EX-99.2 5 sinovacproforma.txt SINOVAC BIOTECH 6K, PRO FORMA FINANCIALS EXHIBIT 99.2 ------------ SINOVAC BIOTECH LTD. -------------------- (formerly Net-Force Systems Inc.) (Unaudited - Prepared by Management) Pro-forma Consolidated Financial Statements June 30, 2003 Index ----- Pro-forma Consolidated Balance Sheet Pro-Forma Consolidated Statement of Stockholders' Equity Pro-Forma Consolidated Statement of Operations Notes to Pro-forma Consolidated Financial Statements F-1
SINOVAC BIOTECH LTD. -------------------- (formerly Net-Force Systems Inc.) Pro-forma Consolidated Balance Sheet June 30, 2003 (Unaudited - Prepared by Management) (Expressed in U.S. Dollars) ================================================================================================================================== Sinovac Tangshan Yian Biotech Ltd. Biological June 30, 2003 Engineering Co., Pro-forma (Pro-forma) Ltd., June 30 adjustments Pro-forma (Note 1) 2003 (Note 3) consolidated ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents 730,250 $ 17,263 (a) $ 760,000 $ 1,507,513 Accounts receivable, net 1,020,096 28,785 - 1,048,881 Inventories 1,552,210 81,475 - 1,633,685 Prepaid expenses and deposits 12,990 - - 12,990 ---------------------------------------------------------------------------------------------------------------------------------- Total current assets 3,315,546 127,523 760,000 4,203,069 ---------------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment 7,706,783 1,894,958 9,601,741 Due from a related party 677,487 - (b) 1,800,000 1,800,000 (e) (677,487) Promissory note - secured, bearing interest at 8% - - (a) 1,793,996 1,793,996 Licenses, permits and other intangible asset 2,578,345 - - 2,578,345 Investment in Sinovac Biotech Co., Ltd. - 532,139 (b) (532,139) - ---------------------------------------------------------------------------------------------------------------------------------- Total assets $ 14,278,161 2,554,620 $ 3,144,370 $ 19,977,151 ================================================================================================================================== LIABILITIES Current liabilities - Loans payable 872,282 1,119,324 (c) $ (1,119,324) $ 872,282 Accounts payable and accrued liabilities 1,760,714 705,990 (d) 2,200,000 4,666,704 Due to related parties 1,246,344 677,487 (e) (677,487) 1,246,344 Deferred research grants 121,850 - - 121,850 ---------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 4,001,190 2,502,801 403,189 6,907,180 ---------------------------------------------------------------------------------------------------------------------------------- Unamortized finance charge on proceeds receivable on disposal of investment - - (b) 133,000 133,000 MINORITY INTEREST 5,035,667 - - 5,035,667 STOCKHOLDERS' EQUITY Preferred stock - - - - Authorized: 50,000,000 shares at par value of $0.001 each Issued and outstanding: nil Common stock 27,091 1,130,198 (a) 2,553,996 30,591 Authorized: 100,000,000 shares at par value of $0.001 each (c) 1,119,324 Issued and outstanding: 30,591,033 (d) (4,800,018) Additional paid-in capital 5,621,362 85,176 (d) 2,571,324 8,277,862 - Accumulated deficit (407,149) (1,163,555)(b) 1,134,861 (407,149) (d) 28,694 ---------------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 5,241,304 51,819 2,608,181 7,901,304 ---------------------------------------------------------------------------------------------------------------------------------- 14,278,161 2,554,620 $ 3,144,370 $ 19,977,151 ==================================================================================================================================
The accompanying notes are an integral part of these financial statements. F-2
SINOVAC BIOTECH LTD. -------------------- (formerly Net-Force Systems Inc.) Pro-forma Consolidated Statement of Stockholders' Equity For the six months ended June 30, 2003 (Unaudited - Prepared by Management) (Expressed in U.S. Dollars) ====================================================================================================================== Total Common stock Additional Stock- --------------------------- paid-in Accumulated holders' Shares Amount capital deficit equity ---------------------------------------------------------------------------------------------------------------------- Recapitalization as a result of acquisition of China Sinovac by Sinovac (Pro-forma) 27,091,033 $ 27,091 $ 5,621,362 $ (341,505) $ 5,306,948 Issuance of common stock to effect the acquisition of Tangshan Yian 3,500,000 3,500 2,656,500 - 2,660,000 Comprehensive income (loss) - Net (loss) for the period - - - (65,644) (65,644) ---------------------------------------------------------------------------------------------------------------------- Balance, June 30, 2003 30,591,033 $ 30,591 $ 8,277,862 $ (407,149) $ 7,901,304 ======================================================================================================================
The accompanying notes are an integral part of these financial statements. F-3
SINOVAC BIOTECH LTD. -------------------- (formerly Net-Force Systems Inc.) Pro-Forma Consolidated Statement of Operations (Unaudited - Prepared by Management) (Expressed in U.S. Dollars) ============================================================================================================================== Sinovac Tangshan Yian Biotech Ltd. Biological Pro-forma (Proforma) Engineering adjustments Pro-forma (Note 1) Co., Ltd. (Note 3) Consolidated ------------------------------------------------------------------------------------------------------------------------------ Six months Six months Ended Ended June 30 June 30 2003 2003 ------------------------------------------------------------------------------------------------------------------------------ Sales $ 1,090,856 21,903 (d) $ (21,903) $ 1,090,856 Cost of sales 357,386 31,798 (d) (31,798) 357,386 ------------------------------------------------------------------------------------------------------------------------------ Gross profit (loss) 733,470 (9,895) 9,895 733,470 ------------------------------------------------------------------------------------------------------------------------------ Selling, general and administrative expenses 615,615 53,451 (d) (53,451) 615,615 Research and development expenses 18,099 365 (d) (365) 18,099 Interest and financing expenses 118,690 21,955 (d) (21,955) 118,690 Depreciation of property, plant and equipment and amortization of licenses and permits 132,994 10,812 (d) (10,812) 132,994 Equity in net loss of Sinovac - 24,134 (d) (24,134) - ------------------------------------------------------------------------------------------------------------------------------ 885,398 110,717 (110,717) 885,398 ------------------------------------------------------------------------------------------------------------------------------ Operating (loss) (151,928) (120,612) 120,612 (151,928) Gain on disposal of drug license - 240,618 (d) (240,618) - Dilution gain - 98,698 (d) (98,698) - Gain on disposal of investment - - (b) 1,134,861 - (d) (1,134,861) Interest income 23,214 1,101 (d) (1,101) 23,214 ------------------------------------------------------------------------------------------------------------------------------ Income (loss) for the period before income taxes and minority interest (128,714) 219,805 (219,805) (128,714) Deferred income tax (expense) - (47,930) (d) 47,930 - Minority interest 63,070 - - 63,070 ------------------------------------------------------------------------------------------------------------------------------ Net income (loss) for the period $ (65,644) 171,875 $ (171,875) $ (65,644) ==============================================================================================================================
The accompanying notes are an integral part of these financial statements. F-4 SINOVAC BIOTECH LTD. -------------------- (formerly Net-Force Systems Inc.) Notes to Pro-forma Consolidated Financial Statements June 30, 2003 (Unaudited - Prepared by Management) (Expressed in U.S. Dollars) ================================================================================ 1. Basis of Presentation -------------------------- These pro-forma consolidated financial statements have been prepared solely for submission to the U.S. Securities and Exchange Commission in connection with the acquisition of Tangshan Yian Biological Engineering Co., Ltd. ("Tangshan Yian"), a company incorporated in China and engaged in the research and development, production and sales of pharmaceutical products in China, by Sinovac Biotech Ltd. ("Sinovac"). A major shareholder and director of Sinovac is also a director and a minority shareholder of Tangshan Yian. These pro-forma consolidated financial statements are not necessarily indicative of the actual results which would have been attained had the combination been in effect on the date indicated or which may be attained in the future. These pro-forma consolidated financial statements have been prepared by management from information derived from the pro-forma consolidated financial statements of Sinovac as at June 30, 2003 (after the completion of its acquisition of Sinovac Biotech Co., Ltd.) and the audited financial statements of Tangshan Yian as at June 30, 2003. 2. Proposed Acquisition and Pro-forma Assumptions --------------------------------------------------- (a) Letter Of Intent Pursuant to a letter of intent dated October 20, 2003, Sinovac will acquire 100% interest in Tangshan Yian by issuing 3,500,000 common stocks and paying $2.2 Million in cash, with a total approximate fair value of $4.8 Million, within twelve (12) months from the date of entering into a formal agreement. The acquisition is recorded by using the purchase method of accounting. (b) Disposal Of Long-term Investment On September 24, 2003, Tangshan Yian disposed all of its 16% interest in Sinovac Biotech Co, Ltd. ("China Sinovac"), a 51% owned subsidiary of Sinovac, to an individual related to a common director of Tangshan Yian and China Sinovac for cash of approximately $1.8 Million. Thangshan Yian also agreed that the proceeds do not have to be paid until one year after the completion of this transaction. The disposition is assumed to have taken effect on June 30, 2003 for the purpose of preparing these pro-forma financial statements. F-5 SINOVAC BIOTECH LTD. -------------------- (formerly Net-Force Systems Inc.) Notes to Pro-forma Consolidated Financial Statements June 30, 2003 (Unaudited - Prepared by Management) (Expressed in U.S. Dollars) ================================================================================ 2. Proposed Acquisition and Pro-forma Assumptions (continued) --------------------------------------------------- (c) Additional Capital Financing Tangshan Yian agreed to raise an approximately $2.6 Million equity ($760,000 cash and $1,793,996 promissory note) from an unrelated party immediately before the afore-mentioned proposed acquisition by Sinovac. The promissory note is secured, bearing interest at 8% per annum and has a one year term. The additional equity financing and the conversion of debt for equity as described in Note 2(d) will cause the change of control in Tangshan Yian. The approximate $2.6 Million equity capital financing is assumed to have taken effect on June 30, 2003 for the purpose of preparing these pro-forma financial statements. (d) Debt Exchange for Shares Creditors of Tangshan Yian have agreed to convert $1,119,324 of debt into equity in Tangshan Yian before the completion of the afore-mentioned proposed acquisition by Sinovac. The proposed debt for the equity is assumed to have taken effect on June 30, 2003 for the purpose of preparing these pro-forma financial statements. (e) The net assets acquired by Sinovac are summarized as follows: Cash and cash equivalents $ 777,263 Accounts receivable and others 28,785 Promissory note - secured and 8% interest rate 1,793,996 Due from a related party 1,800,000 Inventories 81,475 Property, Plant and equipment 1,894,958 Accounts payable and accrued liabilities (1,383,477) Unamortized finance charge (133,000) --------------------------------------------------------------------- $ 4,860,000 ===================================================================== F-6 SINOVAC BIOTECH LTD. -------------------- (formerly Net-Force Systems Inc.) Notes to Pro-forma Consolidated Financial Statements June 30, 2003 (Unaudited - Prepared by Management) (Expressed in U.S. Dollars) ================================================================================ 3. Pro-forma Adjustments -------------------------- (a) To record the proposed approximate additional $2.6 Million equity financing by Tangshan Yian. (b) To record the disposal of investment in China Sinovac by Tangshan Yian. (c) To record the conversion of $1,119,324 of debt for equity by Tangshan Yian. (d) To record the acquisition of Tangshan Yian by Sinovac. (e) To eliminate inter-company receivable and payable. F-7