Tanke Biosciences Corp - FORM 8-K - EX-99.3

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file	filename
8-K - Tanke Biosciences Corp	e608029_8k-tanke.htm
EX-3.3 - Tanke Biosciences Corp	e608029_ex3-3.htm
EX-3.2 - Tanke Biosciences Corp	e608029_ex3-2.htm
EX-4.1 - Tanke Biosciences Corp	e608029_ex4-1.htm
EX-4.3 - Tanke Biosciences Corp	e608029_ex4-3.htm
EX-4.2 - Tanke Biosciences Corp	e608029_ex4-2.htm
EX-10.1 - Tanke Biosciences Corp	e608029_ex10-1.htm
EX-10.2 - Tanke Biosciences Corp	e608029_ex10-2.htm
EX-10.9 - Tanke Biosciences Corp	e608029_ex10-9.htm
EX-10.6 - Tanke Biosciences Corp	e608029_ex10-6.htm
EX-10.8 - Tanke Biosciences Corp	e608029_ex10-8.htm
EX-99.1 - Tanke Biosciences Corp	e608029_ex99-1.htm
EX-99.2 - Tanke Biosciences Corp	e608029_ex99-2.htm
EX-10.3 - Tanke Biosciences Corp	e608029_ex10-3.htm
EX-10.5 - Tanke Biosciences Corp	e608029_ex10-5.htm
EX-10.7 - Tanke Biosciences Corp	e608029_ex10-7.htm
EX-10.4 - Tanke Biosciences Corp	e608029_ex10-4.htm
EX-10.10 - Tanke Biosciences Corp	e608029_ex10-10.htm

Pro Forma Financial Information

Background Information Regarding Pro Forma Financial Statements

On January 3, 2011 China Flying Development Limited, a Hong Kong incorporated company (“China Flying”), and Golden Genesis Limited, a British Virgin Islands company (“Golden Genesis”), the sole stockholder of China Flying, entered into a Share Exchange Agreement (the “Share Exchange”) with Greyhound Commissary, Inc., a Nevada corporation (“Greyhound”). The Share Exchange was consummated on February 9, 2011, and Golden Genesis exchanged 100% of its capital stock in China Flying for 10,758,000 shares of authorized, but previously unissued shares of Greyhound common stock. In connection with the Share Exchange, Greyhound also issued an aggregate of 1,993,000 shares of its authorized, but previously unissued common stock to Regeneration Capital Group LLC, a fund, and certain investors in the fund, the U.S. advisor to Tanke. As a result of the Share Exchange, China Flying became Greyhound’s wholly owned subsidiary. Simultaneous, with the consummation of the Share Exchange, Greyhound sold 6,669,627 units (the “Units”) for $7.67 million. Each Unit consisted of a $1.15 principal amount convertible note (the “Notes”) with an interest rate of 8% per annum and a three year warrant to purchase one share of Greyhound common stock. Each Note is convertible into Greyhound common stock at a conversion rate of $1.15 per share. As a result of the Share Exchange and the sale of Units, and assuming that the Notes are converted into shares of Greyhound common stock, Golden Genesis owns approximately 54% of the outstanding common stock of Greyhound, including the 2 million shares held in escrow pending achievement of certain performance goals, and the investors that purchased Units owned approximately 34% of the outstanding common stock of Greyhound.

The following unaudited pro forma combined balance sheets and statements of operation reflect the combination of China Flying and Greyhound. The unaudited pro forma combined balance sheet has been derived from historical financial statements of both China Flying and Greyhound. The unaudited pro forma combined balance sheets as of December 31, 2009 and September 30, 2010 were prepared as if the Merger had occurred on the balance sheet dates. The unaudited pro forma combined statements of operations were prepared as if the Merger had occurred on the first day of each period presented.

In the opinion of management, all adjustments necessary to present fairly the pro forma combined balance sheets have been made based on the terms and structure of the transaction. The unaudited pro forma combined statements of operations are not necessarily indicative of what actual results would have been had the transaction occurred at the beginning of the period nor do they purport to indicate the results of future operations of China Flying and Greyhound. The unaudited pro forma combined financial statements should be read in conjunction with the accompanying notes and historical financial statements and notes to the financial statements of China Flying and Greyhound.

Combined Pro Forma Balance Sheet as of September 30, 2010 (Unaudited) and Notes Thereto

						Pro Forma Adjustments
						Effect of			Effect of		Effect of
	China Flying		Greyhound			Share Exchange			Private		Discontinued			Pro Forma
	Development		Commissary, Inc.			Agreement			Placement		Operation			Combined
						[A]			[B]		[C]
ASSETS
Current assets:
Cash and cash equivalents	$	3,067,051	$	-		$			$	7,670,000	$			$	10,737,051
Restricted cash		-		-											-
Due from related parties		2,917,239		-											2,917,239
Accounts receivable		2,192,188		-											2,192,188
Inventories		1,114,806		-											1,114,806
Income tax receivable		-		-											-
Other receivables		1,061,587		-											1,061,587
Other current assets		12,580		-											12,580
Total current assets		10,365,451		-			-			7,670,000		-			18,035,451

Investments in unconsolidated entities		253,690													253,690
Property and equipment, net		1,482,931													1,482,931
Construction in progress		121,264													121,264
Intangible asset, net		283,536													283,536
Total assets	$	12,506,872	$	-		$	-		$	7,670,000	$	-		$	20,176,872

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	374,519	$	250		$			$		$	(250	)	$	374,519
Other payables and accrued liabilities		797,195													797,195
Income tax payable		582,685													582,685
Convertible notes payable										2,035,100					2,035,100
Note payable related party				44,366								(44,366	)		-
Accrued interest related party				4,689								(4,689	)		-
Due to related parties		-													-
Current portion of long-term borrowings		107,563													107,563
Total current liabilities		1,861,962		49,305			-			2,035,100		(49,305	)		3,897,062

Government grant		63,616		-											63,616
Long-term borrowings		1,459,344		-											1,459,344
Total liabilities		3,384,922		49,305			-			2,035,100		(49,305	)		5,420,022

Commitments and contingencies

Stockholders' equity:
Common stock				3,398			9,752								13,150
Additional paid-in capital				49,701			1,315,700			5,634,900					7,000,301
Contributed capital		1,427,856					(1,427,856	)							-
Retained earnings		5,401,128		(102,404	)		102,404					49,305			5,450,433
Accumulated other comprehensive income		536,782													536,782
Total stockholders' equity		7,365,766		(49,305	)		-			5,634,900		49,305			13,000,666
Non-controlling interest in subsidiary		1,756,184		-											1,756,184
Total equity		9,121,950		(49,305	)		-			5,634,900		49,305			14,756,850
Total liabilities and stockholders' equity	$	12,506,872	$	-		$	-		$	7,670,000	$	-		$	20,176,872

[A]

The adjustment reflects the impact of the Share Exchange Agreement, the effect of which includes the issuance of 10,758,000 shares to Golden Genesis, 1,993,000 shares to Regeneration Capital Group, LLC and certain investors in the fund, as well as 399,316 shares outstanding from previous shareholders of Greyhound Commissary, Inc. (post reverse split).

[B]

This adjustment reflects the impact of funds raised from a private placement transaction, whereby the Company issued $7,670,071 of two year convertible notes payable, along with three year warrants to purchase up to 6,669,627 shares of common stock. The value of the warrants has been allocated on a weighted average basis to additional paid-in capital. The beneficial conversion feature has also been allocated to additional paid-in capital.

[C]	The adjustment represents the discontinuation of the operations of Greyhound Commissary, Inc.

Combined Pro Forma Statement of Operations for the Nine Months Ended September 30, 2010 (Unaudited) and Notes Thereto

							Pro Forma Adjustments
							Effect of			Effect of
	China Flying			Greyhound			Discontinued			Interest			Pro Forma
	Development			Commissary, Inc.			Operation			Expense			Combined
							[A]			[E]

Net sales	$	13,542,701		$	-		$			$			$	13,542,701
Costs of sales		8,633,237			-									8,633,237
Gross profit		4,909,464			-			-			-			4,909,464
Selling expenses		1,298,552			-									1,298,552
Administrative expenses		591,238			19,350			(19,350	)					591,238
Depreciation and amortization		36,516			-									36,516
Other operating expenses		1,344			-									1,344
Income from operations		2,981,814			(19,350	)		19,350			-			2,981,814
Foreign exchange gains, net		186			-									186
Interest income		33,382			-									33,382
Interest expense		(79,921	)		(2,229	)		2,229			(2,573,287	)		(2,653,208	)
Income before income taxes		2,935,461			(21,579	)		21,579			(2,573,287	)		362,174
Income tax expense		395,930			-									395,930
Net income before non-controlling interest		2,539,531			(21,579	)		21,579			(2,573,287	)		(33,756	)
Non-controlling interest in earnings of subsidiary		(605,631	)		-									(605,631	)
Net income (loss) before discontinued operation		1,933,900			(21,579	)					(2,573,287	)		(639,387	)
Discontinued operations
Net loss								21,579						21,579
Gain on disposal								49,305						49,305
Net income (loss)	$	1,933,900		$	(21,579	)	$	70,884		$	(2,573,287	)	$	(590,082	)

Basic income (loss) per share before discontinued operation					(0.05	)		0.00						(0.05	)
Discontinued operation								0.01						0.01
Net income (loss) per share - basic				$	(0.05	)	$	0.01					$	(0.04	)

Diluted income (loss) per share before discontinued operation					(0.05	)		0.00						(0.05	)
Discontinued operation								0.00						0.01
Net income (loss) per share - diluted				$	(0.05	)	$	0.00					$	(0.04	)

Weighted average shares outstanding - basic	NA				399,316	[B]		12,751,000	[C]					13,150,316
Weighted average shares outstanding - diluted	NA				399,316	[B]		19,420,627	[D]					13,150,316	[D]

[A]	This pro forma adjustment reflects Greyhound Commissary, Inc. as a discontinued operation

[B]	The weighted average shares outstanding for Greyhound Commissary, Inc. reflects the reservse 1 to 8.512 stock split on January 3, 2011.

[C]	This reflects the new shares issued to Golden Genesis and Regeneration Capital Group, LLC and certain investors in the fund, in connection with the Share Exchange Agreement, and assumes these shares were outstanding the entire year.

[D]

Includes the dilutive effect of 6,669,627 shares relating to convertible notes payable to be issued with the private placement transaction. This does not include the effect of 6,669,627 warrants as these would be anti-dilutive. Additionally, the pro forma combined diluted shares do not include the effect of conversion of the convertible notes payable as this conversion would be anti-dilutive.

[E]	Includes interest expense from $7,670,071 convertible note payable at 8% per annum, along with the amortization of the discount stemming from the warrants issued with the private placement transaction and the beneficial conversion feature.

Combined Pro Forma Balance Sheet as of December 31, 2010 (Unaudited) and Notes Thereto

						Pro Forma Adjustments
						Effect of			Effect of		Effect of
	China Flying		Greyhound			Share Exchange			Private		Discontinued			Pro Forma
	Development		Commissary, Inc.			Agreement			Placement		Operation			Combined
						[A]			[B]		[C]
ASSETS
Current assets:
Cash and cash equivalents	$	1,817,875	$	-		$			$	7,670,071	$			$	9,487,946
Restricted cash		73,226		-											73,226
Due from related parties		2,100,221		-											2,100,221
Accounts receivable		1,617,543		-											1,617,543
Inventories		984,606		-											984,606
Income tax receivable		-		-											-
Other receivables		959,146		-											959,146
Other current assets		37,529		-											37,529
Total current assets		7,590,146		-			-			7,670,071		-			15,260,217

Investments in unconsolidated entities		248,968													248,968
Property and equipment, net		1,426,472													1,426,472
Construction in progress		34,831													34,831
Intangible asset, net		278,258													278,258
Total assets	$	9,578,675	$	-		$	-		$	7,670,071	$	-		$	17,248,746

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	143,239	$	1,500		$			$		$	(1,500	)	$	143,239
Other payables and accrued liabilities		368,637													368,637
Income tax payable		282,669													282,669
Convertible notes payable										2,611,284					2,611,284
Note payable related party				28,311								(28,311	)		-
Accrued interest related party				2,415								(2,415	)		-
Due to related parties		-													-
Current portion of long-term borrowings		107,563													107,563
Total current liabilities		902,108		32,226			-			2,611,284		(32,226	)		3,513,392

Government grant		151,099		-											151,099
Long-term borrowings		2,089,209		-											2,089,209
Total liabilities		3,142,416		32,226			-			2,611,284		(32,226	)		5,753,700

Commitments and contingencies

Stockholders' equity:
Common stock				3,398			9,752								13,150
Additional paid-in capital				45,201			1,337,279			5,058,787					6,441,267
Contributed capital		1,427,856					(1,427,856	)							-
Retained earnings		3,467,228		(80,825	)		80,825					32,226			3,499,454
Accumulated other comprehensive income		390,622													390,622
Total stockholders' equity		5,285,706		(32,226	)		-			5,058,787		32,226			10,344,493
Non-controlling interest in subsidiary		1,150,553		-											1,150,553
Total equity		6,436,259		(32,226	)		-			5,058,787		32,226			11,495,046
Total liabilities and stockholders' equity	$	9,578,675	$	-		$	-		$	7,670,071	$	-		$	17,248,746

[A]

[B]

[C]	The adjustment represents the discontinuation of the operations of Greyhound Commissary, Inc.

Combined Pro Forma Statement of Operations for the Year Ended December 31, 2009 (Unaudited) and Notes Thereto

							Pro Forma Adjustments
							Effect of			Effect of
	China Flying			Greyhound			Discontinued			Interest			Pro Forma
	Development			Commissary, Inc.			Operation			Expense			Combined
							[A]			[E]

Net sales	$	12,169,539		$	-		$			$			$	12,169,539
Costs of sales		6,694,921			-									6,694,921
Gross profit		5,474,618			-			-			-			5,474,618
Selling expenses		1,596,439			-									1,596,439
Administrative expenses		783,069			19,831			(19,831	)					783,069
Depreciation and amortization		39,508			-									39,508
Other operating expenses		17,601			-									17,601
Income from operations		3,038,001			(19,831	)		19,831			-			3,038,001
Foreign exchange gains, net		43,159			-									43,159
Interest income		4,890			-									4,890
Interest expense		(58,626	)		(1,834	)		1,834			(3,142,999	)		(3,201,625	)
Income before income taxes		3,027,424			(21,665	)		21,665			(3,142,999	)		(115,575	)
Income tax expense		443,423			-			-			-			443,423
Net income before non-controlling interest		2,584,001			(21,665	)		21,665			(3,142,999	)		(558,998	)
Non-controlling interest in earnings of subsidiary		(591,671	)		-			-						(591,671	)
Net income (loss) before discontinued operation		1,992,330			(21,665	)					(3,142,999	)	$	(1,150,669	)
Discontinued operations
Net loss								21,665						21,665
Gain on disposal								32,226						32,226
Net income (loss)	$	1,992,330		$	(21,665	)	$	53,891		$	(3,142,999	)	$	(1,118,443	)

Basic income (loss) per share before discontinued operation					(0.05	)		0.00						(0.09	)
Discontinued operation								0.00						0.00
Net income (loss) per share - basic				$	(0.05	)	$	0.01					$	(0.09	)

Diluted income (loss) per share before discontinued operation					(0.05	)		0.00						(0.09	)
Discontinued operation								0.00						0.00
Net income (loss) per share - diluted				$	(0.05	)	$	0.00					$	(0.08	)


Weighted average shares outstanding - basic	NA				399,316	[B]		12,751,000	[C]					13,150,316
Weighted average shares outstanding - diluted	NA				399,316	[B]		19,420,627	[D]					13,150,316	[D]

[A]	This pro forma adjustment reflects Greyhound Commissary, Inc. as a discontinued operation

[B]	The weighted average shares outstanding for Greyhound Commissary, Inc. reflects the reservse 1 to 8.512 stock split on January 3, 2011.

[C]	This reflects the new shares issued to Golden Genesis and Regeneration Capital Group, LLC and certain investors in the fund, in connection with the Share Exchange Agreement, and assumes these shares were outstanding the entire year.

[D]

[E]	Includes interest expense from $7,670,071 convertible note payable at 8% per annum, along with the amortization of the discount stemming from the warrants issued with the private placement transaction and the beneficial conversion feature.

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