JIALIJIA GROUP CORPORATION LIMITED UNAUDITED PRO FORMA FINANCIAL INFORMATION
Exhibit 99.3
JIALIJIA GROUP CORPORATION LIMITED
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction
On July 10, 2019, Jialijia Group Corporation Limited (the “Company”) entered into a share purchase/exchange agreement (the “Exchange Agreement”) with Huazhongyun Group Co., Limited (“Huazhongyun”), a company incorporated under the laws of Hong Kong, and Xxx Xx, the sole shareholder of Huazhongyun (the “Shareholder”) and the Chief Executive Officer of the Company. Huazhongyun owns 6,000,000 shares (the “Company Shares”) of the Company, which represent approximately 82% of the shares of the Company’s common stock, issued and outstanding, par value $0.001 per share at the time of execution of the Exchange Agreement. The Shareholder owns an aggregate of 10,000 ordinary shares of Huazhongyun (“Huazhongyun Shares”), which constitute all of the issued and outstanding shares of Huazhongyun.
Pursuant to the Exchange Agreement, among other matters, the Shareholder will sell and transfer all of the Huazhongyun Shares in exchange for all of the Company Shares. As a result, the Shareholder will directly own the Company Shares, which represent approximately 82% of the issued and outstanding shares of the Company’s common stock at the time of execution of the Exchange Agreement and Huazhongyun will become a wholly-owned subsidiary of the Company.
Jialijia Jixiang Investment (Changzhou) Co., Ltd, (“Jialijia (Changzhou)”) is a company incorporated under the laws of the PRC on June 13, 2017. Jialijia (Changzhou) is a wholly-owned subsidiary of Huazhongyun. Rucheng Wenchuan Gas Co., Ltd. (“Xxxxxxx Xxxxxxxx”) was incorporated under the laws of the People’s Republic of China (the “PRC”) on March 31, 2006.
On January 7, 2019, Jialijia (Changzhou) entered into an equity transfer agreement (the “Equity Transfer”) with Xx. Xxxxxxx Xx, the shareholder who owned 94.77% of Xxxxxxx Xxxxxxxx’s outstanding shares. Pursuant to the Equity Transfer, Xx. Xxxxxxx Xx agreed to transfer 70% of his ownership of Xxxxxxx Xxxxxxxx to Jialijia (Changzhou), in exchange of RMB 1,000,000 and 2,860,000 common shares of the Company owned by Huazhongyun. Immediately after the equity transfer agreement, Jialijia (Changzhou) owns 70% of the ownership and becomes the controlling shareholder of Rucheng Wenchuan. Both Huazhongyun and Jialijia (Changzhou) are holding companies and have not carried out substantive business operations of their own. Xxxxxxx Xxxxxxxx is primarily engaged in the production and sale of gases for industrial and medical purposes, such as oxygen and nitrogen, in the PRC.
The following unaudited pro forma condensed consolidated combined financial statements reflect the combination of the historical results of Jialijia Group Corporation Limited and its subsidiaries, Huazhongyun, Jialijia (Changzhou), and Rucheng Wenchuan, on a pro forma basis to give effect to the Exchange Agreement and the Equity Transfer (together, the “Transactions”).
The unaudited pro forma condensed consolidated combined balance sheet of the combined company is based on the unaudited historical balance sheets of the Company, Huazhongyun, Jialijia (Changzhou), and Xxxxxxx Xxxxxxxx as if the Transactions had occurred on June 30, 2019, and includes preliminary adjustments to reflect the events that are directly attributable to the Transactions and factually supportable.
The unaudited pro forma condensed consolidated combined statement of income and comprehensive income of the combined company for the six months ended June 30, 2019 is based on the unaudited historical statements of income and comprehensive income of the Company, Huazhongyun, Jialijia (Changzhou), and Rucheng wenchuan for the same period. The unaudited pro forma condensed consolidated combined statement of income and comprehensive income of the combined company for the year ended December 31, 2018 is based on (i) the audited statement of operations of the Company for the year ended January 31, 2019, and (ii) the unaudited historical statements of income and comprehensive income of Huazhongyun, Jialijia (Changzhou), and Xxxxxxx Xxxxxxxx for the year ended December 31, 2018. The aforementioned unaudited pro forma combined statements of income and comprehensive income have been prepared assuming the Transactions closed on January 1, 2018.
The pro forma adjustments are preliminary and are based upon available information and certain assumptions, described in the accompanying notes to the unaudited pro forma combined financial information that management believes are reasonable under the circumstances. Actual results may differ materially from the unaudited pro forma combined financial information (including the assumptions within the accompanying unaudited pro forma combined financial information).
These unaudited pro forma combined condensed financial statements should be read in conjunction with the Company’s historical financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2019, and the historical financial statements of Xxxxxxx Xxxxxxxx for the six months ended June 30, 2019 and for the year ended December 31, 2018 contained in this Form 8-K.
F-1
JIALIJIA GROUP CORPORATION LIMITED
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 2019
| JIALIJIA GROUP CORPORATION LTD | HUAZHONGYUN GROUP CO., LTD. | JIALIJIA JIXIANG INVESTMENT (CHANGZHOU) CO., LTD | RUCHENG WENCHUAN GAS CO., LTD. | NOTES | PRO FORMA ADJUSTMENTS | PRO FORMA COMBINED | ||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Current assets: | ||||||||||||||||||||||||||
| Cash and cash equivalents | $ | - | $ | - | $ | 13 | $ | 98 | $ | - | $ | 111 | ||||||||||||||
| Advance to suppliers | - | - | 93,222 | 101,966 | 195,188 | |||||||||||||||||||||
| Other current assets | 29,513 | - | 1,758 | 2,039 | - | 33,310 | ||||||||||||||||||||
| Total current assets | 29,513 | - | 94,993 | 104,103 | - | 228,609 | ||||||||||||||||||||
| Property, plant, and equipment, net | - | - | - | 418,555 | - | 418,555 | ||||||||||||||||||||
| Goodwill | {a} | 3,962,424 | - | |||||||||||||||||||||||
| {c} | (3,962,424 | ) | ||||||||||||||||||||||||
| Long-term Investment | - | 120,000 | 62,979 | - | {a} | 83,005 | - | |||||||||||||||||||
| {a} | (265,984 | ) | ||||||||||||||||||||||||
| Total assets | $ | 29,513 | $ | 120,000 | $ | 157,972 | $ | 522,658 | $ | (182,979 | ) | $ | 647,164 | |||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||||||||
| Accrued expenses | - | - | - | 55,713 | - | 55,713 | ||||||||||||||||||||
| Due to related party | 128,160 | 120,000 | 234,348 | 2,567,300 | - | 3,049,808 | ||||||||||||||||||||
| Total current liabilities | 128,160 | 120,000 | 234,348 | 2,623,013 | - | 3,105,521 | ||||||||||||||||||||
| Total liabilities | 128,160 | 120,000 | 234,348 | 2,623,013 | - | 3,105,521 | ||||||||||||||||||||
| Stockholders’ equity | ||||||||||||||||||||||||||
| Common Stock | 8,102 | - | - | - | 8,102 | |||||||||||||||||||||
| Paid in capital | - | 7,355 | 92,598 | {a} | (92,598 | ) | - | |||||||||||||||||||
| {a} | (7,355 | ) | ||||||||||||||||||||||||
| Additional Paid in capital | 48,111 | {a} | 7,355 | 55,466 | ||||||||||||||||||||||
| Accumulated deficit | (154,860 | ) | - | (84,689 | ) | (2,347,677 | ) | {c} | (3,962,424 | ) | (1,890,973 | ) | ||||||||||||||
| {a} | 83,680 | |||||||||||||||||||||||||
| {a} | 35,863 | |||||||||||||||||||||||||
| {a} | 2,228,134 | |||||||||||||||||||||||||
| {b} | 2,311,000 | |||||||||||||||||||||||||
| Accumulated other comprehensive income | - | - | 958 | 154,724 | {a} | (675 | ) | (846 | ) | |||||||||||||||||
| {a} | 482 | |||||||||||||||||||||||||
| {a} | (156,335 | ) | ||||||||||||||||||||||||
| Total stockholders’ equity attributable to the Company | (98,647 | ) | - | (76,376 | ) | (2,100,355 | ) | 447,127 | (1,828,251 | ) | ||||||||||||||||
| Noncontrolling interest | - | - | - | - | {a} | (36,346 | ) | (630,106 | ) | |||||||||||||||||
| {a} | (593,760 | ) | ||||||||||||||||||||||||
| Total stockholders’ equity | (98,647 | ) | - | (76,376 | ) | (2,100,355 | ) | (182,979 | ) | (2,458,357 | ) | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 29,513 | $ | 120,000.00 | $ | 157,972 | $ | 522,658 | $ | (182,979 | ) | $ | 647,164 | |||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
F-2
JIALIJIA GROUP CORPORATION LTD.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2019
| JIALIJIA GROUP CORPORATION LTD | HUAZHONGYUN GROUP CO., LTD | JIALIJIA JIXIANG INVESTMENT (CHANGZHOU) CO., LTD | RUCHENG WENCHUAN GAS CO., LTD. | NOTES | PRO
FORMA ADJUSTMENTS | PRO FORMA COMBINED | ||||||||||||||||||||
| Revenue | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
| Cost of revenue | - | - | - | - | - | - | ||||||||||||||||||||
| Gross profit | - | - | - | - | - | - | ||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||
| General and administrative expenses | 65,045 | - | - | 119,543 | - | 184,588 | ||||||||||||||||||||
| Impairment of Goodwill | {c} | 3,962,424 | 3,962,424 | |||||||||||||||||||||||
| Total operating expenses | 65,045 | - | - | 119,543 | 3,962,424 | 4,147,012 | ||||||||||||||||||||
| Loss from operations | (65,045 | ) | - | - | (119,543 | ) | (3,962,424 | ) | (4,147,012 | ) | ||||||||||||||||
| Investment income (loss) | - | - | (83,680 | ) | {a} | 83,680 | - | |||||||||||||||||||
| Interest income (expense) | - | - | - | - | - | - | ||||||||||||||||||||
| Gain on disposal of investment | {b} | 2,311,000 | 2,311,000 | |||||||||||||||||||||||
| Loss before tax | (65,045 | ) | - | (83,680 | ) | (119,543 | ) | (1,567,744 | ) | (1,836,012 | ) | |||||||||||||||
| Income tax expense | - | - | - | - | - | |||||||||||||||||||||
| Net loss | (65,045 | ) | - | (83,680 | ) | (119,543 | ) | (1,567,744 | ) | (1,836,012 | ) | |||||||||||||||
| Net loss attributable to noncontrolling interest | - | - | - | - | {a} | 35,863 | 35,863 | |||||||||||||||||||
| Net loss attributable to the Jialijia Group Corporation Ltd. | (65,045 | ) | - | (83,680 | ) | (119,543 | ) | (1,800,149 | ) | |||||||||||||||||
| Other Comprehensive Income (Loss): | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | 1,002 | (1,611 | ) | {a} | (1,214 | ) | (1,823 | ) | ||||||||||||||||
| Comprehensive income (loss) | (65,045 | ) | - | (82,678 | ) | (121,154 | ) | (1,214 | ) | (1,801,972 | ) | |||||||||||||||
| Comprehensive income (loss) attributable to noncontrolling interest | - | - | {a} | 483 | 483 | |||||||||||||||||||||
| Comprehensive income (loss) attributable to Jialijia Group Corporation Ltd. | $ | (65,045 | ) | $ | - | $ | (82,678 | ) | $ | (121,154 | ) | $ | (731 | ) | $ | (1,801,489 | ) | |||||||||
| Net Loss Per Common Share: | ||||||||||||||||||||||||||
| Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||||||
| Basic and diluted | 7,496,011 | 7,496,011 | ||||||||||||||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
F-3
JIALIJIA GROUP CORPORATION LTD.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
| JIALIJIA GROUP CORPORATION LTD | HUAZHONGYUN GROUP CO., LTD | JIALIJIA JIXIANG INVESTMENT (CHANGZHOU) CO., LTD | RUCHENG WENCHUAN GAS CO., LTD. | |||||||||||||||||||||||
| For
the Year Ended January 31, 2019 | For
the Year Ended December 31, 2018 | For
the Year Ended December 31, 2018 | For
the Year Ended December 31, 2018 | NOTES | PRO
FORMA ADJUSTMENTS | PRO FORMA COMBINED | ||||||||||||||||||||
| Revenue | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
| Cost of revenue | - | - | - | - | - | |||||||||||||||||||||
| Gross profit | - | - | - | - | - | |||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||
| General and administrative expenses | 42,783 | - | 1,001 | 176,551 | - | 220,335 | ||||||||||||||||||||
| Total operating expenses | 42,783 | - | 1,001 | 176,551 | - | 220,335 | ||||||||||||||||||||
| Loss from operations | (42,783 | ) | - | (1,001 | ) | (176,551 | ) | - | (220,335 | ) | ||||||||||||||||
| Interest income (expense) | - | (3 | ) | - | - | (3 | ) | |||||||||||||||||||
| Loss before tax | (42,783 | ) | - | (1,004 | ) | (176,551 | ) | - | (220,338 | ) | ||||||||||||||||
| Income tax expense | - | - | - | - | ||||||||||||||||||||||
| Net loss | (42,783 | ) | - | (1,004 | ) | (176,551 | ) | - | (220,338 | ) | ||||||||||||||||
| Net loss attributable to noncontrolling interest | - | - | - | {a} | 52,965 | 52,965 | ||||||||||||||||||||
| Net loss attributable to Jialijia Group Corporation Ltd. | (42,783 | ) | - | (1,004 | ) | (176,551 | ) | 52,965 | (167,373 | ) | ||||||||||||||||
| Other Comprehensive Income (Loss): | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | (44 | ) | 109,523 | 109,479 | |||||||||||||||||||||
| Comprehensive income (loss) | (42,783 | ) | - | (1,048 | ) | (67,028 | ) | 52,965 | (57,894 | ) | ||||||||||||||||
| Comprehensive income (loss) attributable to noncontrolling interest | - | {a} | (32,857 | ) | (32,857 | ) | ||||||||||||||||||||
| Comprehensive income (loss) attributable to the Company | $ | (42,783 | ) | $ | - | $ | (1,048 | ) | $ | (67,028 | ) | $ | 20,108 | $ | (90,751 | ) | ||||||||||
| Net Loss Per Common Share: | ||||||||||||||||||||||||||
| Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||||||
| Basic and diluted | 7,285,000 | 7,285,000 | ||||||||||||||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
F-4
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited pro forma condensed combined balance sheet as of June 30, 2019 combines the historical balance sheets of the Company, Huazhongyun, Jialijia (Changzhou), and Rucheng Wenchuan as if the Transactions had occurred on June 30, 2019. The unaudited pro forma combined statements of income and comprehensive income for the six months ended June 30, 2019 and for the year ended December 31, 2018 combine the historical consolidated statements of income and comprehensive income of the Company, Huazhongyun, Jialijia (Changzhou), and Xxxxxxx Xxxxxxxx, and have been prepared has been prepared as if the Transactions had closed on January 1, 2018. The unaudited pro forma condensed combined financial statements have also been adjusted to give effect to pro forma events that are directly attributable to the Transactions, factually supportable and expected to have a continuing impact on the combined results.
The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Both the Company and Huazhongyun and its subsidiaries are under common control upon the Exchange Agreement.
The acquisition of Rucheng Wenchuan by Jialijia (Changzhou) will be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) with Jialijia (Changzhou) as the acquiring entity. In business combination transactions in which the consideration given is not in the form of cash (that is, in the form of non-cash assets, liabilities incurred, or equity interests issued), measurement of the acquisition consideration is based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.
Under ASC 805, all of the Rucheng Wenchuan assets acquired and liabilities assumed in this business combination are recognized at their acquisition-date fair value. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.
The preliminary unaudited pro forma information is presented solely for informational purposes and is not necessarily indicative of the consolidated results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company.
2. Purchase Price
In connection with the acquisition of Xxxxxxx Xxxxxxxx, Jialijia (Changzhou) entered into an equity transfer agreement (the “Equity Transfer”) with Xx. Xxxxxxx Xx, the shareholder who owned 94.77% of Xxxxxxx Xxxxxxxx’s outstanding shares on January 7, 2019. Pursuant to the Equity Transfer, Xx. Xxxxxxx Xx agreed to transfer 70% of his ownership of Xxxxxxx Xxxxxxxx to Jialijia (Changzhou), in exchange of RMB 1,000,000, approximately $145,983, and 2,860,000 common shares of the Company owned by Huazhongyun. Immediately after the equity transfer agreement, Jialijia (Changzhou) owns 70% of the ownership and becomes the controlling shareholder of Rucheng Wenchuan.
Goodwill as a result of the acquisition of Xxxxxxx Xxxxxxxx is calculated as follows:
| Purchase consideration: | ||||
| Cash and cash equivalents | $ | 145,983 | ||
| Common stock (1) | 2,431,000 | |||
| Total consideration | 2,576,983 | |||
| Estimated Fair Value of Assets Acquired: | ||||
| Cash and cash equivalents | $ | 8,822 | ||
| Advance to supplier | 101,811 | |||
| Other current assets | 2,909 | |||
| Property and equipment | 492,413 | |||
| Total assets acquired | 605,955 | |||
| Estimated Fair Value of Liabilities Assumed: | ||||
| Due to related parties | 2,552,596 | |||
| Accrued expenses and other current liabilities | 32,560 | |||
| Total liabilities assumed | 2,585,156 | |||
| Total net assets | (1,979,201 | ) | ||
| Noncontrolling interests | (593,760 | ) | ||
| Total net assets acquired | (1,385,441 | ) | ||
| Goodwill as a result of the acquisition | $ | 3,962,424 | ||
| (1) | 2,860,000 shares of the Company’s common stock to be issued to Xx. Xxxxxxx Xx in connection with the Equity Transfer. Those shares were valued at $0.85 per share, the closing share price of the Company on January 7, 2019. |
F-5
3. Pro Forma Adjustments
The following adjustments were made in the preparation of the unaudited pro forma condensed consolidated combined balance sheet and unaudited pro forma condensed consolidated combined statements of income and comprehensive income:
| {a} | Represents the elimination entry of investment income and investment in Xxxxxxx Xxxxxxxx, and to record the noncontrolling interests, noncontrolling interest expense, and Goodwill as a result of acquisition of Rucheng Wenchuan |
| {b} | Represents the gain on disposal of 2,860,000 shares of common stock owned by Huazhongyun as a result of the Equity Transfer |
| {c} | Represents the impairment of Goodwill. Goodwill represents the excess of total acquisition consideration over the preliminary fair value of the underlying net assets. In accordance with ASC Topic 350, Intangibles—Goodwill and Other, goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. In the event management determines that the value of goodwill has become impaired, the combined company will incur a charge to earnings for the amount of the impairment during the period in which the determination is made. |
F-6
