EX-99.2 3 ex_149615.htm EXHIBIT 99.2 ex_149615.htm

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.