Keyuan Petrochemicals, Inc. - FORM 8-K - EX-99.2 - UNAUDITED PRO FORMA FINANCIAL STATEMENTS - April 28, 2010

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8-K - CURRENT REPORT - Keyuan Petrochemicals, Inc.f8k0410_silverpearl.htm
EX-2.1 - SHARE EXCHANGE AGREEMENT - Keyuan Petrochemicals, Inc.f8k0410ex2i_silverpearl.htm
EX-4.1 - CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A PREFERRED STOCK - Keyuan Petrochemicals, Inc.f8k0410ex4i_silverpearl.htm
EX-10.5 - FORM OF SERIES A WARRANT - Keyuan Petrochemicals, Inc.f8k0410ex10v_silverpearl.htm
EX-10.1 - SECURITIES PURCHASE AGREEMENT - Keyuan Petrochemicals, Inc.f8k0410ex10i_silverpearl.htm
EX-10.2 - REGISTRATION RIGHTS AGREEMENT - Keyuan Petrochemicals, Inc.f8k0410ex10ii_silverpearl.htm
EX-10.4 - LOCK-UP AGREEMENT - Keyuan Petrochemicals, Inc.f8k0410ex10iv_silverpearl.htm
EX-10.3 - SECURITIES ESCROW AGREEMENT - Keyuan Petrochemicals, Inc.f8k0410ex10iii_silverpearl.htm
EX-16.1 - LETTER FROM THE HALL GROUP, CPAS, - Keyuan Petrochemicals, Inc.f8k0410ex16i_silverpearl.htm
EX-99.1 - AUDITED CONSOLIDATED BALANCE SHEETS OF KEYUAN INTERNATIONAL GROUP LIMITED - Keyuan Petrochemicals, Inc.f8k0410ex99i_silverpearl.htm
EX-10.11 - SHARE TRANSFER AGREEMENT BETWEEN BRIAN PAK-LUN MOK AND XIN YUE - Keyuan Petrochemicals, Inc.f8k0410ex10xi_silverpearl.htm
EX-99.3 - PRESS RELEASE - Keyuan Petrochemicals, Inc.f8k0410ex99iv_silverpearl.htm
EX-10.6 - FORM OF SERIES B WARRANT - Keyuan Petrochemicals, Inc.f8k0410ex10vi_silverpearl.htm
EX-10.9 - SHARE TRANSFER AGREEMENT BETWEEN LO KAN KWAN AND PEIJUN CHEN - Keyuan Petrochemicals, Inc.f8k0410ex10ix_silverpearl.htm
EX-10.7 - SHARE TRANSFER AGREEMENT BETWEEN BRIAN PAK-LUN MOK AND CHUNFENG TAO - Keyuan Petrochemicals, Inc.f8k0410ex10vii_silverpearl.htm
EX-10.12 - EMPLOYMENT AGREEMENT - Keyuan Petrochemicals, Inc.f8k0410ex10xii_silverpearl.htm
EX-10.8 - SHARE TRANSFER AGREEMENT BETWEEN O. WING PO AND JICUN WANG - Keyuan Petrochemicals, Inc.f8k0410ex10viii_silverpearl.htm
EX-10.13 - CONFIDENTIALITY AND NON-COMPETE AGREEMENT - Keyuan Petrochemicals, Inc.f8k0410ex10xiii_silverpearl.htm
EX-10.10 - SHARE TRANSFER AGREEMENT BETWEEN BRIAN PAK-LUN MOK AND XIN YUE - Keyuan Petrochemicals, Inc.f8k0410ex10x_silverpearl.htm
EX-4.2 - CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES M PREFERRED STOCK - Keyuan Petrochemicals, Inc.f8k0410ex4ii_silverpearl.htm
 
Exhibit 99.2
 
Pro Forma Combined Financial Statements

 
The following pro forma balance sheet has been derived from the balance sheet of Silver Pearl Enterprises, Inc. at December 31, 2009, and adjusts such information to give the effect of the acquisition of Keyuan International Group, LTD, a British Virgin Island corporation, as if the acquisition had occurred at December 31, 2009.  The following pro forma EPS statement has been derived from the income statement of Keyuan International Group, LTD,, and adjusts such information to give the effect that the acquisition by Silver Pearl Enterprises, Inc. at December 31, 2009 and 2008, respectively.  The pro forma balance sheet and EPS statement is presented for informational purposes only and does not purport to be indicative of the financial condition that would have resulted if the acquisition had been consummated at December 31, 2009 and 2008.

PRO FORMA CONSOLIDATED BALANCE SHEET
                            
(Unaudited)
                            
                             
   
Keyuan International Group LTD.
    
Silver Pearl Enterprises, Inc.
    
 
        
 
  
   
December 31,
    
December 31,
                  
   
2009
    
2009
                  
   
(audited)
    
(audited)
     Adjustments         Proforma  
                             
ASSETS
                            
                             
Current assets:
                            
Cash and cash equivalents
   $ 14,030,655     $ 454     $ (454 ) A     $ 34,932,951,  
                    $ (400,000 ) C          
                      21,302,296   D          
Restricted cash
     6,012,690                         $ 6,012,690  
Trade notes receivable
     400,491                         $ 400,491  
Inventory
     32,595,045                           32,595,045  
Advance payments
     7,417,202                           7,417,202  
Prepaid VAT taxes
     15,263,949                           15,263,949  
Due from directors
     211,493                           211,493  
Due from shareholders
     50,000                           50,000  
Due from unrelated parties
     1,068,741                           1,068,741  
Deferred tax assets
     3,486,922                           3,486,922  
Other current assets
     320,213               -           320,213  
                                     
  Total current assets
     80,857,401       454       20,901,842         $ 101,759,697  
                                     
Property, plant and equipment, net
   $ 131,824,617       -                 $ 131,824,617  
                                     
Other assets:
                                    
Intangible assets, net
     6,378,316       -                   6,378,316  
Deferred tax assets
     -       -       -           -  
                                     
  Total other assets
     6,378,316       -       -           6,378,316  
                                     
Total assets
   $ 219,060,334     $ 454     $ 20,901,842         $ 239,962,630  
                                     
 
 
1
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
                                    
                                     
Current liabilities:
                                    
Short-term bank loans
   $ 82,885,500     $ -                 $ 82,885,500  
Current portion of long-term bank loans
   $ 7,628,400       -                   7,628,400  
Accounts payable - trade and accrued expenses
     2,888,860       25,950       (25,950 ) A       2,888,860  
Accounts payable - construction related
     45,374,656       -                   45,374,656  
Trade notes payable
     13,719,134       -                   13,719,134  
Advance from customers
     16,549,644       -                   16,549,644  
Due to former shareholder
     733,500                           733,500  
Due to unrelated parties
     953,550                           953,550  
Due to related parties
     -       16,500       (16,500 ) A          
Other current liabilities
     290,631                           290,631  
                                     
Total current liabilities
     171,023,875       42,450       (42,450 ) A     $ 171,023,875  
                                     
Long term liabilities:
                                    
                                     
Revolving line-of-credit - related party
     -       58,717       (58,717 ) A     $ 37,408,500  
Long-term bank loans
     37,408,500                           37,408,500  
                                     
Total long-term liabilities
     37,408,500       58,717       (58,717 ) A       37,408,500  
                                     
Total Liabilities
     208,432,375       101,167       (101,167 ) A     $ 208,432,375  
                                     
Stockholders' equity
                                    
Common stock ($1 par value; authorized -   50,000 shares; 3,094,362 issued and outstanding)
     50,000       5,697                   3,095  
                      (50,000 ) D          
                      (3,264 ) C          
                      662   D          
Series A preferred stock,$0.001 par value, 20,000,000 authorized, 5,954,058 issued and outstanding
     -       -       5,954           5,954  
Series M preferred stock,$0.001 par value, 47,658 authorized, 47,658 issued and outstanding
     -       -       48   B       48  
Additional paid in capital
     20,179,997       555,453       (561,150 ) A       41,123,196  
                      (48 ) B          
                      50,000   D          
                      (396,736 ) C          
                      21,295,680   E          
Retained earning (deficit)
     (10,664,819 )     (661,863 )     661,863   A       (10,664,819 )
Accumulated other comprehensive income
     1,062,781       -                 $ 1,062,781  
                                     
Total stockholders' equity (deficit)
   $ 10,627,959     $ (100,713 )   $ 21,003,009         $ 31,530,255  
                                     
Total liabilities and stockholders' equity
   $ 219,060,334       454       20,901,842         $ 239,962,630  
 
See notes to financial statements

2

PRO FORMA EPS (UNAUDITED)
            
             
             
   
Keyuan International Group LTD.
    
Keyuan International Group LTD.
  
   
Year Ended
    
Year Ended
  
   
December 31,
    
December 31,
  
   
2009
    
2008
  
   
(unaudited)
    
(unaudited)
  
             
Net income/(loss)
   $ (8,833,069 )   $ (1,501,928 )
                 
Other comprehensive income (loss)
                
      Foreign currency translation gain
     15,991       649,089  
                 
Comprehensive income (loss)
   $ (8,817,078 )   $ (852,839 )
                 
Net income (loss) per Share
                
      Basic
   $ (3.63 )   $ (0.62 )
      Diluted
   $ (3.63 )   $ (0.62 )
                 
Weighted average shares outstanding
                
      Basic
     2,432,800       2,432,800  
      Diluted
     2,432,800       2,432,800  
 
See notes to financial statements

3


PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
                
                           
                           
   
Keyuan International Group LTD.
    
Silver Pearl Enterprises, Inc.
    
 
      
 
  
   
Year ended
    
Year ended
                
   
December 31,
    
December 31,
                
   
2009
    
2009
                
   
(unaudited)
    
(unaudited)
     Adjustments       Proforma  
                           
Sales
   $ 68,653,603     $ -       -   A     68,653,603  
Cost of sales
     75,311,595       -       -         75,311,595  
                                   
Gross profit (loss)
     (6,657,992 )     -       -   A     (6,657,992 )
                                   
Operating expenses:
                                  
      Selling expenses
     24,836       -       -   A     24,836  
      General and administrative expenses
     2,714,093       15,492       (15,492 )       2,714,093  
                                   
          Total     2,738,929       15,492       (15,492 ) A     2,738,929  
                                   
Income/(loss) from operations
     (9,396,921 )     (15,492 )     15,492         (9,396,921 )
                                   
Other income (expense):
                                  
      Interest income (expense), net
     (2,031,983 )     (2,473 )     2,473   A     (2,031,983 )
      Non-operating expenses
     (348,515 )     -       -         (348,515 )
      Unrealized gain (loss) on securities
     -       305       (305 )       -  
      Dividend income
     -       8       (8 )       -  
                                   
                Other income (expense), net
     (2,380,498 )     (2,160 )     2,160   A     (2,380,498 )
                                   
Loss before provision (benefit) for income tax
     (11,777,419 )     (17,652 )     17,652   A     (11,777,419 )
                                   
Provision (benefit) for income taxes
                                  
     Current year
     -       -                 -  
     Deferred
     (2,944,350 )     -                 (2,944,350 )  
                                   
Net income/(loss)
   $ (8,833,069 )   $ (17,652 )   $ 17,652   A     (8,833,069 )
                                   
Other comprehensive income (loss)
                                  
      Foreign currency translation adjustment
     15,991       -       -         15,991  
                                   
Total comprehensive income (loss)
   $ (8,817,078 )   $ (17,652 )   $ 17,652   A     (8,817,078 )
                                   
Net income (loss) per Share
                                  
      Basic and diluted
   $ (176.66 )   $ (0.00 )             $ (3.63 )
      Basic and diluted
   $ (176.66 )   $ (0.00 )             $ (3.63 )
                                   
Weighted average shares outstanding
                                  
      Basic
     50,000       5,696,800       (3,314,000 )  B,C,D,E     2,432,800  
      Diluted
     50,000       5,696,800       (3,314,000 )  B,C,D,E     2,432,800  
 
See notes to financial statements
 
4
 
 
Unaudited Notes to Pro Forma Combined Financial Statements

On April 22, 2010, Silver Pearl Enterprises, Inc., (the “Silver Pearl” or the "Company"), entered into a Share Exchange Agreement (the “Exchange Agreement”), with (i) Keyuan International Group Limited a company organized under the laws of British Virgin Islands (“Keyuan International”),,”), (ii) Delight Reward Limited, the sole shareholder of Keyuan International and a company organized under the laws of the British Virgin Islands ”), and Denise Smith, our former principal stockholder (“Smith”).Pursuant to the terms of the Exchange Agreement, the Keyuan International’s Shareholders transferred to us all of the Keyuan International shares in exchange for the issuance of 47,658 shares of shares of our Series M preferred stock.  As a result of the Share Exchange, we are now the holding company of Keyuan Plastics Co. Ltd., the operating subsidiary of Keyuan International organized in the People’s Republic of China (“China” or the “PRC”) and engaged in manufacturing and supplying various petrochemical products in China.
 
Immediately prior to the Share Exchange, 3,264,000 shares of our outstanding common stock were cancelled and retired.  Keyuan International also deposited $400,000 into an escrow account, which amount was paid to the Remediation Principal Shareholder, who owned the 3,264,000 shares, as a result of the Share Exchange having been consummated.
 
As a result of the transactions described above, we became the record and beneficial owner of 100% of the share capital of Keyuan International and therefore own 100% of the share capital of its subsidiaries and  Variable Interest Entities indirectly.
 
As a result of the Share Exchange, the cancellation of 3,264,000 shares and the closing of Series A financing, we will have 3,094,362 shares of common stock, 5,954,058 shares of Series A preferred and 47,658 shares of Series M preferred issued and outstanding.  Pursuant to the terms of the Agreement, Keyuan International’s officers and directors were appointed as our officers and directors, and Denise Smith resigned as our President, CEO and sole director.  However, the change in our board of directors will not be effective until 10 days after the mailing of a Schedule 14F Information Statement to our shareholders, which we expect to do promptly after the closing of the Share Exchange.
 
The transaction was regarded as a reverse merger whereby Keyuan International was considered to be the accounting acquirer as it retained control of Silver Pearl after the Share Exchange.
 
All amounts of Remediation were reversed as the net assets assumed by Keyuan International in the reverse merger were $0 after the Company satisfied the remaining portion of a $58,717 line of credit with part of the $400,000 escrow deposit (described above).

Operating through our wholly-owned subsidiary, Keyuan Plastics, Co. Ltd. (“Keyuan Plastics”), located in Ningbo, China, we are a leading independent manufacturer and supplier of various petrochemical products in China. Through Keyuan Plastics, our operations include (i) an annual petrochemical manufacturing capacity of 550,000 metric tons (MT) of a variety of petrochemical products, (ii) facilities for the storage and loading of raw materials and finished goods, (iii) a manufacturing technology that can support our manufacturing process with low raw material costs and high utilization and yields, (iv) a strong management team consisting of petrochemical experts with proven track records from some of China’s largest state-owned enterprises in the petrochemical industry, and (v) a robust customer base with long-term purchase contracts.
 
The consolidated financial statements reflect all predecessor statements of income and cash flow activities and include the accounts of Keyuan International, and its subsidiaries and Variable Interest Entities (VIEs).   Keyuan International (and its historical financial statements) is the continuing entity for financial reporting purposes.
 
 
5
 
 
The preceding unaudited pro forma combined balance sheet represents the combined financial position of Keyuan International as of December 31, 2009, as if the reverse merger acquisition occurred on December 31, 2009.  The unaudited combined income statements give effect to the reverse acquisition of Keyuan International by Silver Pearl assuming that the reverse acquisition took place on January 1, 2010.
 
The unaudited pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if the reverse acquisition of Keyuan International had been consummated as of the beginning of the period indicated, nor is necessarily indicative of the result of future operations.
 
Assumptions and Adjustments:

A)  
 Per the terms of the Share Exchange, Silver Pearl was delivered with zero assets and zero liabilities at time of closing;

B)  
At closing and pursuant to the Exchange Agreement, we acquired all of the issued and outstanding capital stock of Keyuan International in exchange for the issuance of 47,658 shares of Series M preferred stock; 

C)  
In exchange for $400,000, the Company agreed to cancel 3,264,000 shares of common stock;

D)  
At closing, common stock of Keyuan International will be reclassified to additional paid-in-capital to reflect the additional shares of Series M preferred stock issued as part of the Share Exchange; and

E)  
Silver Pearl issues 5,954,058 shares of convertible Series A preferred stock and 661,562 shares of common stock at $3.50 per share to investors for net proceeds of approximately $21,300,000.

 
 
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Keyuan Petrochemicals, Inc. Reports