8-K/A 1 chinadigcomb8ka.txt FORM 8K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) September 30, 2004 ------------------ China Digital Communication Group -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 333-64804 91-2132336 -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2/F North Wondial Building, Keji South 6 Road, Shenzhen High-Tech Industrial Park, Shennan Avenue, Shenzhen, P.R. China -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 86-755-38252698 ---------------- Jasmine's Garden ---------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 9.01 Financial Statements and Exhibits. In the Amended 8K filed by the Company, only Unaudited Pro Forma Financial Statements for the acquired business were provided. The Company now provides Audited Financial Statements for FYE 2002 and FYE 2003 as well as updated more complete Pro Forma Financial Statements. The Audited and Pro Forma Statements were provided by Lichter, Weil & Associates, Certified Public Accountants, 9191 Towne Center Drive, Suite 406, San Diego, California 92122 (858) 320-2850. The following Exhibits are attached hereto: Exhibit 1 - Audited Financial Statements for Shenzhen E'Jenie Science & Technology Company Limited for FYE 2002 Exhibit 2 - Audited Financial Statements for Shenzhen E'Jenie Science & Technology Company Limited for FYE 2003 Exhibit 3 - Unaudited Pro Forma Combined Condensed Financial Statement for Shenzhen E'Jenie Science & Technology Company Limited for FYE 2003 Exhibit 4 - Unaudited Pro Forma Combined Condensed Financial Statement for Shenzhen E'Jenie Science & Technology Company Limited as at September 30, 2004 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CHINA DIGITAL COMMUNICATION GROUP By: /s/ YiBo Sun ----------------------------------- Name: YiBo Sun Title: Chief Executive Officer Dated: December 15, 2004 ================================================================================ Exhibit 1 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED FINANCIAL STATEMENTS DECEMBER 31, 2002 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED FINANCIAL STATEMENTS DECEMBER 31, 2002 TABLE OF CONTENTS Independent Auditor's Report 2 Statement of Financial Position 3 Statement of Operations 4 Statement of Cash Flow 5 Statement of Changes in Stockholders' Equity 6 Notes to Financial Statements 7 1 INDEPENDENT AUDITOR'S REPORT ---------------------------- To the Board of Directors and Stockholders Shenzhen E'Jenie Science & Technology Company Limited We have audited the accompanying Statement of Financial Position of Shenzhen E'Jenie Science & Technology Company Limited ("the Company") as of December 31, 2002 and the related Statement of Operations, Changes in Stockholders' Equity and Cash Flows for the period from inception (July 1, 2002) through December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Shenzhen E'Jenie Science & Technology Company Limited as of December 31, 2002 and the results of its operations and cash flows for the period from inception (July 1, 2002) through December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. November 8, 2004 San Diego, California 2 SHENZHEN E' JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2002 ASSETS ------ Current Assets Cash and cash equivalents $24,444 Accounts receivable, net 282,614 Due from related party 48,268 Other receivables 52,767 Prepaid expenses 425 -------------- Total Current Assets 408,518 -------------- Fixed Assets, net 34,443 -------------- Total Fixed Assets 34,443 -------------- Total Assets $442,961 ============== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities Accounts payable and accrued expenses $175,988 Due to related party 96,019 Current portion, obligation under finance lease 3,240 Provision for value-added tax 43,941 Provision for income tax 7,969 -------------- Total Current Liabilities 327,157 -------------- Long-term debt, net of current portion Obligation under finance lease 5,476 Employees' welfare reserve 4,926 -------------- 10,402 -------------- Total Liabilities 337,559 -------------- Stockholders' Equity Registered share capital 60,338 Cumulative foreign currency translation adjustment (4) Retained earnings 45,068 -------------- Total Stockholders' Equity 105,402 -------------- Total Liabilities and Stockholders' Equity $442,961 ============== See Accompanying Notes and Auditor's Report 3 SHENZHEN E' JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED STATEMENT OF OPERATIONS FROM INCEPTION (JULY 1, 2002) THROUGH DECEMBER 31, 2002 Sales, net $284,299 Cost of sales 198,221 -------------- Gross profit 86,078 Selling, general and administrative expenses 35,688 -------------- Income from operations 50,390 -------------- Other (Income)/Expense Interest income (19) Rent income (2,930) (Gain)/Loss on currency exchange 12 Interest expense 199 Miscellaneous expense 91 -------------- Total Other (Income) (2,647) -------------- Income before income taxes 53,037 Provison for income taxes 7,969 -------------- Net income $45,068 ============== Earnings Per Share, Basic and Diluted $90 ============== See Accompanying Notes and Auditor's Report 4 SHENZHEN E' JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED STATEMENT OF CASH FLOWS FROM INCEPTION (JULY 1, 2002) THROUGH DECEMBER 31, 2002 CASH FLOWS FROM OPERATING ACTIVITIES Net income $45,068 Adjustments to reconcile net income to net cash provided by/(used in) operating activities: Depreciation 3,762 (Increase) in receivables (282,614) (Increase) in other receivables (52,767) (Increase) in prepaid expenses (425) Increase in accounts payable and accrued expenses 175,988 Increase in employee welfare reserve 4,926 Increase in provision for income tax 7,969 Increase in provision for value-added tax 43,941 -------------- Total Adjustments (99,220) -------------- Net cash used in operations (54,152) -------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of furniture and equipment (38,205) -------------- Net cash used in investing activities (38,205) -------------- CASH FLOWS FROM FINANCING ACTIVITIES Inception of finance lease 10,016 Payment on finance lease (1,300) Loan from related party 96,019 Loan to related party (48,268) Issuance of stock 60,338 -------------- Net cash provided by financing activities 116,805 -------------- Effect of exchange rate (4) -------------- Net change in cash and cash equivalents 24,444 Cash and cash equivalents at beginning of period 0 -------------- Cash and cash equivalents at end of year $24,444 ============== Supplemental cash flows disclosures: Income tax payments $0 -------------- Interest payments $199 -------------- See Accompanying Notes and Auditor's Report 5 SHENZHEN E' JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FROM INCEPTION (JULY 1, 2002) THROUGH DECEMBER 31, 2002 Registered share capital outstanding Balance at beginning of period $0 Shares issued 60,338 -------------- Balance at end of year 60,338 ============== Cumulative foreign-exchange translation adjustment Balance at beginning of period 0 Foreign currency translation (4) -------------- Balance at end of year (4) ============== Retained earnings Balance at beginning of period 0 Net income 45,068 -------------- Balance at end of year 45,068 -------------- Total stockholders' equity at end of year $105,402 ============== See Accompanying Notes and Auditor's Report 6 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2002 Note A - ORGANIZATION ------------ Shenzhen E'Jenie Science & Technology Company Limited, was legally established on July 8, 2002 under the laws of the Peoples' Republic of China. When used in these notes, the terms "Company, we, our" means Shenzhen E'Jenie Science & Technology Company Limited. The Company is in the business of developing and producing metal battery casings for use in the cellular telecommunications industry. Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Revenue Recognition ------------------- Revenue from sales of products to customers is recognized upon shipment or when title passes to customers based on the terms of the sales, and is recorded net of returns, discounts and allowances. Risks and Uncertainties ----------------------- The Company is subject to substantial risks from, among other things, rapid change in technology, rapidly changing customer requirements, limited operating history, and the volatility of public markets. Contingencies ------------- Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. 7 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------- Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include collectibility of accounts receivable, accounts payable, sales returns and recoverability of long-term assets. Fixed Assets ------------ Property and equipment are stated at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, or the remaining term of the lease, as follows: Furniture and Fixtures 5 years Equipment 5 -10 years Computer Hardware and Software 2- 5 years Exchange Gain (Loss): --------------------- During year ended December 31, 2002, the transactions of Shenzhen E'Jenie were denominated in a foreign currency and are recorded in the Chinese Yuan Renminbi at the rates of exchange in effect when the transactions occur. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled. Translation Adjustment ---------------------- As of December 31, 2002, the accounts of the Company were maintained, and their financial statements were expressed, in the Chinese Yuan Renminbi (CNY). Such financial statements were translated into U.S. Dollars (USD) in accordance with Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency Translation", with the CNY as the functional currency. According to the Statement, all assets and liabilities were translated at the current exchange rate, stockholder's equity are translated at the historical rates and income statement items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income". As of December 31, 2002, the exchange rates between CNY and the USD was USD$1=CNY$8.28710 The weighted-average rate of exchange between CNY and USD was USD$1 = CNY$8.28687 Total translation adjustment recognized for the period ended December 31, 2002 is $(4.00). 8 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------- Fair Value of Financial Instruments ----------------------------------- The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of the Company's financial instruments, including accounts receivable (trade and related party), notes receivable and accounts payable (trade and related party), and accrued expenses, the carrying amounts approximate fair value due to their short maturities. The amounts owed for long-term debt also approximates fair value because interest rates and terms offered to the Company are at current market rates. Statement of Cash Flows ----------------------- In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows", cash flows from the Company's operations is based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Concentration of Credit Risk ---------------------------- Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for un-collectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. Inventory --------- Inventory is valued at the lower of cost or market. Cost is determined on the weighted average method. As of December 31, 2002 the Company had no inventory on hand. 9 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------- Cash and Cash Equivalents ------------------------- The Company considers all highly liquid investments purchased with initial maturities of three months or less to be cash equivalents. Advertising ----------- Advertising costs are expensed in the year incurred. Income Taxes ------------ Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Taxes are based on the laws and regulations of the Peoples' Republic of China. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in SFAS No. 109, "Accounting for Income Taxes". As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Earnings Per Share ------------------ The Company uses SFAS No. 128, "Earnings Per Share", for calculating the basic and diluted earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share are computed similar to basic earnings per share except that the denominator is increased to include common stock equivalents, if any, as if the potential common shares had been issued. Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of ----------------------------------------------------------------------- The Company adopted the provision of FASB No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair values of the assets. In assessing the impairment of these identifiable intangible assets, identifiable goodwill will be allocated on a pro rata basis using fair values of the assets at the original acquisition date. In estimating expected future cash flows for determining whether an asset is impaired and if expected future cash flows are used in measuring assets that are impaired, assets will be grouped at the lowest level (entity level) for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. In recording an impairment loss, any related goodwill would be reduced to zero before reducing the carrying amount of any identified impaired asset. 10 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 Note C - CASH ----- The Company maintains its cash balances at various banks in China. All balances are insured by the Central Deposit Insurance Corporation (CDIC). As of December 31, 2002, there were no uninsured portions of the balances held at the banks. Note D - FIXED ASSETS ------------ Fixed assets consist of the following: 2002 ---- Machinery and equipment 23,616 Transportation equipment 14,336 Furniture and fixtures 253 ------ $38,205 Accumulated depreciation (3,762) ------ $34,443 ====== Note E- COMMITTMENTS ------------ The Company leases facilities under operating leases that are month to month. Rental expense for these leases consisted of $9,712 for the six months ended December 31, 2002. 11 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 Note F - INCOME TAXES ------------ Total income taxes are based on the income tax laws of the Peoples' Republic of China. Based on these laws the income tax is 15% of the net income of the Company. The Company has accordingly accrued $7,969 in income tax expense as of December 31, 2002. Note G - DEBT ---- At December 31, 2002, the Company had notes payable outstanding in the aggregate amount of $8,716. Payable as follows: Notes payable to a bank in China, interest at 5.0% per annum, 36 monthly installment payments of $300 $ 8,716 Current portion 3,240 ------- Long-term portion $ 5,476 ======= Note H - RELATED PARTY TRANSACTIONS -------------------------- Throughout the history of the Company, certain members of the Board of Directors, stockholders and general management have made loans to the Company to cover operating expenses or operating deficiencies. The Company has also loaned money to relatives and associates of the major stockholder of the Company. These amounts do not bear interest and are not collateralized. At December 31, 2002 the Company had a loan receivable from another company which is owned by a relative of one of the major stockholder's of the Company in the amount of $48,268. The Company also had a loan payable to two stockholders and two related companies that amounted to $96,019. 12 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2002 Note I - FAIR VALUE OF FINANCIAL INSTRUMENTS ----------------------------------- The carrying amounts of cash and cash equivalents, accounts receivable, deposits and accounts payable approximate their fair value because of the short maturity of those instruments. The carrying amounts of the Company's long-term debt approximate their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms. Note J - CONCENTRATION ------------- The Company sells its products to original equipment manufacturers throughout China. The Company performs ongoing credit evaluations of its customers' financial condition. At December 31, 2002, four customers, each of who accounted for more than 5% of the Company's annual sales, accounted for 89% of total sales and 95% of the accounts receivable at year end. Note K - SUBSEQUENT EVENTS ----------------- LOAN - On July 31, 2004 the Company entered into a loan agreement with ---- a financial institution in China. The loan amount is $241,345, payable on July 30, 2005, bearing interest at the rate of 5.31% per annum. DIVIDEND - Subsequent to December 31, 2003 the Company declared and -------- paid a dividend of $90,500. EXCHANGE AGREEMENT - On August 8, 2004, the shareholders of the Company ------------------ transferred all of their shares of stock to a British Virgin Islands (BVI) corporation in exchange for equal shares and ownership of the BVI corporation stock. The BVI corporation is Billion Electronics Co Limited. On October 11, 2004, Billion Electronics Co., Ltd, entered into an exchange agreement with China Digital Communication Group, a United States publicly traded company. Pursuant to the Exchange Agreement, the Company agrees to purchase all of the issued and outstanding shares of Billion from the shareholders for approximately $1,500,000 and 4,566,210 shares of the Company's common stock, or approximately 8.7% of the total issued and outstanding shares. 13 ================================================================================ Exhibit 2 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 TABLE OF CONTENTS Independent Auditor's Report 2 Statements of Financial Position 3 Statements of Operations 4 Statements of Cash Flow 5 Statements of Changes in Stockholders' Equity 6 Notes to Financial Statements 7 1 INDEPENDENT AUDITOR'S REPORT ---------------------------- To the Board of Directors and Stockholders Shenzhen E'Jenie Science & Technology Company Limited We have audited the accompanying Statements of Financial Position of Shenzhen E'Jenie Science & Technology Company Limited ("the Company") as of December 31, 2003 and 2002 and the related Statements of Operations, Changes in Stockholders' Equity and Cash Flows for the periods from inception (July 1, 2002) through December 31, 2002 and the year ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Shenzhen E'Jenie Science & Technology Company Limited as of December 31, 2003 and 2002 and the results of its operations and cash flows for the periods from inception (July 1, 2002) through December 31, 2002 and for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. November 8, 2004 San Diego, California 2 SHENZHEN E' JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2003 AND 2002
ASSETS ------ 2003 2002 --------------- -------------- Current Assets Cash and cash equivalents $101,425 $24,444 Accounts receivable, net 509,493 282,614 Inventory 117,017 0 Due from related parties 182,977 48,268 Other receivables 56,832 52,767 Prepaid expenses 0 425 --------------- -------------- Total Current Assets 967,744 408,518 --------------- -------------- Fixed Assets, net 47,017 34,443 --------------- -------------- Total Fixed Assets 47,017 34,443 --------------- -------------- Total Assets $1,014,761 $442,961 =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities Accounts payable and accrued expenses $414,473 $175,988 Due to related party 26,547 96,019 Current portion, obligation under finance lease 3,409 3,240 Provision for value-added tax 277,183 43,941 Provision for income tax 33,906 7,969 --------------- -------------- Total Current Liabilities 755,518 327,157 --------------- -------------- Long-term debt, net of current portion Obligation under finance lease 2,067 5,476 Employees' welfare reserve 19,609 4,926 --------------- -------------- 21,676 10,402 --------------- -------------- Total Liabilities 777,194 337,559 --------------- -------------- Stockholders' Equity Registered share capital 60,338 60,338 Cumulative foreign currency translation adjustment 9 (4) Retained earnings 177,220 45,068 --------------- -------------- Total Stockholders' Equity 237,567 105,402 --------------- -------------- Total Liabilities and Stockholders' Equity $1,014,761 $442,961 =============== ==============
See Accompanying Notes and Auditor's Report 3 SHENZHEN E' JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED STATEMENTS OF OPERATIONS FOR THE PERIOD FROM INCEPTION (JULY 1, 2002) THROUGH DECEMBER 31, 2002 AND FOR THE YEAR ENDED DECEMBER 31, 2003
2003 2002 --------------- -------------- See Accompanying Notes and Auditor's Report 4 SHENZHEN E' JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM INCEPTION (JULY 1, 2002) THROUGH DECEMBER 31, 2002 AND FOR THE YEAR ENDED DECEMBER 31, 2003
2003 2002 --------------- -------------- See Accompanying Notes and Auditor's Report 5 SHENZHEN E' JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION (JULY 1, 2002) THROUGH DECEMBER 31, 2002 AND FOR THE YEAR ENDED DECEMBER 31, 2003
2003 2002 --------------- -------------- See Accompanying Notes and Auditor's Report 6 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 Note A - ORGANIZATION ------------ Shenzhen E'Jenie Science & Technology Company Limited, was legally established on July 8, 2002 under the laws of the Peoples' Republic of China. When used in these notes, the terms "Company, we, our" means Shenzhen E'Jenie Science & Technology Company Limited. The Company is in the business of developing and producing metal battery casings for use in the cellular telecommunications industry. Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Revenue Recognition ------------------- Revenue from sales of products to customers is recognized upon shipment or when title passes to customers based on the terms of the sales, and is recorded net of returns, discounts and allowances. Risks and Uncertainties ----------------------- The Company is subject to substantial risks from, among other things, rapid change in technology, rapidly changing customer requirements, limited operating history, and the volatility of public markets. Contingencies ------------- Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. 7 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2003 AND 2002 Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------- Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include collectibility of accounts receivable, accounts payable, sales returns and recoverability of long-term assets. Fixed Assets ------------ Property and equipment are stated at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, or the remaining term of the lease, as follows: Furniture and Fixtures 5 years Equipment 5 -10 years Computer Hardware and Software 2- 5 years Exchange Gain (Loss): --------------------- During periods ended December 31, 2003 and 2002, the transactions of Shenzhen E'Jenie were denominated in a foreign currency and are recorded in the Chinese Yuan Renminbi at the rates of exchange in effect when the transactions occur. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled. Translation Adjustment ---------------------- As of December 31, 2003 and 2002, the accounts of the Company were maintained, and their financial statements were expressed, in the Chinese Yuan Renminbi (CNY). Such financial statements were translated into U.S. Dollars (USD) in accordance with Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency Translation", with the CNY as the functional currency. According to the Statement, all assets and liabilities were translated at the current exchange rate, stockholder's equity are translated at the historical rates and income statement items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income". As of December 31, 2003 and 2002, the exchange rates between CNY and the USD was USD$1=CNY8.28670 and USD$1=CNY8.28710, respectively. The weighted-average rate of exchange between CNY and USD was USD$1=CNY8.28715 and USD$1 = CNY8.28687, respectively. Total translation adjustment recognized for the periods ended December 31, 2003 and 2002 was $9.00 and $(4.00), respectively. 8 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2003 AND 2002 Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------- Fair Value of Financial Instruments ----------------------------------- The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of the Company's financial instruments, including accounts receivable (trade and related party), notes receivable and accounts payable (trade and related party), and accrued expenses, the carrying amounts approximate fair value due to their short maturities. The amounts owed for long-term debt also approximates fair value because interest rates and terms offered to the Company are at current market rates. Statement of Cash Flows ----------------------- In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows", cash flows from the Company's operations is based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Concentration of Credit Risk ---------------------------- Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for un-collectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. Inventory --------- Inventory is valued at the lower of cost or market. Cost is determined on the weighted average method. As of December 31, 2003 the Company's inventory was comprised entirely of finished goods. As of December 31, 2002 the Company had no inventory on hand. 9 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2003 AND 2002 Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------- Cash and Cash Equivalents ------------------------- The Company considers all highly liquid investments purchased with initial maturities of three months or less to be cash equivalents. Advertising ----------- Advertising costs are expensed in the year incurred. Income Taxes ------------ Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Taxes are based on the laws and regulations of the Peoples' Republic of China. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in SFAS No. 109, "Accounting for Income Taxes". As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Earnings Per Share ------------------ The Company uses SFAS No. 128, "Earnings Per Share", for calculating the basic and diluted earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share are computed similar to basic earnings per share except that the denominator is increased to include common stock equivalents, if any, as if the potential common shares had been issued. Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of ----------------------------------------------------------------------- The Company adopted the provision of FASB No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair values of the assets. In assessing the impairment of these identifiable intangible assets, identifiable goodwill will be allocated on a pro rata basis using fair values of the assets at the original acquisition date. In estimating expected future cash flows for determining whether an asset is impaired and if expected future cash flows are used in measuring assets that are impaired, assets will be grouped at the lowest level (entity level) for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. In recording an impairment loss, any related goodwill would be reduced to zero before reducing the carrying amount of any identified impaired asset. 10 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2003 AND 2002 Note C - CASH ---- The Company maintains its cash balances at various banks in China. All balances are insured by the Central Deposit Insurance Corporation (CDIC). As of December 31, 2003 and 2002, there were no uninsured portions of the balances held at the banks. Note D - FIXED ASSETS ------------ Fixed assets consist of the following: 2003 2002 ---- ---- Machinery and equipment $ 42,643 $ 23,616 Transportation equipment 14,336 14,336 Furniture and fixtures 3,279 253 ------ ------ 60,258 38,205 Accumulated depreciation (13,241) (3,762) ------ ------ $ 47,017 $ 34,443 ====== ====== Note E- COMMITTMENTS ------------ In 2002 the Company leased facilities under operating leases that were month to month. Rental expense for these leases consisted of $9,712 for the six months ended December 31, 2002. As of December 31, 2003 the company leased office facilities and employee quarters under an operating lease agreement through April 30, 20011. The lease agreement is for monthly payments of $6,824. Future minimum amounts required under this agreement are as follows: For the year ending: 2004 $ 81,900 2005 81,900 2006 81,900 2007 81,900 2008 81,900 2009 and thereafter 191,100 ------- $ 600,000 ======= 11 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2003 AND 2002 Note F - INCOME TAXES ------------ Total income taxes are based on the income tax laws of the Peoples' Republic of China. Based on these laws the income tax is 15% of the net income of the Company. The Company has accordingly accrued $33,906 and $7,969 in income tax expense as of December 31, 2003 and 2002, respectively. Note G - DEBT ---- At December 31, 2003 and 2002, the Company had notes payable outstanding in the aggregate amount of $5,476 and $8,716, respectively. Payable as follows: 2003 2002 ---- ---- Notes payable to a bank in China, interest at 5.0% per annum, 36 monthly installment payments of $300 $5,476 $ 8,716 Current portion 3,409 3,240 ------- ------- Long-term portion $2,067 $ 5,476 ======= ======= Note H - RELATED PARTY TRANSACTIONS -------------------------- Throughout the history of the Company, certain members of the Board of Directors, stockholders and general management have made loans to the Company to cover operating expenses or operating deficiencies. The Company has also loaned money to relatives and associates of the major stockholders of the Company. These amounts do not bear interest and are not collateralized. At December 31, 2003 the Company had loans receivable from two companies owned by related parties and loans receivable from two stockholders of the Company, which total $182,977. The Company also had loans payable to one company owned by a related party and to one stockholder, which total $26,547. At December 31, 2002 the Company had a loan receivable from another company which is owned by a relative of one of the major stockholder's of the Company in the amount of $48,268. The Company also had a loan payable to two stockholders and two related companies that amounted to $96,019. 12 SHENZHEN E'JENIE SCIENCE & TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2003 AND 2002 Note I - FAIR VALUE OF FINANCIAL INSTRUMENTS ----------------------------------- The carrying amounts of cash and cash equivalents, accounts receivable, deposits and accounts payable approximate their fair value because of the short maturity of those instruments. The carrying amounts of the Company's long-term debt approximate their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms. Note J - CONCENTRATION ------------- The Company sells its products to original equipment manufacturers throughout China. The Company performs ongoing credit evaluations of its customers' financial condition. At December 31, 2003, four customers, each of who accounted for more than 5% of the Company's annual sales, accounted for 79% of total sales and 84% of the accounts receivable at year end. At December 31, 2002, four customers, each of who accounted for more than 5% of the Company's annual sales, accounted for 89% of total sales and 95% of the accounts receivable at year end. Note K - SUBSEQUENT EVENTS ----------------- LOAN - On July 31, 2004 the Company entered into a loan agreement with ---- a financial institution in China. The loan amount is $241,345, payable on July 30, 2005, bearing interest at the rate of 5.31% per annum. DIVIDEND - Subsequent to December 31, 2003 the Company declared and -------- paid a dividend of $90,500. EXCHANGE AGREEMENT - On August 8, 2004, the shareholders of the Company ------------------transferred all of their shares of stock to a British Virgin Islands (BVI) corporation in exchange for equal shares and ownership of the BVI corporation stock. The BVI corporation is Billion Electronics Co Limited. On October 11, 2004, Billion Electronics Co., Ltd, entered into an exchange agreement with China Digital Communication Group, a United States publicly traded company. Pursuant to the Exchange Agreement, the Company agrees to purchase all of the issued and outstanding shares of Billion from the shareholders for approximately $1,500,000 and 4,566,210 shares of the Company's common stock, or approximately 8.7% of the total issued and outstanding shares. 13 ================================================================================ Exhibit 3 The accompanying condensed financial statements illustrate the effect of the stock exchange agreement between China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited, on the Company's financial position and results of operations. The pro forma condensed consolidated balance sheet as September 30, 2004 is based on the historical balance sheets of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited, as of that date. The pro forma condensed combined balance sheet assumes the acquisition took place on January 1, 2004. The pro forma condensed consolidated balance sheet as December 31, 2003 is based on the historical balance sheets of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited, as of that date. The pro forma condensed combined balance sheet assumes the acquisition took place on January 1, 2003. The pro forma condensed combined statements of operations for the year ended December 31, 2003 is based on the historical statements of operations of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited, and assumes the acquisition took place on January 1, 2003. The pro forma condensed combined statement of operations for the nine months ended September 30, 2004 is based on the historical statements of operations of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited and assumes the acquisition took place on January 1, 2004. The pro forma condensed combined financial statements may not be indicative of the actual results of the acquisition and there can be no assurance that the foregoing results will be obtained. In particular, the pro form condensed combined financial statements are based on management's current estimates of the exchange agreement. The actual may differ. The accompanying pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited China Digital Communication Group (formerly known as Jasmine's Garden) UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET December 31, 2003
December 31, 2003 December 31, 2003 -------------------- ---------------------- China Digital Shenzhen E'Jenie Communication Science & Group (f/k/a) Technology Company Jasmine's Garden Limited Pro Forma Adjustments Pro Forma -------------------- --------------------- --------------------- -------------------- Assets Current Assets Cash and cash equivalents $21,221 $101,425 $122,646 Accounts receivable - 509,493 509,493 Inventory - 117,017 117,017 Due from related party - 182,977 182,977 Other receivables - 56,832 56,832 --------------------- --------------------- -------------------- Total Current Assets 21,221 967,744 988,965 Fixed assets, net - 47,017 47,017 --------------------- --------------------- --------------------- Total Assets $21,221 $1,014,761 $1,035,982 ===================== ===================== ===================== Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 5,000 $ 414,473 (2) 17,000 $436,473 Due to related party - 26,547 26,547 Current portion under finance lease - 3,409 3,409 Provision for value added tax - 277,183 277,183 Provision for income tax - 33,906 33,906 --------------------- --------------------- --------------------- Total Current Liabilites 5,000 755,518 777,518 Obligation under finance lease - 2,067 2,067 Employee welfare reserve - 19,609 19,609 --------------------- --------------------- --------------------- Total Liabilities 5,000 777,194 799,194 --------------------- --------------------- --------------------- Stockholders' Equity Common stock 6,015 - 6,015 Registered share capital - 60,338 (1) (60,338) - Additional paid in capital 15,385 - (1) 134,624 150,009 Cumulative foreign currency translation - 9 9 Retained earnings (5,179) 177,220 (1) (74,286) 80,755 (2) (17,000) --------------------- --------------------- -------------------- --------------------- Total Stockholders' Equity 16,221 237,567 236,788 --------------------- --------------------- --------------------- Total Liabilities and Stockholders' Equity $21,221 $1,014,761 $0 $1,035,982 ===================== ===================== ==================== =====================
China Digital Communication Group (formerly known as Jasmine's Garden) UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT For the Year Ended December 31, 2003
Historical Pro Forma --------------------------------------------- China Digital Shenzhen E'Jenie Communication Science & Group (f/k/a) Technology Company Jasmine's Garden Limited Adjustments Pro Forma -------------------- --------------------- ------------------- -------------------- Sales revenue $808 $2,061,528 $2,062,336 -------------------- --------------------- -------------------- 808 2,061,528 2,062,336 Cost of goods sold 579 1,810,126 1,810,705 -------------------- --------------------- -------------------- 579 1,810,126 1,810,705 Gross Profit 229 251,402 251,631 -------------------- --------------------- -------------------- General, selling and administrative expenses 6,028 116,713 (2) 17,000 139,741 -------------------- --------------------- ------------------- -------------------- Operating income ( loss ) (5,799) 134,689 (17,000) 111,890 -------------------- --------------------- ------------------- -------------------- Nonoperating income ( expense ) Interest income - 43 43 Rent income - 27,209 27,209 Other income 6,581 (145) 6,436 Interest expenses - (3,754) (3,754) Gain/(loss) on currencly translation - 47 47 -------------------- --------------------- -------------------- Total nonoperating income ( expenses ) 6,581 23,400 29,981 -------------------- --------------------- -------------------- Income ( loss ) before provision for income tax 782 158,089 141,871 Provision for income taxes - 25,937 25,937 -------------------- --------------------- -------------------- Net income ( loss ) $782 $132,152 ($17,000) $115,934 ==================== ===================== =================== ====================
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS 1. Basis for Pro Forma Presentation The unaudited pro forma combined condensed financial statements of Shenzhen E'Jenie Science & Technology Company Limited have been prepared on the basis of assumptions relating to the stock exchange agreement between China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited and management's best estimates. 2. Pro Forma Adjustments Certain adjustments have been made to the historical financial statements in order to prepare the pro forma financial information as if the transaction had occurred at the beginning of the fiscal period presented. The adjustments are as follows: (1) To eliminate the equity of Shenzhen E'Jenie Science & Technology Company Limited. (2) To accrue estimated costs to consummate the transaction. ================================================================================ Exhibit 4 The accompanying condensed financial statements illustrate the effect of the stock exchange agreement between China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited, on the Company's financial position and results of operations. The pro forma condensed consolidated balance sheet as September 30, 2004 is based on the historical balance sheets of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited, as of that date. The pro forma condensed combined balance sheet assumes the acquisition took place on January 1, 2004. The pro forma condensed consolidated balance sheet as December 31, 2003 is based on the historical balance sheets of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited, as of that date. The pro forma condensed combined balance sheet assumes the acquisition took place on January 1, 2003. The pro forma condensed combined statements of operations for the year ended December 31, 2003 is based on the historical statements of operations of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited, and assumes the acquisition took place on January 1, 2003. The pro forma condensed combined statement of operations for the nine months ended September 30, 2004 is based on the historical statements of operations of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited and assumes the acquisition took place on January 1, 2004. The pro forma condensed combined financial statements may not be indicative of the actual results of the acquisition and there can be no assurance that the foregoing results will be obtained. In particular, the pro form condensed combined financial statements are based on management's current estimates of the exchange agreement. The actual may differ. The accompanying pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited China Digital Communication Group (formerly known as Jasmine's Garden) UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET September 30, 2004
September 30, 2004 September 30, 2004 Pro Forma -------------------------------------------- China Digital Communication Group Shenzhen E'Jenie (f/k/a) Jasmine's Science & Technology Assets Garden Company Limited Adjustments Pro Forma -------------------- ------------------- ----------- ----------- Current Assets Cash and cash equivalents 24,915 130,852 155,767 Accounts receivable - 1,337,093 1,337,093 Inventory - 152,295 152,295 Due from related party - 139,047 139,047 Deposit 1,492,900 - 1,492,900 Other receivables - 55,447 55,447 -------------------- ------------------- ----------- Total Current Assets 1,517,815 1,814,734 3,332,549 -------------------- ------------------- ----------- Fixed assets, net - 184,711 184,711 -------------------- ------------------- ----------- Total Assets 1,517,815 1,999,445 3,517,260 ==================== =================== =========== Liabilities and Stockholders' Equity Current Liabilities Short-term borrowing 105,443 241,345 346,788 Accounts payable - 535,572 (2) 17,000 552,572 Due to related party - 12,067 12,067 Current portion, obligation under lease - 2,446 2,446 Provision for value-added tax - 558,098 558,098 Provision for income tax - 105,384 105,384 -------------------- -------------------- ----------- Total Current Liabilites 105,443 1,454,912 1,577,355 Employee welfare reserve - 59,694 59,694 -------------------- -------------------- ----------- Total Liabilities 105,443 1,637,049 Stockholders' Equity Common stock 47,975 - 47,975 Legal reserve/share capital - 60,338 (1) (60,338) - Additional paid in capital 6,377,025 - 174,929 6,551,954 Cumulative foreign currency translation - 13 13 Retained earnings (5,012,628) 424,488 (1) (114,591) (4,719,731) (2) (17,000) -------------------- --------------------- --------------- ----------- Total Stockholders' Equity 1,412,372 1,880,211 -------------------- --------------------- --------------- ----------- Total Liabilities and Stockholders' Equity 1,517,815 1,999,445 0 3,517,260 ==================== ===================== =============== ===========
China Digital Communication Group (formerly known as Jasmine's Garden) UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT For the Period January 1, 2004 through September 30, 2004
Historical Pro Forma ----------------------------------------- China Digital Shenzhen E'Jenie Communication Science & Group (f/k/a) Technology Company Jasmine's Garden Limited Adjustments Pro Forma ---------------- ------------------- --------------- ----------- Sales revenue 760 2,759,777 2,760,537 ---------------- ------------------- ----------- 760 2,759,777 2,760,537 Cost of goods sold 567 2,196,503 2,197,070 ---------------- ------------------- ----------- 567 2,196,503 2,197,070 Gross Profit 193 563,274 563,467 ---------------- ------------------- ----------- General, selling and administrative expenses 675 161,840 (2) 17,000 179,515 ---------------- ------------------- --------------- ----------- Operating income ( loss ) (482) 401,434 (17,000) 383,952 ---------------- ------------------- --------------- ----------- Nonoperating income ( expense ) Rent income - 2,756 2,756 Other income 2,608 - 2,608 Interest expenses - (190) (190) ---------------- ------------------- ----------- Total nonoperating income ( expenses ) 2,608 2,566 5,174 ---------------- ------------------- ----------- Income ( loss ) before provision for income tax 2,126 404,000 389,126 Provision for income taxes - 66,229 66,229 ---------------- ------------------- ----------- Net income ( loss ) 2,126 337,771 (17,000) 322,897 ================ =================== ================ ===========
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS 1. Basis for Pro Forma Presentation The unaudited pro forma combined condensed financial statements of Shenzhen E'Jenie Science & Technology Company Limited have been prepared on the basis of assumptions relating to the stock exchange agreement between China Digital Communication Group and Shenzhen E'Jenie Science & Technology Company Limited and management's best estimates. 2. Pro Forma Adjustments Certain adjustments have been made to the historical financial statements in order to prepare the pro forma financial information as if the transaction had occurred at the beginning of the fiscal period presented. The adjustments are as follows: (1) To eliminate the equity of Shenzhen E'Jenie Science & Technology Company Limited. (2) To accrue estimated costs to consummate the transaction.