Deerfield Resources, Ltd. - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - August 30, 2011

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8-K - FORM 8-K - Deerfield Resources, Ltd.d8k.htm
EX-99.1 - EXHIBIT 99.1 - Deerfield Resources, Ltd.exhibit99-1.htm
EX-23.1 - EXHIBIT 23.1 - Deerfield Resources, Ltd.exhibit23-1.htm
EX-10.3 - EXHIBIT 10.3 - Deerfield Resources, Ltd.exhibit10-3.htm
EX-10.2 - EXHIBIT 10.2 - Deerfield Resources, Ltd.exhibit10-2.htm
EX-10.1 - EXHIBIT 10.1 - Deerfield Resources, Ltd.exhibit10-1.htm

Exhibit 99.2

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following Unaudited pro forma consolidated statements of income for the year ended December 31, 2008 and the six months ended June 30, 2009, have been prepared based on the historical consolidated statements of income of China TMK Battery Systems Inc. and Shenzhen Borou Industrial Co., Ltd. (Borou) incorporated by reference or included elsewhere herein, under the assumptions set forth in the accompanying footnotes. The unaudited pro forma consolidated balance sheet at June 30, 2009 has been prepared based on the historical consolidated balance sheet of China TMK Battery Systems Inc. incorporated by reference herein under the assumptions set forth in the accompanying footnotes.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AT JUNE 30, 2009

(In US Dollars)

    China                      
    TMK                      
    Battery     Shenzhen                
    Systems     Borou             Pro Forma  
    Inc. and     Industrial     Pro Forma       Consolidated  
    Subsidiaries     Co., Ltd.     Adjustments       Balance Sheet  
                           
Assets                          
         Current Assets                          
                       Cash and cash equivalents $  442,827    $ -                                            $ 442,827  
                       Trade receivables, net   8,427,174     -             8,427,174  
                       Advances to suppliers   203,666     -             203,666  
                       Inventories, net   3,107,959     -             3,107,959  
                       Due from related parties   -     -             -  
                       Prepaid expenses and other receivables   -     -             -  
                       Restricted cash   1,385,707     -             1,385,707  
         Total current assets   13,567,333     -             13,567,333  
                       Property, equipment and construction in progress, net   3,185,486     4,210,959     452,647   A   7,849,092  
                       Advances for property and equipment purchase   8,811,639     -     (3,057,935 ) B   5,753,704  
                       Restricted cash   131,877     -             131,877  
                       Investment in Borou   -     -             -  
                       Other assets   88,853     -             88,853  
Total Assets $  25,785,188   $  4,210,959             27,390,859  
Liabilities and Shareholders' Equity                          
         Current Liabilities                          
                       Accounts payable $  1,310,526   $ -             1,310,526  
                       Accrued liabilities and other payable   523,205     -     439,590   C   1,359,452  
          -     396,657   D      
                       Customer deposits   250,904     -             250,904  
                       Wages payable   710,472     -             710,472  
                       Corporate tax payable   94,006     -             94,006  
                       Short-term bank loan   4,204,244     -             4,204,244  
                       Current portion of long-term bank loans   1,758,360     -             1,758,360  
                       Deferred revenue   -     55,383             55,383  
                       Due to related parties   385     3,814,344     (3,814,344 ) E   385  
                       Bank notes payable   2,930,600     -             2,930,600  
         Total current liabilities   11,782,702     3,869,727             12,674,332  
                       Long-term bank loans   2,637,540     -             2,637,540  
                       Deferred tax liabilities   -     -     607,735   F   607,735  
Total Liabilities $  14,420,242   $  3,869,727             15,919,607  
Stockholders' Equity                          
         Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding at June 30, 2009   -     -           -  
         Common stock, $0.001 par value, 300,000,000 shares authorized, 25,250,000 shares outstanding at June 30, 2009   25,250     -           25,250  
         Invested Capital         362,040     (362,040 ) G   -  
         Additional paid-in capital   1,193,591     -             1,193,591  
         Accumulated other comprehensive income   397,453     75,305     (79,552 ) H   393,206  
         Statutory reserves   1,038,988     -             1,038,988  
         Retained earnings   8,709,664     (96,113 )   96,113   G   8,820,217  
                110,553   I      
         Total stockholders' equity   11,364,946     341,232             11,471,252  
Total Liabilities & Stockholders' Equity $  25,785,188   $  4,210,959             27,390,859  

P-2

UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2009

(In US Dollars)

    China TMK                    
    Battery     Shenzhen           Pro Forma  
    Systems     Borou             Consolidated  
    Inc. and     Industrial     Pro Forma       Income  
    Subsidiaries     Co. Ltd.     Adjustments        Statement  
                           
Revenue $  21,278,432     -                                           $ 21,278,432  
Rental Revenue   -     31,849             31,849  
             Cost of Goods Sold   (16,078,400 )   -             (16,078,400 )
                           
Gross Profit   5,200,032     31,849             5,231,881  
                           
Operating Costs and Expenses                          
             Selling expenses   396,304     -             396,304  
             Depreciation   58,398     45,969     4,836   J   109,203  
             General and administrative   565,182     25,694             590,876  
             Research and development   237,760     -             237,760  
             Total operating expenses   1,257,644     71,663             1,334,143  
Income from operations   3,942,388     (39,814 )           3,897,738  
                           
                           
Other income (expenses):                          
             Interest expense, net   (312,165 )   -             (312,165 )
                           
             Other expense, net   (678 )   -             (678  
                           
             Total other income (expenses)   (312,843 )   -             (312,843 )
                           
                           
Income before income taxes   3,629,545     (39,814 )           3,584,895  
                           
Income taxes   (537,390 )   -     15,198   K   (522,192 )
                           
Net income $  3,092,155     (39,814 )                                         $ 3,062,703  
                           
                           
Earnings per share - basic $  0.12     N/A                                             0.12  
Weighted-average shares outstanding, basic   25,250,000     N/A         $ 25,250,000  
Earnings per share - diluted $  0.12     N/A                                           $ 0.12  
Weighted-average shares outstanding, diluted   25,250,000     N/A           25,250,000  

P-3

UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008

(In US Dollars)

                           
    China     Shenzhen             Pro Forma  
    TMK     Borou             Consolidated  
    Battery      Industrial     Pro Forma       Income  
      Systems Inc.     Co., Ltd.     Adjustments       Statement  
                           
Revenue $  36,762,688     -         $ 36,762,688  
Other Sales   83,463     -             83,463  
         Cost of Goods Sold   (28,236,136 )   -             (28,236,136 )
Gross Profit   8,610,015     -             8,610,015  
                           
Operating Costs and Expenses                          
         Selling expenses   872,441     -             872,441  
         Depreciation   22,676     83,907     9,373   J   115,956  
         Bad debts (recovery)   40,010     -             40,010  
         Other general and administrative expense   1,029,314     50,540             1,079,854  
         Research and development   624,051     -             624,051  
         Loss on disposal of assets   17,644     -             17,644  
         Total operating costs and expense   2,606,136     134,447             2,749,956  
Income from operations   6,003,879     (134,447 )           5,860,059  
                           
Other income (expenses):                          
         Interest income   53,335     -             53,335  
         Interest expense   (422,550 )   -             (422,550 )
         Other income, net   22,381     -             22,381  
         Gain on acquisition of business               110,553   I   110,553  
         Total other income (expenses)   (346,834 )   -             (236,281 )
                           
Income before income taxes   5,657,045     (134,447 )           5,623,778  
Income taxes   -     -     29,893   K   29,893  
Net income $  5,657,045     (134,447 )               $ 5,653,671  
                           
Net income per share - Basic $  0.22     N/A                $ 0.22  
Weighted average shares outstanding - Basic   25,250,000     N/A             25,250,000  
Net income per share - Diluted $  0.22     N/A                 $ 0.22  
Weighted average shares outstanding - Diluted   25,250,000     N/A             25,250,000  

P-4

Notes to Unaudited Pro Forma Consolidated Financial Data

Basis of Presentation

On July 14, 2009, Shenzhen TMK Power Industries Ltd., the operating subsidiary of China TMK Battery Systems, Inc., acquired 100% ownership of Borou for approximately $3,490,826 pursuant to the Acquisition Agreement and Supplemental Ownership Transfer Agreement. This transaction was accounted for by China TMK Battery Systems Inc. using the acquisition method of accounting. The effect of this transaction is reflected in the Pro Forma Adjustments in the unaudited pro forma consolidated financial statements.

The unaudited pro forma consolidated of income for the year ended December 31, 2008 and the six months ended June 30, 2009, assumes the Acquisition occurred on January 1, 2008. The unaudited pro forma consolidated balance sheet at June 30, 2009, assumes the Acquisition occurred on that date. China TMK Battery Systems Inc. believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to such transactions. The unaudited pro forma consolidated financial statements do not purport to represent what our results of operations would have been if such transactions had occurred on that date. These unaudited pro forma consolidated financial statements should be read in conjunction with the Consolidated Financial Statements of China TMK Battery Systems Inc., incorporated by reference herein and the Financial Statements of Borou included herein.

For the purposes of the pro forma financial information, purchase consideration totaled 3,490,826 and was paid in cash.

The following represents the preliminary allocation of the acquisition price to the acquired assets and assumed liabilities based on Borou’s balance sheet as of June 30, 2009 and is for illustrative purposes only.

Total identifiable assets acquired $ 4,661,154  
       
Deferred revenue   (55,383 )
Other payable   (396,657 )
Deferred tax liability   (607,735 )
Total liabilities assumed   (1,059,775 )
Net identifiable assets acquired   3,601,379  
Gain   (110,553 )
Total acquisition price   3,490,826  

Because the fair value of the assets increased from the date the purchase price was fixed through the closing date of the acquisition, the fair value of identifiable net assets acquired exceeded the fair value of the consideration paid and represents a gain.

Forma Adjustments

The pro forma financial data has been prepared to give effect to the Acquisition. The pro forma consolidated statements are not necessarily indicative of the results of our future operations.

A. To record fixed assets to fair value;
   
B. To adjust Advances for property and equipment purchase to reflect purchase price paid;
   
C. To record acquisition price that has not been paid as of June 30, 2009;
   
D. To record other payable assumed;


E. To eliminate due to related party balance that will not be assumed after acquisition;
   
F. To record deferred tax liability resulted from the differences in book and tax basis of properties acquired;
   
G. To eliminate Borou’s historical invested capital;
   
H. To record accumulated other comprehensive income due to the foreign currency translation adjustments;
   
I. To record gain from difference of fair value of identifiable net assets acquired and fair value of the consideration paid;
   
J. To adjust depreciation expense to give effect to the acquisition price allocated to the Acquisition;
   
K. To record deferred tax benefit to give effect to deferred tax liability allocated to the Acquisition.

P-5

Deerfield Resources, Ltd. Reports