EX-99.3 7 f8ka2ex99iii_chinagrow.htm UNAUDITED PRO FORMA FINANCIAL STATEMENTS f8ka2ex99iii_chinagrow.htm
Exhibit 99.3
 

 
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
Summary of Transactions and Basis of Presentation

On December 15, 2010, China Growth Corporation(“China Growth” or the “Company”), a Cayman Islands company  entered into a share exchange agreement (the “Exchange Agreement”) with Wealth Environmental Protection Group (“Wealth”), a British Virgin Islands company and shareholders of Wealth Environmental Protection (“Wealth Environmental Protection Shareholders”).  Wealth is a private company incorporated under the laws of British Virgin Islands. Wealth owns 100% of the issued and outstanding capital stock of Wealth Environmental Technology Holding Ltd. (“Wealth Technology”), a company incorporated under the laws of Hong Kong, which holds all of the issued and outstanding capital stock of Jiangmen Huiyuan Environmental Protection Technology Consultancy Co., Ltd (“Huiyuan”), a wholly foreign owned enterprise incorporated under the laws of the People’s Republic of China.

Pursuant to the terms of the Exchange Agreement, Wealth Environmental Protection Shareholders transferred to the Company all of the issued and outstanding ordinary shares, a total of 7,000 shares, of Wealth Environmental Protection in exchange for the issuance of a total of 24,956,875 ordinary shares, par value $0.000128 per share, or 94.6% of the ordinary shares of the Company issued and outstanding after the Closing.

Concurrent with the Exchange Agreement, the Company also entered into certain agreements that have been given effect in the unaudited pro-forma consolidated financial statements as described below:

 The Private Placement

On the Closing Date,  the Company  entered  into a subscription agreement  with a group of accredited investors (the “Subscription Agreement”), pursuant to which the Company issued to the investors an aggregate of 222,402 units, or the Units, for an aggregate purchase price of $6,672,031, or $30.00 per Unit (the “Private Placement”). Each Unit consists of (i) two (2) shares of our Class A 6% convertible preference share (the “Preference Share”) with each of the Preference Share convertible into five ordinary shares for a total of ten ordinary shares per Unit, and (ii) a warrant to purchase five (5) ordinary shares at an exercise price of $4.50 per share (the “Warrant”). The closing of the Share Exchange was conditioned upon all conditions set forth in the Subscription Agreement being met and the closing of the Private Placement was conditioned upon the closing of the Share Exchange.  As soon as practicable, the Company will effectuate a 1: 1.42610714 reverse stock split on all of the ordinary shares issued and outstanding at the closing of the Share Exchange (the “Reverse Split”).

Under the Subscription Agreement, the Company is obligated to file a registration statement covering the resale of the ordinary shares underlying the Preference Shares and the Warrants (the “Registrable Securities”) no later than thirty (30) days following the closing date. If the registration statement is not timely filed, the Company is obligated to pay to each investor liquidated damages equal to 1% of each investor’s investment per month under the Subscription Agreement. In addition, the Company will use its best efforts to cause the registration statement to be declared effective under the Securities Act as soon as possible, but in no event later than 180 days following the Closing Date (the “Effective Date”). If the registration statement is not declared effective by the SEC on or prior to the Effective Date, then the Company is obligated to pay to each investor liquidated damages equal to 1% of such investor’s investment. However, the liquidated damages payable if  the Registration Statement is not declared effective by the Effective Date will be waived, provided that (1) the Company has responded to all SEC comments on the Registration Statement and its amendments within twenty (20) business days of their respective receipt, which shall be extended to thirty (30) business days if the SEC response cannot be submitted because the Company is required to provide updated financial statements under Regulation S-X; and (2) the Company is current with the filing of all of its periodic reports under the Exchange Act.
 
The securities shall only be treated as Registrable Securities if and only for so long as they (i) have not been sold (A) pursuant to a registration statement; (B) to or through a broker, dealer or underwriter in a public distribution or a public securities transaction; and/or (C) in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Securities Act”) under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale; (ii) are not held by a holder or a permitted transferee; and (iii) are not eligible for sale pursuant to Rule 144 (or any successor thereto) under the Securities Act.

 
1
 

CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

In connection with filing the registration statement, if the SEC limits the amount of Registrable Securities to be registered for resale pursuant to Rule 415 under the Securities Act, then the Company shall be entitled to exclude such disallowed Registrable Securities (the “Cut Back Shares”) on a pro rata basis among the holders thereof with a first priority given to the shares underlying the Warrants.  The Company shall prepare, and, as soon as practicable but in no event later than the six months from the date the registration statement was declared effective, file with the SEC an additional registration statement (“Additional Registration Statement”) on Form S-1 covering the resale of all of the disallowed Registrable Securities not previously registered on an Additional Registration Statement hereunder.  The Company shall use its best efforts to have each Additional Registration Statement declared effective by the SEC as soon as practicable.  No liquidated damages hereof shall accrue on or as to any Cut Back Shares, and the required Filing Date for such additional Registration Statement including the Cutback Shares will be tolled, until such time as the Company is able to effect the registration of the Cut Back Shares in accordance with any SEC comments.
 
Make Good Escrow Agreement
 
In connection with the Private Placement, the Company entered into a make good escrow agreement, or Make Good Escrow Agreement with Star Prince, and Access America Investments, LLC as representative of the investors, pursuant to which Star Prince delivered into an escrow account share certificates evidencing 4,500,000 ordinary shares held by it (after giving effect to the Reverse Split), to be held in favor of the investors in order to secure certain make good obligations. Under the Make Good Escrow Agreement, the Company established minimum after tax net income thresholds (as determined in accordance with GAAP and excluding any non-cash expenses and one-time expenses related to the reverse acquisition of Wealth Environmental Protection and the private placement transaction) of $13.2 million for fiscal year 2010 and $18.09 million for fiscal year 2011 and minimum earnings per share thresholds (calculated on a fully diluted basis and including adjustment for any stock splits, stock combinations, stock dividends or similar transactions, and for shares issued in one public offering or pursuant to the exercise of any warrants, options, or other securities issued during or prior to the calculation period) of $0.58 for fiscal year 2010 and $0.66 for fiscal year 2011. If our after tax net income or earnings per share for either fiscal year 2010 or fiscal year 2011 is less than 90% of the applicable performance threshold, then the performance threshold will be deemed not to have been achieved, and the investors will be entitled to receive ordinary shares based upon a pre-defined formula agreed to between the parties. The parties agreed that, for purposes of determining whether or not any of the performance thresholds are met, the release of any of the escrowed shares and any related expense recorded under GAAP shall not be deemed to be an expense, charge, or any other deduction from revenues even if GAAP requires contrary treatment or the annual report for the respective fiscal years filed with the SEC by the Company may report otherwise.
 
Holdback Escrow Agreement
 
Also in connection with the private placement, the Company entered into a holdback escrow agreement, or the Holdback Escrow Agreement, with Anslow & Jaclin, LLP, the escrow agent, and Access America Investments, LLC, as representative of the investors, pursuant to which $2,167,203 was deposited with the escrow agent to be distributed upon the satisfaction of certain covenants set forth in the Subscription Agreement. Pursuant to the Holdback Escrow Agreement, the $1,500,000 will be released to the Company upon the hiring of a chief financial officer on terms acceptable to Access America Investments, LLC and $667,203 will be released to us upon appointment of the required independent directors to our board of directors.
 
IR Escrow Agreement
 
We also entered into an investor relations escrow agreement, or the IR Escrow Agreement, with Anslow & Jaclin, LLP, the escrow agent, and Access America Investments, LLC, as representative of the investors, pursuant to which $120,000 was deposited with the escrow agent to be distributed in incremental amounts to pay our investor relations firm, the choice of which is subject to the approval of Access America Investments, LLC, which approval cannot be unreasonably withheld.
 
Lockup Agreements
 
In connection with the Private Placement, the Company also entered into lockup agreements, or the Lockup Agreement, with Wealth Environmental Protection Shareholders, pursuant to which each of Wealth Environmental Protection Shareholders agreed not to transfer any of our capital stock held directly or indirectly by them for an eighteen-month period following the closing of the Private Placement, unless it is approved otherwise by Access American Investments, LLC.
 
Shares Issued for Services

On December 15, 2010, the Company issued 998,275 shares to Mr. Karlson Ka Tsun PO, at par value 0.000128 per share, as compensation for the services he provided to us in connection with the Share Exchange and Private Placement. We calculated the company’s cost for the issuance by  using the Block Scholes Option Pricing Model and referenced the cash price paid in a concurrent Private Placement of convertible preferred stock as follows:

 
2
 
 
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

   
Amount
  
         
Price per unit for 2 preferred shares each convertible into 10 common
        
shares and  detachable  warrants for the purchase of 5 common shares
        
for $4,50 per share for a period of 5 years.
  
$
30.00
  
Value of detachable warrant for purchase of 5 common shares using the
        
Black Scholes Option Pricing Model and, a current price per share of $2.20,
        
an expected exercise period of 5 years, a volatility factor of 75% based on
        
a similar company operating in China, a risk free interest rate of 2.1%
        
and no expected dividend yield of zero.
    
8.01
  
         
Value of 10 shares of common stock included in the unit
  
$
21.99
  
         
Value of one share
  
$
2.20
  
         
Shares issued
    
700,000
  
         
Total value
  
$
1,538,856
  

Shares Issued for Conversion of Debt

On December 15, 2010, the Company issued 998,725 shares to Access America Fund, LP in connection with the automatic conversion of the  notes for an aggregate of $500,000 that the Company issued to Access America Fund, LP in the event of the Share Exchange.

Pro Forma Financial Statements

The unaudited pro forma consolidated financial statements of the Company in the opinion of management include all material adjustments directly attributable to the aforementioned share exchanges contemplated by the agreements and to the agreements and transactions entered into concurrently with those agreements as described above.  The unaudited pro forma consolidated balance sheet reflects the financial position of the company had the share exchange occurred on September 30, 2010.  The unaudited pro forma consolidated statements of income (loss) and comprehensive income (loss) were prepared as if the transaction was consummated on the beginning of the reporting periods. The Private Placement

These pro forma unaudited combined financial statements should be read in conjunction with the Registrant's historical financial statements and notes thereto and the consolidated financial statements of Huiyuan and its variable interest entity, Jiangmen Wealth Water Purifying Agent Company, Ltd. (“Wealth Water”) and Wealth Water’s wholly-owned and majority-owned subsidiaries, included elsewhere in this report.  These unaudited pro forma consolidated financial statements have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the transaction occurred on the date indicated and are not necessarily indicative of the results that may be expected in the future.
 
Proforma Earnings per Share
 
The pro forma basic and dilutive net income per share is based on the weighted average number of shares of pro forma China Growth as if the shares issued to acquire Wealth had taken place at the beginning of each of the reporting periods.
 
 
3
 
 
CHINA GROWTH CORPORATION
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET
                             
                             
   
China Growth
    
Wealth
                  
   
as of
    
as of
                  
   
September 30,
    
September 30,
    
Pro Forma
        
Pro Forma
  
   
2010
    
2010 (4)
    
Adjustments
        
Combined
  
ASSETS:
        
(As Restated)
                  
Current assets:
                            
 Cash and cash equivalent
  
$
1,426
    
$
25,839,474
    
$
4,384,828
  
 (6
)
  
$
30,225,728
  
Restricted cash
            
-
      
2,167,203
  
(9
)
        
                     
120,000
  
(10
)
    
2,287,203
  
 Note payable
    
500,000
      
-
      
(500,000
)
(4
)
    
-
  
 Accounts receivable
    
-
      
1,431,175
      
-
          
1,431,175
  
 Inventories
    
-
      
816,543
      
-
          
816,543
  
 Other current assets
    
10,613
      
250,898
      
-
          
261,511
  
Total current assets
    
512,039
      
28,338,090
      
6,172,031
          
35,022,160
  
                                     
Property, plant and equipment and
                                    
        land use and mining rights, net
    
-
      
15,259,616
      
-
          
15,259,616
  
 Total Assets
  
$
512,039
    
$
43,597,706
    
$
6,172,031
        
$
50,281,776
  
                                     
 LIABILITIES AND SHAREHOLDERS' EQUITY:
                                    
 Current liabilities:
                                    
 Convertible notes payable, net
    
-
    
$
125,000
    
$
(125,000
)
(7
) 
        
 Note payable to affiliate
    
500,000
      
-
      
(500,000
)
(4
)
        
 Payable to related parties
    
12,876
      
250,000
      
-
          
262,876
  
 Accounts payable
    
1,302
      
1,528,257
      
-
          
1,529,559
  
 Accrued interest payable
    
10,617
      
10,347
      
-
          
20,964
  
 Accrued expense
    
-
      
487,404
      
-
          
487,404
  
 Value added taxes payable
    
-
      
361,676
      
-
          
361,676
  
 Other taxes payable
    
-
      
87,457
      
-
          
87,457
  
 Income tax payable
    
-
      
1,466,078
      
(396,500
) )
(12 
) 
    
1,069,578
  
 Total current liabilities
    
524,795
      
4,316,219
      
(1,021,500
)
        
3,819,514
  
                                     
Deferred income taxes
            
197,319
                  
197,319
  
Total liabilities
    
524,795
      
4,513,538
      
(1,021,500
)
        
4,016,833
  
                                     
Commitments and contingencies
                                    
                                     
 Shareholders' equity (deficit):
                                    
 Preference shares
    
-
      
-
      
854
  
(6 
) 
    
854
  
 Ordinary shares
    
128
      
7,000
      
(4,760
)
(1
)
        
                     
90
  
(7
)
        
                     
90
  
(8
)
    
2,548
  
 Additional paid-in capital
    
6,597
      
15,584,052
      
(14,721
)
(3
)
        
                     
499,910
  
(7
)
        
                     
1,210,910
  
(8
)
        
                     
6,671,177
  
(6
)
    
23,957,925
  
 Subscription receivable
    
-
      
(7,000
)
                
(7,000
)
 Accumulated other comprehensive income
    
-
      
4,085,940
      
-
          
4,085,940
  
 Retained earnings
    
(19,481
)
    
19,414,176
      
19,481
  
(2
)
        
                     
(1,189,500
)
(11
)
    
18,224,676
  
Total shareholders' equity (deficit)
    
(12,756
)
    
39,084,168
      
7,193,531
          
46,264,943
  
Total liabilities and shareholders' equity
  
$
512,039
    
$
43,597,706
    
$
6,172,031
        
$
50,281,776
  
 
 
4
 
 
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(1)
This adjustment gives effect to the Issuance of 17,500,000 ordinary shares of China Growth in exchange of the ownership of the 7,000 ordinary shares of Wealth. Under  the terms of the Exchange Agreement with Wealth, and shareholders of Wealth named in the Exchange Agreement, Wealth transferred to China Growth all of the issued and outstanding ordinary shares of Wealth in exchange for the issuance of a total of 24,956,875 ordinary shares, par value $0.000128 per share, or 96.15% of the ordinary shares of the Company issued and outstanding after the Closing. China Growth is currently seeking shareholder approval to effectuate a 1: 1.42610714 reverse stock split on all of the ordinary shares issued and outstanding at the closing of the Share Exchange resulting in Wealth shareholders owning 17,500,000 shares.
 
  
(2)
Elimination of the accumulated deficit of China Growth, the accounting acquiree.
 
  
(3)
Net effects of notes (1) and (2)
 
  
(4)
Intercompany loans
 
  
(5)
Includes the accounts of Wealth's wholly owned and majorly owned subsidiaries and its variable interest entities.
 
  
(6)
This adjustment gives effect to the private placement of preferred shares and warrants completed on December 15, 2010, with a group of accredited investors, under which the Company issued to the investors an aggregate 222,402 Units for a purchase price of $6,672,031, or $30.00 per Unit. Each Unit consists of two Preferred Shares and a Warrant to purchase five ordinary shares after giving effect to the Reverse Split described in adjustment (1). The Warrants have a term of 5 years, bear an exercise price of $4.50 per share (subject to customary adjustments), are exercisable on a net exercise or cashless basis and are exercisable by investors at any time after the closing date.
 
  
 (7)
This adjustment gives effect to the Company's December 15, 2010 issuance of  998,275 shares (700,000 post reverse split shares) to Mr. Karlson Ka Tsun PO,  as compensation for the services he provided in connection with the Share Exchange and Private Placement.
 
  
 (8)
This adjustment gives effect to the Company's December 15, 2010 issuance of 998,725 shares (700,000 post reverse split shares) to Access America Fund, LP in connection with the automatic conversion of the  notes for an aggregate of $500,000 that was triggered by the Share Exchange. The amount originally allocated to the beneficial conversion was equal to the proceed resulting in a reduction in the debt that was being amortized over the one year term of the notes. The unamortized portion of the discount or $375,000 has been recognized as interest expense.
 
  
 (9)
This adjustment gives effect to the holdback agreement entered into at the time of  the private placement. The Company entered into a holdback escrow agreement under which $2,167,203 was deposited with the escrow agent to be distributed upon the satisfaction of certain covenants set forth in the Subscription Agreement. Under  the Holdback Escrow Agreement, the $1,500,000 will be released to the Company upon the hiring of a chief financial officer on terms acceptable under the agreement and $667,203 will be released to us upon appointment of the required independent directors to our board of directors.
 
  
 (10)
This adjustment give effect to the  investor relations escrow agreement, or the IR Escrow Agreement, with Anslow & Jaclin, LLP, the escrow agent, and Access America Investments, LLC, as representative of the investors, under which $120,000 was deposited with the escrow agent to be distributed in incremental amounts to pay our investor relations firm, the choice of which is subject to the approval of Access America Investments, LLC.
  
 (11)
Effect of adjustments to income on retained earnings.
  
 (12)
To record the tax effect of adjustments to income.
  
 
 
 
5
 
 
CHINA GROWTH CORPORATION
 
  
UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)
  
AND COMPREHENSIVE INCOME (LOSS)
                                 
         
Wealth
                      
   
China Growth
    
For the
                      
   
For The Three
    
Nine Months
                      
   
Months Ended
    
Ended
                      
   
September 30,
    
September 30,
    
Pro Forma
          
Pro Forma
    
   
2010
    
2010 (1)
    
Adjustments
          
Combined
    
                                 
Revenue, net of sales discount
  
$
-
    
$
36,024,913
      
-
          
$
36,024,913
    
Cost of revenue
    
-
      
18,548,682
      
-
            
18,548,682
    
Gross profit
    
-
      
17,476,231
      
-
            
17,476,231
    
                                         
 Operating expense:
                                        
Selling and marketing
    
-
      
1,133,482
      
-
            
1,133,482
    
General and administrative
    
1,006
      
2,120,472
      
-
            
2,121,478
    
Total operating expenses
    
1,006
      
3,253,954
      
-
            
3,254,960
    
                                         
Income (loss) from operations
    
(1,006
)
    
14,222,277
      
-
            
14,221,271
    
                                         
Other income (expenses):
                                        
Cost of recapitalization
                    
(1,211,000
)
  
(2
)
    
(1,211,000
)
  
Interest income
    
-
      
45,411
      
-
            
45,411
    
Interest expense
    
-
      
(135,347
)
    
(375,000
)
  
(3
)
    
(510,347
)
  
Total other expenses
    
-
      
(89,936
)
    
(1,586,000
)
          
(1,675,936
)
  
                                         
Income before provision for income taxes
    
(1,006
)
    
14,132,341
      
(1,586,000
)
          
12,545,335
    
                                         
Provision for income taxes
    
-
      
3,535,196
      
396,500
    
(4
)
    
3,138,696
    
                                         
 Net income
    
(1,006
)
    
10,597,145
      
(1,189,500
) 
          
9,406,639
    
                                         
Other comprehensive income-
                                        
Foreign currency translation adjustments
    
-
      
794,237
      
-
            
794,237
    
                                         
Comprehensive income (loss)
  
$
(1,006
)
  
$
11,391,382
    
$
(1,189,500
) 
        
$
10,200,876
    
                                         
Weighted average number of shares
                                        
outstanding:
                                        
 Basic
    
998,275
      
7,000
      
17,493,000
    
(5
)
          
                     
700,000
    
(2
)
          
                     
700,000
    
(3
)
    
19,898,275
    
                                         
 Diluted
    
998,275
      
7,000
      
17,493,000
    
(5
)
          
                     
700,000
    
(2
)
          
                     
700,000
    
(3
)
          
                     
2,224,020
    
(6
)
    
22,122,295
    
                                         
Net (loss) income per common share - basic and diluted
                                        
   
$
-
    
$
1,627.34
                  
$
0.47
    
                                         
   
$
-
    
$
1,627.34
                  
$
0.43
    
 
 
6
 
 
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(1)
Includes the accounts of Wealth's wholly owned subsidiaries and its variable interest entity, Wealth Water, and Wealth Water's wholly owned and major owned subsidiaries.
 
(2)
This adjustment gives effect to the Company's December 15, 2010 issuance of  998,275 shares (700,000 post reverse split shares) to Mr. Karlson Ka Tsun PO,  as compensation for the services he provided in connection with the Share Exchange and Private Placement.
 
(3)
This adjustment gives effect to the Company's December 15, 2010 issuance of 998,725 shares (700,000 post reverse split shares) to Access America Fund, LP in connection with the automatic conversion of the  notes for an aggregate of $500,000 that was triggered by the Share ExchangeThe amount originally allocated to the beneficial conversion was equal to the proceed resulting in a reduction in the debt that was being amortized over the term of the notes that was one year. The unamortized portion of the discount or $375,000 has been recognized as interest expense.
 
(4)
To recognize the tax effect of adjustments (1) and (2)
 
(5)
This adjustment gives effect to the Issuance of 17,500,000 ordinary shares of China Growth in exchange of the ownership of the 7,000 ordinary shares of Wealth. Under  the terms of the Exchange Agreement with Wealth, and shareholders of Wealth named in the Exchange Agreement, Wealth transferred to China Growth all of the issued and outstanding ordinary shares of Wealth in exchange for the issuance of a total of 24,956,875 ordinary shares, par value $0.000128 per share, or 96.15% of the ordinary shares of the Company issued and outstanding after the . China Growth is currently seeking shareholder approval to effectuate a 1: 1.42610714 reverse stock split on all of the ordinary shares issued and outstanding at the closing of the Share Exchange resulting in Wealth shareholders owning 17,500,000 shares.
 
(6)
This adjustment recognizes the dilutive effect of the December 15, 2010 Private Placement with a group of accredited investors, under which the Company issued to the investors an aggregate of 222,402 ("Units"), for an aggregate purchase price of $6,672,031, or $30.00 per Unit (the “Private Placement”) as if it occurred on January 1, 2009. Each Unit consists of (i) two (2) shares of our Class A 6% convertible Preference with each of the Preference Share convertible into five ordinary shares for a total of ten ordinary shares per Unit, and (ii) a warrant to purchase five (5) ordinary shares at an exercise price of $4.50 per share
 
 
 
 
 
7
 


 
 
CHINA GROWTH CORPORATION
 
UNAUDITED PROFORMA COMBINED STATEMENT OF INCOME (LOSS) COMPREHENSINCOME (LOSS)
AND COMPREHENSIVE INCOME (LOSS)
                               
   
China Growth
    
Wealth
                    
   
For the Year Ended
    
For the Year Ended
                    
   
December 31,
    
December 31,
    
Pro Forma
          
Pro Forma
  
   
2009
    
2009 (1)
    
Adjustments
          
Combined
  
                               
Revenue, net of sales discount
  
$
-
    
$
38,975,961
      
-
          
$
38,975,961
  
Cost of revenue
    
-
      
20,703,600
      
-
            
20,703,600
  
 Gross profit
    
-
      
18,272,361
      
-
            
18,272,361
  
                                       
Operating expense:
                                      
Selling and marketing
    
-
      
1,454,054
      
-
            
1,454,054
  
General and administrative
    
2,374
      
2,251,883
      
-
            
2,254,257
  
Total operating expenses
    
2,374
      
3,705,937
      
-
            
3,708,311
  
                                       
Income (loss) from operations
    
(2,374
)
    
14,566,424
      
-
            
14,564,050
  
                                       
Other income (expenses):
                                      
Cost of recapitalization
    
-
      
-
      
(1,211,000
)
  
(2
)
    
(1,211,000
)
Interest expense
                    
(500,000
)
  
(3
)
    
(500,000
)
Interest income
    
-
      
43,649
      
-
            
43,649
  
                                       
Total other expenses
    
-
      
43,649
      
(1,711,000
)
          
(1,667,351
)
                                       
Income before provision for income taxes
    
(2,374
)
    
14,610,073
      
(1,711,000
)
          
12,896,699
  
                                       
Provision for income taxes
    
-
      
3,652,518
      
427,750
    
(4
)
    
3,224,768
  
                                       
Net income
    
(2,374
)
    
10,957,555
      
(1,283,250
) 
          
9,671,931
  
                                       
Other comprehensive income-
                                      
Foreign currency translation adjustments
    
-
      
4,043
      
-
            
4,043
  
                                       
Comprehensive income (loss)
  
$
(2,374
)
  
$
10,961,598
    
$
(1,283,250
)
        
$
9,675,974
  
                                       
Weighted average number of shares
                                      
outstanding:
                                      
 Basic
    
998,275
      
7,000
      
17,493,000
    
(5
)
        
                     
700,000
    
(2
)
        
                     
700,000
    
(3
)
    
19,898,275
  
                                       
 Diluted
    
998,275
      
7,000
      
17,493,000
    
(5
)
        
                     
700,000
    
(2
)
        
                     
700,000
    
(3
)
        
                     
2,224,020
    
(6
)
    
22,122,295
  
                                       
Net (loss) income per common share - basic and diluted
                                      
Basic
  
$
-
    
$
1,627.34
                  
$
0.49
  
                                       
Diluted
  
$
-
    
$
1,627.34
                  
$
0.44
  
 
 
8
 
 
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 
(1)
Includes the accounts of Wealth's wholly owned subsidiaries and its variable interest entity, Wealth Water, and Wealth Water's wholly owned and major owned subsidiaries.
 
(2)
This adjustment gives effect to the Company's December 15, 2010 issuance of  998,275 shares (700,000 post reverse split shares) to Mr. Karlson Ka Tsun PO,  as compensation for the services he provided to us in connection with the Share Exchange and Private Placement.
 
(3)
This adjustment gives effect to the Company's December 15, 2010 issuance of 998,725 shares (700,000 post reverse split shares) to Access America Fund, LP in connection with the automatic conversion of the  notes for an aggregate of $500,000 that was triggered by the Share ExchangeThe amount originally allocated to the beneficial conversion was equal to the proceed resulting in a reduction in the debt that was being amortized over the term of the notes that was one year. The unamortized portion of the discount or $375,000 has been recognized as interest expense.
 
(4)
To recognize the tax effect of adjustments (1) and (2)
 
(5)
This adjustment gives effect to the Issuance of 17,500,000 ordinary shares of China Growth in exchange of the ownership of the 7,000 ordinary shares of Wealth. Under  the terms of the Exchange Agreement with Wealth, and shareholders of Wealth named in the Exchange Agreement, Wealth transferred to China Growth all of the issued and outstanding ordinary shares of Wealth in exchange for the issuance of a total of 24,956,875 ordinary shares, par value $0.000128 per share, or 96.15% of the ordinary shares of the Company issued and outstanding after the Closing. China Growth is currently seeking shareholder approval to effectuate a 1: 1.42610714 reverse stock split on all of the ordinary shares issued and outstanding at the closing of the Share Exchange resulting in Wealth shareholders owning 17,500,000 shares.
 
(6)
This adjustment recognizes the dilutive effect of the December 15, 2010 Private Placement with a group of accredited investors, under which the Company issued to the investors an aggregate of 222,402 ("Units"), for an aggregate purchase price of $6,672,031, or $30.00 per Unit (the “Private Placement”) as if it occurred on January 1, 2009. Each Unit consists of (i) two (2) shares of our Class A 6% convertible Preference with each of the Preference Share convertible into five ordinary shares for a total of ten ordinary shares per Unit, and (ii) a warrant to purchase five (5) ordinary shares at an exercise price of $4.50 per share
 
 
 
 
9