STONE MOUNTAIN RESOURCES INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
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CONTENTS
PAGE | 1 | Basis of presentation |
PAGE | 2 | Unaudited Pro Forma Condensed Consolidated Balance Sheet at March 31, 2007 |
PAGE | 3 | Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) for the three months ended March 31, 2007 |
PAGE | 4 | Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) for the year ended December 31, 2006 |
PAGE | 5 | Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements |
STONE MOUNTAIN RESOURCES INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
Basis of Presentation
On June 29, 2007, Stone Mountain Resources, Inc. (the “Company” or “SMOU”) executed a Share Exchange Agreement (the “Share Exchange Agreement”) by and between Stone Mountain Resources Inc., Continental Development Limited, a Hong Kong corporation (the “Continental”) and Excelvantage Group Limited, a British Virgin Islands Company which owns 100% of Continental (the “Continental Shareholder”).
Under the Share Exchange Agreement, at the Closing on June 29, 2007, the Company issued 12,000,000 shares of its common stock, representing 60.12% of the Company’s issued and outstanding common stock after giving effect to the cancellation of 12,000,000 shares by Peter Dodge on June 29, 2007, to the Continental Shareholders in exchange for 100% of the common stock of Continental. After the closing of the transaction, SMOU had a total of 19,961,000 shares of common stock outstanding, with the Continental Shareholders owning 60.12%% of the total issued and outstanding shares of SMOU’s common stock, and the balance held by those who held shares of Stone Mountain’s common stock prior to the closing of the exchange. This share exchange transaction resulted in the Continental Shareholders obtaining a majority voting interest in SMOU. Generally accepted accounting principles require that the company whose shareholders retain the majority interest in a combined business be treated as the acquirer for accounting purposes, resulting in a reverse acquisition. Accordingly, the share exchange transaction has been accounted for as a recapitalization of SMOU.
The unaudited pro forma condensed consolidated statements of income (loss) combine the historical condensed consolidated statements of income (loss) of SMOU and Continental, giving effect to the share exchange and other related events as if it had occurred on January 1, 2006 and January 1, 2007. The unaudited pro forma condensed consolidated balance sheet combines the historical condensed consolidated balance sheets of SMOU and Continental, giving effect to the share exchange and other related events as if it had been consummated on March 31, 2007. These unaudited pro forma condensed consolidated financial statements have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the transaction occurred on the date indicated and are not necessarily indicative of the results that may be expected in the future.
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STONE MOUNTAIN RESOURCES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 2007
KANDI HISTORICAL | SMOU HISTORICAL | PRO FORMA ADJUSTMENTS | PRO FORMA COMBINED | |||||||||||||
CURRENT ASSETS | ||||||||||||||||
Cash and cash equivalents | $ | 735,227 | $ | 396 | $ | - | $ | 735,623 | ||||||||
Restricted cash | 12,024,514 | 12,024,514 | ||||||||||||||
Accounts receivable | 7,686,365 | - | - | 7,686,365 | ||||||||||||
Notes receivable | 5,135,329 | - | - | 5,135,329 | ||||||||||||
Inventories | 4,764,052 | - | - | 4,764,052 | ||||||||||||
Other receivables | 2,393,639 | - | - | 2,393,639 | ||||||||||||
Due from employees | 12,613 | - | - | 12,613 | ||||||||||||
Prepayments and prepaid expenses | 211,992 | - | - | 211,992 | ||||||||||||
Deferred taxes | 100 | - | - | 100 | ||||||||||||
Total current assets | 32,963,831 | 396 | - | 32,964,227 | ||||||||||||
Plant and equipment, net | 9,239,091 | - | - | 9,239,091 | ||||||||||||
Land use right, net | 393,512 | - | - | 393,512 | ||||||||||||
Construction in progress | 458,404 | - | - | 458,404 | ||||||||||||
Deferred taxes | 8,145 | - | - | 8,145 | ||||||||||||
Total long term assets | 10,099,152 | - | - | 10,099,152 | ||||||||||||
TOTAL ASSETS | $ | 43,062,983 | $ | 396 | $ | - | $ | 43,063,379 | ||||||||
CURRENT LIABILITIES | ||||||||||||||||
Accounts payable | $ | 5,877,556 | $ | - | $ | - | $ | 5,877,556 | ||||||||
Other payables and accrued liabilities | 390,978 | 8,100 | - | 399,078 | ||||||||||||
Short term bank loans | 10,753,668 | - | - | 10,753,668 | ||||||||||||
Current portion of long-term bank loan | 1,920,934 | - | - | 1,920,934 | ||||||||||||
Notes payable | 14,012,262 | - | - | 14,012,262 | ||||||||||||
Due to related parties | 2,403 | - | - | 2,403 | ||||||||||||
Customer deposits | 1,414,672 | - | - | 1,414,672 | ||||||||||||
Deferred taxes | 345 | - | - | 345 | ||||||||||||
Total current liabilities | 34,372,818 | 8,100 | - | 34,380,918 | ||||||||||||
LONG-TERM LIABILITIES | ||||||||||||||||
Deferred taxes | 3,309 | - | - | 3,309 | ||||||||||||
Total long-term liabilities | 3,309 | - | - | 3,309 | ||||||||||||
TOTAL LIABILITIES | 34,376,127 | 8,100 | - | 34,384,227 | ||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||
Registered capital | 6,645,321 | - | (6,645,321 | )(1) | - | |||||||||||
Common stock | - | 19,961 | - | 19,961 | ||||||||||||
Additional paid-in capital | 520,872 | 91,289 | 6,645,321 | (1) | 7,257,482 | |||||||||||
Retained earnings (deficit) | 1,037,142 | (118,954 | ) | - | 918,188 | |||||||||||
Accumulated other comprehensive income | 483,521 | - | - | 483,521 | ||||||||||||
Total Shareholders’ Equity | 8,686,856 | (7,704 | ) | - | 8,679,152 | |||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 43,062,983 | $ | 396 | $ | - | $ | 43,063,379 | ||||||||
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STONE MOUNTAIN RESOURCES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2007
KANDI HISTORICAL | SMOU HISTORICAL | PRO FORMA ADJUSTMENTS | PRO FORMA COMBINED | |||||||||||||
REVENUES, NET | $ | 6,004,743 | $ | - | $ | - | $ | 6,004,743 | ||||||||
COST OF GOODS SOLD | 4,854,101 | - | - | 4,854,101 | ||||||||||||
GROSS PROFIT | 1,150,642 | - | - | 1,150,642 | ||||||||||||
Research and development | 11,978 | - | - | 11,978 | ||||||||||||
Selling and marketing | 163,171 | - | - | 163,171 | ||||||||||||
General and administrative | 170,532 | 872 | - | 171,404 | ||||||||||||
TOTAL OPERATING EXPENSES | 345,681 | 872 | - | 346,553 | ||||||||||||
INCOME (LOSS) FROM OPERATIONS | 804,961 | (872 | ) | - | 804,089 | |||||||||||
INTEREST EXPENSE, NET | (89,803 | ) | - | - | (89,803 | ) | ||||||||||
FORFEITURE ON CUSTOMER DEPOSITS | 265,789 | - | - | 265,789 | ||||||||||||
OTHER EXPENSE, NET | (4,937 | ) | - | - | (4,937 | ) | ||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 976,010 | (872 | ) | - | 975,138 | |||||||||||
INCOME TAXES | 34,892 | - | - | 34,892 | ||||||||||||
NET INCOME (LOSS) | 941,118 | (872 | ) | - | 940,246 | |||||||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||||||
Foreign currency translation gain | 91,058 | - | - | 91,058 | ||||||||||||
Income tax expense related to other comprehensive income | (30,049 | ) | - | - | (30,049 | ) | ||||||||||
OTHER COMPREHENSIVE INCOME, NET OF TAX | 61,009 | - | - | 61,009 | ||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | 1,002,127 | $ | (872 | ) | $ | - | $ | 1,001,255 | |||||||
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED | - | 19,961,000 | - | 19,961,000 | ||||||||||||
Net income (loss) per common share, basic and diluted | $ | - | $ | (0.00 | ) | $ | - | $ | 0.05 | |||||||
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STONE MOUNTAIN RESOURCES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2006
KANDI HISTORICAL DECEMBER 31, 2006 | SMOU HISTORICAL MARCH 31, 2007 | PRO FORMA ADJUSTMENTS | PRO FORMA COMBINED | |||||||||||||
REVENUES | $ | 14,480,836 | $ | - | $ | - | $ | 14,480,836 | ||||||||
COST OF GOODS SOLD | 11,884,462 | - | - | 11,884,462 | ||||||||||||
GROSS PROFIT | 2,596,374 | - | - | 2,596,374 | ||||||||||||
Research and development | 103,785 | - | - | 103,785 | ||||||||||||
Selling and marketing | 289,408 | - | - | 289,408 | ||||||||||||
General and administrative | 411,306 | 1,990 | - | 413,296 | ||||||||||||
TOTAL OPERATING EXPENSES | 804,499 | 1,990 | 806,489 | |||||||||||||
INCOME (LOSS) FROM OPERATIONS | 1,791,875 | (1,990 | ) | - | 1,789,885 | |||||||||||
INTEREST EXPENSE, NET | (836,056 | ) | - | - | (836,056 | ) | ||||||||||
GOVERNMENT GRANTS | 97,806 | - | - | 97,806 | ||||||||||||
FORGIVENESS OF DEBT | 29,324 | - | - | 29,324 | ||||||||||||
OTHER EXPENSE, NET | (3,725 | ) | - | - | (3,725 | ) | ||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 1,079,224 | (1,990 | ) | - | 1,077,234 | |||||||||||
INCOME TAXES | (69 | ) | - | - | (69 | ) | ||||||||||
NET INCOME (LOSS) | 1,079,155 | (1,990 | ) | - | 1,077,165 | |||||||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||||||
Foreign currency translation gain | 236,114 | - | - | 236,114 | ||||||||||||
Income tax expense related to other comprehensive income | (77,918 | ) | - | - | (77,918 | ) | ||||||||||
OTHER COMPREHENSIVE INCOME, NET OF TAX | 158,196 | - | - | 158,196 | ||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | 1,237,351 | $ | (1,990 | ) | $ | - | $ | 1,235,361 | |||||||
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED | - | 19,961,000 | - | 19,961,000 | ||||||||||||
Net income (loss) per common share, basic and diluted | $ | - | $ | (0.00 | ) | $ | - | $ | 0.06 | |||||||
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STONE MOUNTAIN RESOURCES INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Notes:
The following adjustments to the unaudited pro forma condensed consolidated financial statements are based on the assumption that the share exchange was consummated on January 1, 2007 and January 1, 2006.
(1) | Adjustment to eliminate the registered capital of Kandi as if the share exchange occurred on January 1, 2007 and January 1, 2006. |
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