Description of the Transaction
Exhibit 99.2
Description of the Transaction
On October 9, 2018, the Company entered into a Share Sale and Purchase Agreement on October 3, 2018 (the “Purchase Agreement”) pursuant to which Dragon Jade International Limited (“DJIL”, “Dragon Jade”) was the legal and accounting acquirer, agreed to purchase 100% issued and outstanding share capital of Montrose Food & Wine H.K. Limited (“Montrose HK”) which was the legal and accounting acquiree, with a total consideration of $616,410 of which $256,410 (HK$2 million) paid in cash and $360,000 paid in 100,000 DJIL common stock with fair value at $3.60 per share as of December 31, 2018.
On December 31, 2018, the acquisition transaction was completed and Montrose HK and its subsidiaries became wholly owned subsidiaries of DJIL. At the closing of the acquisition, DJIL paid $256,410 in cash to the original shareholder of Montrose HK. The 100,000 shares of the Company’s common stock were issued to the original shareholder of Montrose HK on April, 9, 2019 after all the required procedures and documents were completed and presented.
After the transaction was completed, Montrose HK and its subsidiaries became wholly owned subsidiaries of DJIL. This transaction would be classified as an acquisition. There was no change in control after this transaction. All the assets and liabilities of Montrose HK and its subsidiaries would be recoded and reflected at fair value as at January 1, 2019 and would be consolidated in the financial statement of DJIL from January 1, 2019 onwards under acquisition method. Since all the assets and liabilities of Montrose HK and its subsidiaries would be accounted at fair value as at January 1, 2019 whereas intangible assets and goodwill would be recognized and reflected in the consolidated financial statements of DJIL after January 1, 2019. The following pro forma condensed combined financial statements were prepared to reflect the financial condition and position as if Montrose HK and its subsidiaries were wholly owned subsidiaries of DJIL as at January 1, 2018. See the following notes to the unaudited pro forma condensed combined financial statements for details.
DRAGON JADE INTERNATIONAL LTD.
Unaudited Pro Forma Condensed Combined Balance Sheets
December 31, 2018
| Dragon Jade | Montrose HK | Pro Forma Adjustments | Notes | Pro Forma Combined | ||||||||||||||
| (Unaudited) | (Audited) | (Unaudited) | ||||||||||||||||
| Assets | ||||||||||||||||||
| Current Assets | ||||||||||||||||||
| Amount due from subsidiaries | $ | - | $ | 28,460 | $ | - | $ | 28,460 | ||||||||||
| Amount due from related companies | 166,667 | 124,710 | (166,667 | ) | (3b) | 124,710 | ||||||||||||
| Loan receivables | 1,130,982 | - | - | 1,130,982 | ||||||||||||||
| Trade and other receivables | 1,003,655 | 495,523 | (256,410 | ) | (3a) | 1,242,768 | ||||||||||||
| Inventory | 74,556 | 592,681 | - | 667,237 | ||||||||||||||
| Cash and cash equivalents | 509,219 | 83,536 | - | 592,755 | ||||||||||||||
| Total current assets | 2,885,079 | 1,324,910 | (423,077 | ) | 3,786,912 | |||||||||||||
| Property and equipment, net | 154,222 | 14,324 | 168,546 | |||||||||||||||
| Intangible assets | - | - | 62,692 | (3a) | 62,692 | |||||||||||||
| Goodwill | - | - | 259,520 | (3a) | 259,520 | |||||||||||||
| Total assets | $ | 3,039,301 | $ | 1,339,234 | $ | (100,865 | ) | $ | 4,277,670 | |||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||
| Current liabilities | ||||||||||||||||||
| Trade and other payables | $ | 269,284 | $ | 591,811 | $ | - | $ | 861,095 | ||||||||||
| Amount due to fellow subsidiaries | - | 166,667 | (166,667 | ) | (3b) | - | ||||||||||||
| Amounts due to shareholder | - | 30,148 | - | 30,148 | ||||||||||||||
| Temporary loan | - | 256,410 | - | 256,410 | ||||||||||||||
| Total current liabilities | 269,284 | 1,045,036 | (166,667 | ) | 1,147,653 | |||||||||||||
| Total liabilities | 269,284 | 1,045,036 | (166,667 | ) | 1,147,653 | |||||||||||||
| Shareholder’s equity | ||||||||||||||||||
| Common stock | 17,543,961 | 1,282 | (1,282 | ) | (3a) | 17,543,961 | ||||||||||||
| Additional paid-in capital | - | 1,166,888 | (1,166,888 | ) | (3a) | - | ||||||||||||
| Common stock to be issued | - | - | 360,000 | (3a) | 360,000 | |||||||||||||
| Accumulated deficit | (14,722,447 | ) | (873,972 | ) | 873,972 | (3a) | (14,722,447 | ) | ||||||||||
| Total shareholder’s equity | 2,821,514 | 294,198 | 65,802 | 3,181,514 | ||||||||||||||
| Non-controlling interest | (51,497 | ) | - | - | (51,497 | ) | ||||||||||||
| Total liabilities and shareholder’s equity | $ | 3,039,301 | $ | 1,339,234 | $ | (100,865 | ) | $ | 4,277,670 | |||||||||
(1) See Note to the accompanying notes to unaudited pro forma condensed combined financial statements
DRAGON JADE INTERNATIONAL LTD.
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Year Ended December 31, 2018
| Dragon Jade | Montrose HK | Pro Forma Adjustments | Notes | Pro Forma Combined | ||||||||||||||
| (Unaudited) | (Audited) | (Unaudited) | ||||||||||||||||
| Product sales | $ | 234,855 | $ | 2,257,241 | $ | - | $ | 2,492,096 | ||||||||||
| Cost of product sales | 63,985 | 1,383,244 | - | 1,447,229 | ||||||||||||||
| Gross profit | 170,870 | 873,997 | - | 1,044,867 | ||||||||||||||
| Operating expenses | ||||||||||||||||||
| Selling, general and administrative | 5,791,433 | 1,109,918 | - | 6,901,351 | ||||||||||||||
| Total operating expenses | 5,841,433 | 1,109,918 | - | 6,901,351 | ||||||||||||||
| Operating income (loss) | (5,620,563 | ) | (235,921 | ) | - | (5,856,484 | ) | |||||||||||
| Other (expenses) income, net | 46,466 | 301,510 | - | 347,976 | ||||||||||||||
| Interest expenses | - | (46,014 | ) | - | (46,014 | ) | ||||||||||||
| Non-controlling interests | 10,493 | - | - | 10,493 | ||||||||||||||
| Net income (loss) | $ | (5,563,604 | ) | $ | 19,575 | $ | (5,544,029 | ) | ||||||||||
| Net income (loss) per share: | ||||||||||||||||||
| Basic | $ | (0.092 | ) | 1.96 | (1.771 | ) | $ | (0.097 | ) | |||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||
| Basic | 57,023,319 | 10,000 | 90,000 | 57,123,319 | ||||||||||||||
(1) See Note to the accompanying notes to unaudited pro forma condensed combined financial statements
DRAGON JADE INTERNATIONAL LTD.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
| 1. | Basis of Presentation |
The accompanying unaudited pro forma condensed combined financial statements combine the historical consolidated financial statements of Dragon Jade and those of Montrose HK after giving effect to the acquisition, using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, “Business Combinations”, and applying the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed combined statements of operations combine Dragon Jade’s unaudited consolidated operating results for the year ended December 31, 2018, with the operating results of Montrose HK for the year ended December 31, 2018, respectively. The unaudited pro forma condensed balance sheets combine Dragon Jade’s consolidated balance sheet as of December 31, 2018 with the audited balance sheet of Montrose HK as of December 31, 2018. The unaudited pro forma condensed combined statements of operations and balance sheets give effect to the acquisition as if such transaction had occurred at the beginning of the year. The historical combined financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results following the business combination.
| 2. | Estimated consideration and preliminary purchase price allocation |
The Company accounted for the Acquisition as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of Montrose HK will be recorded as of the acquisition date at December 31, 2018, in fair values, and combined with Dragon Jade International Limited.
The purchase price has been allocated based on Management’s estimates and independent appraisal of fair values as follows:
| Component | Acquiree’s carrying amount | Fair value adjustments | Purchase price allocated | |||||||||
| Property, plant and equipment | $ | 14,324 | – | $ | 14,324 | |||||||
| Inventories | $ | 592,681 | – | $ | 592,681 | |||||||
| Trade receivables, deposits, prepayment and other receivables | $ | 648,693 | - | $ | 648,693 | |||||||
| Trade payables and accruals | $ | (591,811 | ) | - | $ | (591,811 | ) | |||||
| Cash | $ | 83,536 | - | $ | 83,536 | |||||||
| Loan payables | $ | (453,225 | ) | - | $ | (453,225 | ) | |||||
| Intangible assets - Customer relationship | - | 62,692 | 62,692 | |||||||||
| $ | 294,198 | 62,692 | $ | 356,890 | ||||||||
| Goodwill | $ | 259,520 | ||||||||||
| Total purchase price | $ | 616,410 | ||||||||||
Montrose HK’s results of operations are consolidated with the Company effective January 1, 2019.
| 3. | Pro Forma Adjustments |
This note should be read in conjunction with Notes 1 and 2. Adjustments included in the pro forma adjustments column of the pro forma condensed combined statement of operations and the pro forma condensed combined balance sheet include the following, as indicated in the “Notes” column thereto:
| (a) | Reflects adjustments to record goodwill of $259,520 related to the transaction. Reflects the fair value estimate of identifiable intangible assets to be acquired by Dragon Jade of $62,692. The identifiable intangible asset includes customer relationship. |
| (b) | Represents the elimination of the amount of loan due from Montrose HK to a subsidiary of Dragon Jade. |