China Auto Logistics Inc - FORM 8-K/A - EX-99.3 - UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Attached files

file	filename
8-K/A - CURRENT REPORT - China Auto Logistics Inc	f8k113013a_chinaautologist.htm
EX-99.2 - UNAUDITED CONDENSED BALANCE SHEET - China Auto Logistics Inc	f8k113013aex99ii_chinaauto.htm
EX-99.1 - AUDITED CONSOLIDATED BALANCE SHEETS - China Auto Logistics Inc	f8k113013aex99i_chinaauto.htm

Exhibit 99.3

CHINA AUTO LOGISTICS INC.

Unaudited Pro Forma Consolidated Financial Statements

The accompanying unaudited pro forma consolidated financial statements have been prepared by China Auto Logistics Inc. (“China Auto Logistics”) to reflect its completed acquisition of Tianjin Zhonghe Automobile Sales and Service Co., Ltd. (“Zhonghe”), on November 30, 2013, as described in Item 2.01 of the Current report on Form 8-K filed on December 5, 2013. The unaudited pro forma consolidated financial statements include a balance sheet as of September 30, 2013 and statements of operations for the nine months ended September 30, 2013 and the fiscal year ended December 31, 2012.

The following assumptions were used in preparing the adjustments for the consolidated pro forma financial statements:

	1.	Adjustments relating to the unaudited pro forma consolidated balance sheet were computed assuming the transaction was consummated on September 30, 2013, the latest balance sheet date filed in this Form 8-K/A and all adjustments are directly attributable to the transaction and are factually supportable.

	2.	Adjustments relating to the unaudited pro forma consolidated statements of operations were computed assuming the transaction was consummated on the first day of the reporting periods and include adjustments which are directly attributable to the transaction, are expected to have a continuing impact and are factually supportable.

Management believes that the assumptions used and the adjustments made are reasonable given the information available. However, the pro forma information presented which reported the consummation of the acquisition of Zhonghe is not expected to reflect definitive conclusions regarding the allocation of the purchase price or other effects, which will be determined in conjunction with the audit of China Auto Logistics consolidated financial statements for the year ended December 31, 2013.

The unaudited pro forma consolidated financial statements are presented for informational purposes only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the acquisition been consummated as of the dates indicated or of the results that may be obtained in the future. The unaudited pro forma consolidated financial statements and the accompanying notes should be read in conjunction with our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 1, 2013, Quarterly Report on Form 10-Q filed with the SEC on November 14, 2013, and recent Current Report on Form 8-K filed on December 5, 2013.

CHINA AUTO LOGISTICS INC.

UNAUDITED PRO FORMA BALANCE SHEETS

	China Auto
	Logistics		Zhonghe
	as of		as of
	September 30, 2013		September 30, 2013							Pro Forma
	(unaudited)		(unaudited)			Adjustments			Note #	(unaudited)

Current Asses
Cash and cash equivalents	$	5,973,548	$	98,526		$	-			$	6,072,074
Restricted cash		40,528,915		-			-				40,528,915
Accounts receivable - Trade		128,838		-			-				128,838
Receivable related to auto mall management fees		254,628		-			-				254,628
Receivable related to financing services		68,048,048		-			-				68,048,048
Receivable from shareholder		-		9,464,809			-				9,464,809
Inventories, net		23,077,715		-			-				23,077,715
Advances to suppliers		42,842,131		-			-				42,842,131
Prepaid expenses		25,437		-			-				25,437
Deposits		-		4,746			-				4,746
VAT recoverable		1,583,649		-			-				1,583,649
Deferred tax assets		733,329		-			-				733,329
Other current assets		-		1,185			-				1,185
		183,196,238		9,569,266			-				192,765,504

Property plant, and equipment		251,322		27,674,121			31,824,404		(a) (i)		59,749,847
Acquisition deposit		16,296,200		-			(16,296,200	)	(a) (ii)		-
Customer list		-		-			635,552		(a) (iii)		635,552
Goodwill		-		-			29,912,779		(a) (iv)		29,912,779

Total Assets	$	199,743,760	$	37,243,387		$	46,076,535			$	283,063,682

LIABILITIES AND EQUITY

Current liabilities
Bank overdraft	$	2,421,468	$	-		$	-			$	2,421,468
Lines of credit related to financing services		63,401,567		-			-				63,401,567
Short term borrowings		19,602,915		-			-				19,602,915
Current portion of payable to seller related to acquisition of Zhonghe		-		-			39,156,086		(a) (v)		39,156,086
Accounts payable		80,207		1,234			-				81,441
Notes payable to suppliers		13,036,960		-			-				13,036,960
Accrued expenses		361,077		97,090			-				458,167
Customer deposits		34,312,328		35,982			-				34,348,310
Deferred revenue		138,589		27,997			-				166,586
Due to shareholders		2,214,037		-			-				2,214,037
Due to director		501,597		-			-				501,597
Income tax payable		335,768		-			-				335,768
		136,406,513		162,303			39,156,086				175,724,902

Payable to seller related to acquisition of Zhonghe, net of current portion		-		-			35,768,625		(a) (v)		35,768,625
Deferred tax liabilities		-		-			8,149,838		(a) (vii)		8,149,838
		136,406,513		162,303			83,074,549				219,643,365
Total Liabilities

Equity
China Auto Logistics Inc. shareholders' equity
Preferred stock		-		-			-				-
Common stock		3,694		-			340		(b) (i)		4,034
Additional paid in capital		21,994,074		-			771,460		(b) (i)		22,765,534
Contributed capital		-		38,114,409			(38,114,409	)	(a) (vi)		-
Accumulated other comprehensive income
foreign currency translation adjustments		7,403,250		3,172,391			(3,089,321	)	(a) (vi)		7,486,320
Retained earnings		33,367,503		(4,205,716	)		3,433,916		(a) (vi),(b)		32,595,703
Total China Auto Logistics Inc. shareholders' equity		62,768,521		37,081,084			(36,998,014	)			62,851,591
Noncontrolling interests		568,726		-			-				568,726
Total equity		63,337,247		37,081,084			(36,998,014	)			63,420,317

Total liabilities and equity	$	199,743,760	$	37,243,387		$	46,076,535			$	283,063,682

The accompanying notes form an integral part of these unaudited pro forma financial statements

CHINA AUTO LOGISTICS INC.

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS

	China Auto
	Logistics			Zhonghe							Pro Forma
	Nine Months Ended			Nine Months Ended							Nine Months Ended
	September 30, 2013			September 30, 2013							September 30, 2013
	(unaudited)			(unaudited)			Adjustments			Note #	(unaudited)

Net revenue	$	343,370,742		$	20,465,465		$	-			$	363,836,207

Cost of revenue		337,757,403			19,660,034			-				357,417,437

Gross profit		5,613,339			805,431			-				6,418,770

Operating expenses
Sales and marketing		522,334			68,683			94,154		(c)		685,171
General and administrative		1,432,621			1,468,577			688,314		(d)		4,634,612
								1,016,600		(b)
								28,500		(e)

		1,954,955			1,537,260			1,827,568				5,319,783

Income (loss) from operations		3,658,384			(731,829	)		(1,827,568	)			1,098,987

Other income (expenses)
Interest income		367,186			47,805			-				414,991
Interest expense		(453,627	)		-			(2,362,830	)	(f)		(2,816,457	)
Foreign exchange loss		(198,624	)		-			-				(198,624	)
		(285,065	)		47,805			(2,362,830	)			(2,600,090	)

Income (loss) before income tax		3,373,319			(684,024	)		(4,190,398	)			(1,501,103	)

Income tax expense (benefit)		1,014,166			-			(793,450	)	(g)		220,716

Net income (loss)		2,359,153			(684,024	)		(3,396,948	)			(1,721,819	)

Less: Net income (loss) attributable to noncontrolling interest		(1,941	)		-			-				(1,941	)

Net income (loss) attributable to the Company	$	2,361,094		$	(684,024	)	$	(3,396,948	)		$	(1,719,878	)

Earnings (loss) per share attributable to the Company's shareholders
- basic and diluted	$	0.64									$	(0.43	)

Weighted average number of shares outstanding
- basic and diluted		3,694,394						340,000				4,034,394

The accompanying notes form an integral part of these unaudited pro forma financial statements

CHINA AUTO LOGISTICS INC.

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS

	China Auto
	Logistics			Zhonghe							Pro Forma
	Year Ended			Year Ended							Year Ended
	December 31, 2012			December 31, 2012							December 31, 2012
	(audited)			(audited)			Adjustments			Note #	(unaudited)

Net revenue	$	591,315,104		$	63,765,514		$	(5,993,916	)	(h)	$	649,086,702

Cost of revenue		580,057,718			62,392,989			(5,993,916	)	(h)		636,456,791

Gross profit		11,257,386			1,372,525			-				12,629,911

Operating expenses
Sales and marketing		977,555			192,214			123,743		(c)		1,293,512
General and administrative		2,036,436			2,219,203			852,402		(d)		6,835,741
								1,693,200		(b)
								34,500		(e)
Impairment loss of goodwill and intangible assets		4,661,201			-			-				4,661,201

		7,675,192			2,411,417			2,703,845				12,790,454

Income (loss) from operations		3,582,194			(1,038,892	)		(2,703,845	)			(160,543	)

Other income (expenses)
Interest income		230,916			2,934			-				233,850
Interest expense		(531,301	)		-			(3,128,881	)	(f)		(3,660,182	)
Loss on disposal of property and equipment		(172,043	)		-			-				(172,043	)
Gain on forgiveness of debt		1,139,861			-			-				1,139,861
Miscellaneous		(72,922	)		-			-				(72,922	)
		594,511			2,934			(3,128,881	)			(2,531,436	)

Income (loss) before income tax		4,176,705			(1,035,958	)		(5,832,726	)			(2,691,979	)

Income tax expense (benefit)		1,596,179			-			(1,034,882	)	(g)		561,297

Net income (loss)		2,580,526			(1,035,958	)		(4,797,844	)			(3,253,276	)

Less: Net income (loss) attributable to noncontrolling interest		13,439			-			-				13,439

Net income (loss) attributable to the Company	$	2,567,087		$	(1,035,958	)	$	(4,797,844	)		$	(3,266,715	)

Earnings (loss) per share attributable to the Company's shareholders
- basic and diluted	$	0.69									$	(0.81	)

Weighted average number of shares outstanding
- basic and diluted		3,694,394						340,000				4,034,394

The accompanying notes form an integral part of these unaudited pro forma financial statements

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.	Basis of Presentation

On November 30, 2013, Tianjin Binhai Shisheng Trading Group Co., Ltd. (“Shisheng”), a wholly-owned subsidiary of China Auto Logistics Inc. (the “Company” or “China Auto Logistics”), signed an Equity Transfer Agreement (the “Automall Acquisition Agreement”) with Hezhong (Tianjin) International Development Co., Ltd. (“Hezhong”) to purchase 100% of the equity of Tianjin Zhonghe Auto Sales Service Co., Ltd. (“Zhonghe”), which owns and operates the Airport International Automall located in the Tianjin Airport Economic Area (the “Automall Acquisition”).

Under the terms of the Automall Acquisition Agreement, Shisheng would pay RMB 559,768,000 (approximately $91.2 million) to Hezhong, in four annual installments with an annualized rate of interest of 6%. The initial payment of RMB 240,000,000 (approximately $39.2 million) was paid within 5 business days after the signing of the Agreement. Upon the payment by Shisheng of this first installment, Hezhong would transfer control of Zhonghe to Shisheng. Failure by Shisheng to pay the remaining installments may result in the termination of the Automall Acquisition Agreement, as well as a penalty of 10% of the total transfer price.

The unaudited pro forma consolidated balance sheet as of September 30, 2013, presents the proforma effects of the acquisition of Zhonghe as if the acquisition had occurred on September 30, 2013. The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2013 and the fiscal year ended December 31, 2012, present the pro forma effects as if the acquisition had occurred on January 1, 2013 and January 1, 2012, respectively.

2.	Notes Regarding the Unaudited Pro Forma Adjustments

(a)

Purchase Accounting Entries:

(i)

To record the fair value increase on the real estate property over its carrying value.

(ii)

To apply the acquisition deposit to offset the initial payment of the purchase price of Zhonghe.

(iii)

To record identified intangible assets - customer list.

(iv)

To record goodwill representing the excess of the purchase price over the identified tangible and intangible assets of Zhonghe.

(v)

To record payable to seller for the purchase price of Zhonghe.

(vi)

To eliminate Zhonghe’s contributed capital, accumulated deficit of $4,205,716 and accumulated other comprehensive income of Zhonghe.

(vii)

To record the deferred tax effects on differences between acquired assets’ fair value and income tax basis.

(b)

To record the issuance of 340,000 shares of common stock to Pegasus Evolution Co. and Miao Jing pursuant to the terms of the consulting agreements.

(c)

Amortization of customer list acquired over an amortization period of five years.

(d)

Additional depreciation on the excess of the fair value over the carrying value of the real estate property acquired for the fair value over the carrying value over the estimated economic useful lives.

(e)

Consulting fees related to due diligence service performed on Zhonghe and professional fees related to purchase price allocation service.

(f)

Interest expense on payable to seller related to acquisition of Zhonghe at a rate of 6% per annum.

(g)

Estimated income tax effects on the adjustments related to additional depreciation expense, interest expense, consulting fees related to due diligence service performed on Zhonghe and fees related to purchase price allocation service.

(h)

Eliminate revenue and cost of revenue between China Auto Logistics and Zhonghe.

China Auto Logistics Inc - FORM 8-K/A - EX-99.3 - UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - February 13, 2014

Attached files

China Auto Logistics Inc Reports