EX-99.3 2 ex99-3.htm

 

Exhibit 99.3

 

FLYWHEEL ADVANCED TECHNOLOGY, INC.

 

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2022

 

   Flywheel
Advanced		   QBS System   Pro Forma
Adjustments		   Pro Forma
Consolidated		 
                 
   ASSETS 
CURRENT ASSETS                    
Cash and equivalents  $-   $336,082   $-   $336,082 
Accounts receivable, net of allowances   -    1,332,953    -    1,332,953 
Due from related parties   -    123,054    -    123,054 
Prepaid expenses and other current   679    384,772    -    385,451 
Income tax refundable   -    31,737    -    31,737 
Deferred taxes assets   -    7,719    -    7,719 
Total Current Assets   679    2,216,317    -    2,216,996 
                     
PROPERTY, PLANT AND EQUIPMENT,   -    9,584    -    9,584 
RIGHT-OF-USE ASSETS   -    67,768    -    67,768 
GOODWILL   -    - {b}   2,063,075    2,063,075 
                     
TOTAL ASSETS  $679   $2,293,669   $2,063,075   $4,357,423 
                     
   LIABILITIES AND STOCKHOLDERS’ EQUITY 
CURRENT LIABILITIES                    
Bank loans - current portion  $-   $107,489   $-   $107,489 
Accounts payable   -    162,417    -    162,417 
Accrued expenses and other current   16,879    118,116    -    134,995 
Due to related parties   213,762    379,777    -    593,539 
Operating leases liabilities   -    22,524    -    22,524 
Income tax payable   -    -    -    - 
Total current liabilities   230,641    790,323    -    1,020,964 
                     
LONG-TERM LIABILITIES                    
Bank loans   -    564,169    -    564,169 
Operating leases liabilities   -    52,184    -    52,184 
Total long-term liabilities   -    616,353    -    616,353 
Total Liabilities   230,641    1,406,676    -    1,637,317 
                     
COMMITMENTS AND CONTINGENCIES   -    -    -    - 
STOCKHOLDERS’ EQUITY                    
Common stock   1,782    13 {a}{c}{d}   1 ,171    2,966 
Paid in capital   2,534,546    - {a}{b}{d}   3,905,884    6,440,430 
(Accumulated deficit)/Retained earnings   (2,766,290)   910,868 {c}{d}   (1,867,868)   (3,723,290)
Accumulated other comprehensive loss   -    (23,888) {c}   23,888    - 
Total Stockholders’ Equity   (229,962)   886,993    2,063,075    2,720,106 
                     
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $679   $2,293,669   $2,063,075   $4,357,423 

 

See accompanying notes to pro forma consolidated financial statements.

 

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FLYWHEEL ADVANCED TECHNOLOGY, INC.

 

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

AND COMPREHENSIVE LOSS

THREE MONTHS ENDED DECEMBER 31, 2022

 

   Flywheel
Advanced		  

 

QBS System

   Pro Forma
Adjustments {f}		   Pro Forma
Consolidated		 
                 

REVENUE, NET

  $-   $688,188   $-   $688,188 
COST OF REVENUE   -    (480,002)   -    (480,002)
                     
GROSS PROFIT   -    208,186    -    208,186 
                     
OPERATING EXPENSES                    
Sales and marketing   -    15,402    -    15,402 
General and administrative   25,832    150,936    957,000    1,133,768 
Depreciation and amortization   -    13,591    -    13,591 
                     
Total Operating Expenses   25,832    179,929    957,000    1,162,761 
                     
OPERATING (LOSS) INCOME   (25,832)   28,257    (957,000)   (954,575)
                     
OTHER INCOME (EXPENSES)                    
Interest income (expense), net   -    (5,843)   -    (5,843)
Other income   -    7,403    -    7,403 
                     
Total Other Income   -    1,560    -    1,560 
                     
(LOSS) INCOME BEFORE INCOME TAXES   (25,832)   29,817    (957,000)   (953,015)
                     
Income taxes   -    154    -    154 
                     
NET INCOME (LOSS)   (25,832)   29,663    (957,000)   (953,169)
                     
OTHER COMPREHENSIVE LOSS                    
Foreign currency translation (loss)   -    (6,172)   -    (6,172)
                     
COMPREHENSIVE INCOME (LOSS)  $(25,832)  $23,491   $(957,000)  $(959,341)
Net loss per share, basic and diluted  $(0.00)  $297        $(0.03)
Weighted average shares outstanding,
basic and diluted		   17,822,564    100     {e}   

29,662,164

 

 

See accompanying notes to pro forma consolidated financial statements.

 

2
 

 

FLYWHEEL ADVANCED TECHNOLOGY, INC.

 

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

AND COMPREHENSIVE LOSS

FOR THE YEAR ENDED SEPTEMBER 30, 2022

 

   Flywheel
Advanced		  

 

QBS System

   Pro Forma
Adjustments {f}		   Pro Forma
Consolidated		 
                 

REVENUE, NET

  $-   $3,682,142   $-   $3,682,142 
COST OF REVENUE   -    (2,765,796)   -    (2,765,796)
                     
GROSS PROFIT   -    916,346    -    916,346 
                     
OPERATING EXPENSES                    
Sales and marketing   -    75,095    -    75,095 
General and administrative   204,130    632,468    957,000    1,793,598 
Provision for credit losses        55,340         55,340 
Depreciation and amortization   -    53,566    -    53,566 
                     
Total Operating Expenses   204,130    816,469    957,000    1,977,599 
                     
OPERATING (LOSS) INCOME   (204,130)   99,877    (957,000)   (1,061,253)
                     
OTHER INCOME (EXPENSES)                    
Interest income (expense), net   -    (25,511)   -    (25,511)
Other income   -    147,974    -    147,974 
                     
Total Other Income   -    122,463    -    122,463 
                     
(LOSS) INCOME BEFORE INCOME TAXES   (204,130)   222,340    (957,000)   (938,790)
Income taxes   -    15,124    -    15,124 
                     
NET INCOME (LOSS)  $(204,130)  $207,216   $(957,000)  $(953,914)
                     
OTHER COMPREHENSIVE LOSS                    
                     
Foreign currency translation (loss)   -    (19,168)   -    (19,168)
COMPREHENSIVE INCOME (LOSS)  $(204,130)  $188,048   $(957,000)  $(973,082)
                     

Net loss per share, basic and diluted

  $(0.03)  $2,072        $(0.03)
Weighted average shares outstanding,
basic and diluted		   5,874,306    8,939,600     {e}   

29,662,164

 

 

See accompanying notes to pro forma consolidated financial statements.

 

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FLYWHEEL ADVANCED TECHNOLOGY, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

December 31 and September 30, 2022

 

Note 1    Introduction

 

On December 15, 2022, Flywheel Advanced Technology, Inc., a Nevada corporation (the “ Company “or “Flywheel Advanced”), entered into a share exchange agreement (the “Share Exchange Agreement”) with QBS System Limited, a limited company incorporated under the laws of Hong Kong (“QBS System”), and QBS Flywheel Limited, a company incorporated under the laws of Australia (the “Shareholder”). Subject to the closing conditions set forth in the Share Exchange Agreement, at closing the Shareholder will transfer and assign to the Company all of the issued and outstanding shares of QBS System for 8,939,600 newly issued shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). Following the closing of the share exchange, there will be no change in the officers and directors of the Company, and QBS System will continue its business as a wholly owned subsidiary of the Company and the Shareholder shall own 8,939,600 Common Stock, or 33.41% of the then issued and outstanding shares of Common Stock on a fully diluted basis.

 

The following unaudited pro forma consolidated balance sheets as of December 31, 2022 and the unaudited pro forma consolidated statements of operations for the year ended September 30, 2022 and for the three months ended December 31, 2022 are based on the historical consolidated financial statements of Flywheel Advanced and QBS System and its subsidiary, QBS System Pty Limited as adjusted to give effect to the acquisition of QBS System and its subsidiary by Flywheel Advanced (the “ Acquisition” ). The Acquisition was accounted for using the acquisition method of accounting and assuming a purchase price by the issuance of the Company’s common shares of $2,950,068.

 

Under the acquisition method of accounting, the total purchase price presented in the accompanying unaudited pro forma consolidated financial statements was allocated to the assets acquired based on their fair values assuming the transaction occurred on December 31, 2022 with respect to the balance sheet and as of October 1, 2021 with respect to the statements of operations for the three months ended December 31, 2022 and the year ended September 31, 2022. The excess of the purchase price over the total of estimated fair values assigned to tangible and identifiable intangible assets acquired is recognized as goodwill.

 

The unaudited pro forma consolidated financial statements do not necessarily reflect what the consolidated company’s financial condition or results of operations would have been had the Acquisition occurred on the dates indicated. The unaudited pro forma consolidated financial statements and the underlying pro forma adjustments are based upon currently available information and include certain estimates and assumptions made by management; accordingly, actual results could differ materially from the pro forma information. Management believes the assumptions provide a reasonable and supportable basis for presenting the estimated significant effects of the arrangement. The unaudited pro forma consolidated financial statements is provided for illustrative purposes only and may or may not provide an indication of results in the future.

 

The unaudited pro forma consolidated financial statements, including the notes thereto, should be read in conjunction with Flywheel Advanced’s historical financial statements for the year ended December 31, 2022 and three months ended December 31, 2022, included in our Annual Report on Form 10-K and Quarter Report on Form 10-Q.

 

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FLYWHEEL ADVANCED TECHNOLOGY, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

December 31 and September 30, 2022

 

Note 2    Basis of Presentation

 

Flywheel Advanced and QBS System and its subsidiary have different fiscal quarter and year ends. Flywheel Advanced has a fiscal year ending on September 30, however, QBS System and its subsidiary has a fiscal calendar year ending on March 31. Accordingly, the unaudited pro forma consolidated statement of operations for the fiscal year ended September 30, 2022, combines the historical results of (i) Flywheel Advanced for the 12 months ended September 30, 2022, and (ii) QBS System and its subsidiary for the six months October 1, 2021, to March 31, 2022, and six months April 1, 2022, to September 30, 2022. The unaudited pro forma consolidated statement of operations for the three months ended December 31, 2022, combines the historical results of (i) Flywheel Advanced for the three months ended December 31, 2022, and (ii) QBS System and its subsidiary for the three months October 1, 2022, to December 31, 2022. We have used balance sheet at December 31, 2022 for the purpose of preparing the unaudited pro forma consolidated balance sheet as of December 31, 2022.

 

The unaudited pro forma consolidated balance sheet as of December 31, 2022, and the unaudited pro forma consolidated statements of operations for the year ended September 30, 2022 and for the three months ended December 31, 2022 are based on the historical financial statements of Flywheel Advanced after giving effect to the acquisition of QBS System and its subsidiary (the “Acquisition”) using the acquisition method of accounting. In conjunction with the Acquisition, we may incur future restructuring expenses and transaction costs that are not included in the pro forma consolidated financial statements.

 

The unaudited pro forma consolidated balance sheet as of December 31, 2022, is presented as if the Acquisition occurred on December 31, 2022. The unaudited pro forma consolidated statements of operations for the year ended September 30, 2022, and for the three months ended December 31, 2022, are presented as if the Acquisition had taken place on October 1, 2021  and October 1, 2022, respectively.

 

The unaudited pro forma financial statements for QBS System and its subsidiary are prepared in accordance with US GAAP and translated into USD.

 

The unaudited pro forma condensed consolidated financial information is based on estimates and assumptions which have been made solely for purposes of developing such pro forma information.

 

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FLYWHEEL ADVANCED TECHNOLOGY, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

December 31 and September 30, 2022

 

Note 3    Purchase Consideration and Allocation

 

Purchase Consideration

 

The purchase consideration is approximately $3 million, based on the closing price of Flywheel common stock on Over-the-Counter-Markets of $0.33 on December 31, 2022. The purchase consideration is as follows:

 

QBS System’s ordinary shares issued and outstanding   100(1)
Exchange ratio   89,396 
Flywheel Advanced shares issued in exchange   8,939,600 
Flywheel Advanced closing share price  $0.33(2)
      
Purchase consideration paid at closing  $2,950,068 

 

  (1) Represents 100 shares of QBS ordinary shares issued and outstanding as of December 31, 2022.
  (2) Represents the closing price of the Flywheel Advanced’s common stock on the Over-the-Counter- Markets on December 31, 2022.

 

Purchase Price Allocation

 

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of QBS System and its subsidiary are recorded at their fair values as of the Acquisition Date and added to those of Flywheel Advanced. The purchase price allocation shown below is based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and has been prepared to illustrate the estimated effect of the acquisition. Flywheel Advanced has performed the fair valuation of QBS System and its subsidiary’s assets and liabilities. The fair values are subject to adjustment after the close of the transaction as additional information is obtained.

 

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FLYWHEEL ADVANCED TECHNOLOGY, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

December 31 and September 30, 2022

 

The following table sets forth the allocation of the total purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed, based on QBS System and its subsidiary’s balance sheet at December 31, 2022, with excess recorded as goodwill:

 

Purchase consideration  $2,950,068 
      
Cash and equivalents  $336,082 
Other current assets   1,880,235 
Property and Equipment   9,584 
Right-of-use assets   67,768 
Total assets acquired   2,293,669 
      
Bank loans   (671,658)
Other liabilities   (735,018)
Total liabilities assumed   (1,406,676)
      
Fair value of net assets acquired   886,993 
      
Goodwill  $2,063,075 

 

Goodwill is the excess of acquisition consideration over the fair value of the underlying net assets acquired. In accordance with ASC 350, Goodwill and Other Intangible Assets, goodwill is not amortized, but instead is reviewed for impairment at least annually, absent any indicators of impairment. Goodwill recorded in the Acquisition is not deductible for tax purposes.

 

Note 3    Pro Forma Adjustment

 

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited condensed consolidated financial information:

 

Adjustments to the unaudited pro forma consolidated balance sheet at December 31, 2022:

 

  {a} Reflects the issuance of 8,939,600 shares at acquisition of $2,950,068.
     
  {b} Reflects $2,063,075 of goodwill which is the excess of the purchase price over the fair value of the assets acquired as if the Acquisition occurred on December 31, 2022.
     
  {c} Represents the write-off of the QBS System and its subsidiary’s book value of equity of $886,980 and issuance of 100 shares of common stock valued at $13.
     
  {d} Reflects the additional issuance of 2,900,000 shares to settle the advisory service fees upon completion of the Acquisition, based on the closing price of Flywheel common stock on Over-the Counter Markets of $0.33 on December 31, 2022.

 

Adjustments to the unaudited pro forma consolidated statement of operations for the year ended September 30, 2022 and for the three months ended December 31, 2022:

 

  {e} Addition to basic and diluted weighted average number of shares outstanding to reflect the 8,939,600 common shares issued as part of the Acquisition consideration. The calculation of weighted average shares outstanding for basic and diluted earnings per share assumes that the shares issuable relating to the arrangement was outstanding for the entire year as if the Acquisition transaction occurred on October 1, 2021.
     
  {f} Reflects the additional issuance of 2,900,000 shares to settle the advisory service fees upon completion of the Acquisition, assumingthe closing price of Flywheel common stock on Over-the Counter Markets of $0.33 if the Acquisition had taken place on October 1, 2021 and October 1, 2022, respectively .

 

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