----------
NET INCOME/(LOSS) BEFORE MINORITY INTEREST ................ $ 1,037 $ (4) $ 2,071 $ (2,023)
----------- ----------- ----------- -----------
Minority interest ......................................... $ (67) $ 77 $ (87) $ 10
----------- ----------- ----------- -----------
NET INCOME/(LOSS) ......................................... $ 970 $ 73 $ 1,984 $ (2,013)
RETAINED EARNINGS/(DEFICIT) BROUGHT FORWARD ............... - - (61,987) (62,762)
----------- ----------- ----------- -----------
RETAINED EARNINGS/(DEFICIT) CARRIED FORWARD ............... - - (60,003) (64,775)
=========== =========== =========== ===========
BASIC AND DILUTED NET INCOME/(LOSS) PER SHARE ............. $ 0.04 $ 0.003 $ 0.08 $ (0.08)
=========== =========== =========== ===========
SHARE USED IN BASIC AND DILUTED NET INCOME PER SHARE
CALCULATIONS .............................................. 26,308,949 26,303,949 26,307,347 26,303,949
=========== =========== =========== ===========
Notes: 1. As of December 31, 2001, the Company adopted the Emerging Issues
Task Force Issue No. 00-14, "Accounting for Certain Sales
Incentives" (EITF 00-14). EITF 00-14 stipulates that the reduction
in the selling price of the product or service resulting from any
cash sales incentive should be classified as a reduction of revenue.
The adoption of this EITF resulted in the Company reclassifying
certain sales incentives from a sales expense to a reduction of
revenue for the period of three months and six months ended June 30,
2001. This reclassification represented less than 3% of revenues for
the said periods and did not impact net income.
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 JUNE 30 SIX MONTHS ENDED JUNE 30
---------------------------- ----------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Sales ......................................... $ 149 $ 111 $ 279 $ 241
Circulation ................................... 25 53 156 87
General and administrative .................... 344 525 603 850
Online services development ................... 111 196 310 293
----------- ----------- ----------- -----------
$ 629 $ 885 $ 1,348 $ 1,471
----------- ----------- ----------- -----------
GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN U.S. DOLLARS THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE DATA)
SIX MONTHS ENDED JUNE 30
2002 2001
----------- -----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(Loss) ......................................................................... $ 1,984 $(2,013)
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization ............................................................ 4,391 4,462
Loss on sale of property and equipment ................................................... - 2
Accretion of U.S. Treasury strips zero % coupons ......................................... (52) (63)
Bad debt expense ......................................................................... 432 605
Non-cash compensation expense ............................................................ 1,348 1,471
Write-down of investment ................................................................. - 250
Income attributable to minority shareholder .............................................. 87 (10)
Property and equipment written off ....................................................... 108 2
------- -------
8,298 4,706
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivables ..................................................................... 568 338
Receivables from sales representatives ................................................... (1,231) 1,753
Receivables from related party sales representatives ..................................... 1,871 (643)
Inventory of paper ....................................................................... 344 (93)
Prepaid expenses and other current assets ................................................ (302) 11
Long term assets ......................................................................... 71 224
Accounts payable ......................................................................... (508) (3,153)
Accrued liabilities and liabilities for incentive and bonus plans ........................ (344) 314
Deferred income and customer prepayments ................................................. 47 109
Tax liability ............................................................................ 193 162
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. 9,007 3,728
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ........................................................ (2,347) (2,063)
Proceeds from sales of property and equipment ............................................. - 5
Proceeds from matured bonds ............................................................... 160 170
------- -------
NET CASH USED FOR INVESTING ACTIVITIES ................................................ (2,187) (1,888)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term borrowings ........................................................ - (2,000)
Amount received towards directors stock option plan ....................................... 50 164
------- -------
NET CASH GENERATED (USED FOR) FROM FINANCING ACTIVITIES ............................... 50 (1,836)
------- -------
Net increase in cash and cash equivalents .................................................. 6,870 4
Cash and cash equivalents, beginning of the year ........................................... 20,236 12,727
------- -------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD ............................................... 27,106 12,731
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income tax paid ........................................................................... $ 284 $ 442
Interest paid ............................................................................. - 125
======= =======