EXHIBIT 99.2
EVER-GLORY INTERNATIONAL GROUP, INC.
PRO FORMA FINANCIAL STATEMENTS
PROFORMA FINANCIAL INFORMATION
The following consolidated (unaudited) condensed pro forma balance sheet reflects the financial position of Ever-Glory International Group, Inc. “EGLY” as of September 30, 2006 as if the merger with Nanjing Catch-Luck Garments Company Limited “Catch-Luck” and the acquisition of Nanjing New-Tailun Garments Company Limited “New-Tailun” had been completed as of that date, and the consolidated (unaudited) condensed pro forma statements of operations for EGLY for the nine months ended September 30, 2006, for the year ended December 31, 2005 and 2004, as if the merger had been completed as of January 1, 2004 and the acquisition was completed on January 1, 2006.
The shareholder of Catch-Luck exchanged 100% of their ownership of Catch-Luck for the common stocks of EGLY, having an aggregate fair market value of $3.4 million and cash in the amount of $600,000 under a sales and purchase agreement. The $600,000 cash payment is a cash distribution to Catch-Luck’s shareholder who is also a majority shareholder of EGLY. The number of shares of the common stock of EGLY will be determined as of the closing of the transaction by dividing $3.4 million by the fair market value per share of the common stock of EGLY. The fair market value shall be the preceding 30-day average of the high bid and the low asking price quoted as of the closing of the transaction. Had the transaction closed on September 30, 2006, the preceding 30-day average of the high bid price and the low asking price would have been $0.54 and 6,296,296 shares of EGLY’s common stock would accordingly have been issued. The number of shares of common stock of EGLY is subject to adjustment based upon a public offering price per share as of closing. The number of shares to be issued will have a direct impact on the net income per share on the pro forma financial statements.
The transfer has been accounted for as a merger of entities under common control as the companies were beneficially owned by identical shareholders and share common management. The financial statements have been prepared as if the merger had occurred retroactively.
The acquisition of New-Tailun will be accounted for under the purchase method of accounting. Under the purchase method of accounting, assets acquired and liabilities assumed are recorded at their estimated fair values. Goodwill is generated to the extent that the consideration, including transaction and closing costs, exceeds the fair value of net assets acquired. The shareholder of New-Tailun exchanged 100% of their ownership of New Tailun for the common stocks of EGLY, having an aggregate fair market value of $10 million and cash in the amount of $2 million under a sales and purchase agreement. The $2 million cash payment is a cash distribution to New-Tailun’s shareholder. The number of shares of the common stock of EGLY will be determined as of the closing of the transaction by dividing $10 million by the fair market value per share of the common stock of EGLY. The fair market value shall be the preceding 30-day average of the high bid and the low asking price quoted as of the closing of the transaction. Had the transaction closed on September 30, 2006, the preceding 30-day average of the high bid price and the low asking price would have been $0.54 and 18,518,519 shares of EGLY’s common stock would accordingly have been issued. The number of shares of common stock of EGLY is subject to adjustment based upon a public offering price per share as of closing. The number of shares to be issued will have a direct impact on the net income per share on the pro forma financial statements.
The unaudited pro forma financial information is presented for information purposes only and it is not necessarily indicative of the financial position and results of operations that would have been achieved had the transaction been completed as of the date indicated and is not necessarily indicative of EGLY’s future financial position or results of operations.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements of EGLY, Catch-Luck and New-Tailun.
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EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED CONDENSED PRO FORMA BALANCE SHEETS AS OF SEPTEMBER 30, 2006 (UNAUDITED) | |||||||||||||||
EGLY | Catch-Luck | New-Tailun | Pro Forma | Pro Forma | |||||||||||
ASSETS | (Historical) | (Historical) | (Historical) | Adjustments | Combined | ||||||||||
CURRENT ASSETS | $ | 1,897,586 | $ | 2,515,469 | $ | 1,391,593 | (2 | ) | (600,000 | ) | $ | 3,171,835 | |||
(3 | ) | (32,813 | ) | (6 | ) | (2,000,000 | ) | ||||||||
INVESTMENT IN A SUBSIDIARY | (2 | ) | 4,000,000 | (6 | ) | 12,000,000 | - | ||||||||
(1 | ) | (4,000,000 | ) | (5 | ) | (12,000,000 | ) | ||||||||
GOODWILL, NET | (5 | ) | 10,449,434 | 10,449,434 | |||||||||||
PROPERTY AND EQUIPMENT, NET | 7,687,851 | 1,153,325 | 353,707 | 9,194,883 | |||||||||||
LAND USE RIGHT, NET | 2,305,733 | - | - | 2,305,733 | |||||||||||
TOTAL ASSETS | $ | 11,891,170 | $ | 3,668,794 | $ | 1,745,300 | $ | 25,121,885 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||
CURRENT LIABILITIES | $ | 4,549,166 | $ | 1,418,216 | $ | 194,734 | (3 | ) | 32,813 | $ | 6,129,303 | ||||
STOCKHOLDERS' EQUITY | |||||||||||||||
Preferred stock ($.0001 par value, | - | - | - | - | |||||||||||
authorized 5,000,000 shares, | |||||||||||||||
Nil shares issued and outstanding) | |||||||||||||||
Series A Convertible Preferred Stock | 1 | - | - | 1 | |||||||||||
($.0001 par value, authorized 10,000 shares, | |||||||||||||||
7,883 shares issued and outstanding | |||||||||||||||
as of September 30, 2006; 7,883 shares issued | |||||||||||||||
and outstanding as of the date of merger) | |||||||||||||||
Common stock ($.0001 par value, authorized | 1,997 | 600,000 | 900,000 | (2 | ) | (630 | ) | (6 | ) | (1,852 | ) | 4,479 | |||
100,000,000 shares, issued and | (1 | ) | 600,000 | (5 | ) | 900,000 | |||||||||
outstanding 19,971,758 shares as of | |||||||||||||||
September 30, 2006; issued and outstanding | |||||||||||||||
44,786,573 shares as of the date of merger) | |||||||||||||||
Additional paid-in capital | 1,263,749 | - | - | (2 | ) | (3,399,370 | ) | (6 | ) | (9,998,148 | ) | 11,261,267 | |||
(1 | ) | 3,400,000 | |||||||||||||
Retained earnings | 5,804,769 | 1,630,873 | 650,319 | (5 | ) | 650,319 | 7,435,642 | ||||||||
Accumulated other comprehensive income | 271,488 | 19,705 | 247 | (5 | ) | 247 | 291,193 | ||||||||
Total Stockholders' Equity | 7,342,004 | 2,250,578 | 1,550,566 | 18,992,582 | |||||||||||
TOTAL LIABILITIES AND | |||||||||||||||
STOCKHOLDERS' EQUITY | $ | 11,891,170 | $ | 3,668,794 | $ | 1,745,300 | $ | 25,121,885 |
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EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED CONDENSED PRO FORMA | |||||||||||||||
STATEMENT OF OPERATIONS | |||||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 | |||||||||||||||
(UNAUDITED) | |||||||||||||||
EGLY | Catch-Luck | New-Tailun | Pro Forma | Pro Forma | |||||||||||
(Historical) | (Historical) | (Historical) | Adjustments | Combined | |||||||||||
NET SALES | $ | 17,529,139 | $ | 14,433,759 | $ | 5,525,124 | (3 | ) | 560,971 | $ | 36,927,051 | ||||
COST OF SALES | (14,399,072 | ) | (12,285,470 | ) | (4,599,375 | ) | (3 | ) | (560,971 | ) | (30,722,946 | ) | |||
GROSS PROFIT | 3,130,067 | 2,148,289 | 925,749 | 6,204,105 | |||||||||||
OPERATING EXPENSES | 1,423,382 | 301,978 | 275,714 | (3 | ) | (14,063 | ) | 1,987,011 | �� | ||||||
INCOME FROM OPERATIONS | 1,706,685 | 1,846,311 | 650,035 | 4,217,094 | |||||||||||
OTHER INCOME (EXPENSES) | (95,897 | ) | 1,044 | 284 | (3 | ) | 14,063 | (108,632 | ) | ||||||
INCOME BEFORE INCOME TAX EXPENSE | 1,610,788 | 1,847,355 | 650,319 | 4,108,462 | |||||||||||
INCOME TAX EXPENSE | (255,883 | ) | - | - | (255,883 | ) | |||||||||
NET INCOME | 1,354,905 | 1,847,355 | 650,319 | 3,852,579 | |||||||||||
OTHER COMPREHENSIVE INCOME | 238,060 | 17,427 | 247 | 255,734 | |||||||||||
COMPREHENSIVE INCOME | $ | 1,592,965 |
| $ | 1,864,782 | $ | 650,566 | $ | 4,108,313 | ||||||
Net income per share - basic | $ | 0.07 |
| $ | 0.29 | $ | 0.04 | $ | 0.09 | ||||||
Net income per share - diluted | $ | 0.02 |
| $ | 0.29 | $ | 0.04 | $ | 0.04 | ||||||
Weighted average number of shares | |||||||||||||||
outstanding during the period - basic | 19,971,758 | (4 | ) | 6,296,296 | (4 | ) | 18,518,519 | 44,786,573 | |||||||
Weighted average number of shares | |||||||||||||||
outstanding during the period - diluted | 79,886,746 | (4 | ) | 6,296,296 | (4 | ) | 18,518,519 | 104,701,561 |
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EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED CONDENSED PRO FORMA | |||||||||||||||
STATEMENT OF OPERATIONS | |||||||||||||||
FOR THE YEAR ENDED DECEMBER 31, 2005 | |||||||||||||||
(UNAUDITED) | |||||||||||||||
EGLY | Catch-Luck | New-Tailun | Pro Forma | Pro Forma | |||||||||||
(Historical) | (Historical) | (Historical) | Adjustments | Combined | |||||||||||
NET SALES | $ | 10,813,961 | $ | 4,099,612 | $ | - | (3 | ) | 65,943 | $ | 14,847,630 | ||||
COST OF SALES | (8,712,565 | ) | (3,703,977 | ) | - | (3 | ) | (65,943 | ) | (12,350,599 | ) | ||||
GROSS PROFIT | 2,101,396 | 395,635 | - | 2,497,031 | |||||||||||
OPERATING EXPENSES | 969,663 | 348,055 | - | (3 | ) | (18,326 | ) | 1,299,392 | |||||||
INCOME FROM OPERATIONS | 1,131,733 | 47,580 | - |
| 1,197,639 | ||||||||||
OTHER INCOME (EXPENSES) | 73,487 | (521 | ) | - | (3 | ) | 18,326 | 54,640 | |||||||
INCOME BEFORE INCOME TAX EXPENSE | 1,205,220 | 47,059 | - | 1,252,279 | |||||||||||
INCOME TAX EXPENSE | (161,680 | ) | - | - | (161,680 | ) | |||||||||
NET INCOME | 1,043,540 | 47,059 | - | 1,090,599 | |||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | 5,621 | (7,310 | ) | - | (1,689 | ) | |||||||||
COMPREHENSIVE INCOME | $ | 1,049,161 | $ | 39,749 | $ | - | $ | 1,088,910 | |||||||
Net income per share - basic | $ | 0.02 |
| $ | 0.01 | $ | - | $ | 0.02 | ||||||
Net income per share - diluted | $ | 0.01 | $ | 0.01 | $ | - | $ | 0.01 | |||||||
Weighted average number of shares | |||||||||||||||
outstanding during the year - basic | 55,224,701 | (4 | ) | 6,296,296 | (4 | ) | - | 61,520,997 | |||||||
Weighted average number of shares | |||||||||||||||
outstanding during the year - diluted | 115,139,689 | (4 | ) | 6,296,296 | (4 | ) | - | 121,435,985 |
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EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED CONDENSED PRO FORMA | ||||||||||||||||
STATEMENT OF OPERATIONS | ||||||||||||||||
FOR THE YEAR ENDED DECEMBER 31, 2004 | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
EGLY | Catch-Luck | New-Tailun | Pro Forma | Pro Forma | ||||||||||||
(Historical) | (Historical) | (Historical) | Adjustments | Combined | ||||||||||||
NET SALES | $ | 7,967,601 | $ | 3,890,885 | $ | - | (3 | ) | 2,356 | $ | 11,856,130 | |||||
COST OF SALES | (6,092,868 | ) | (3,857,615 | ) | - | (3 | ) | (2,356 | ) | (9,948,127 | ) | |||||
GROSS PROFIT | 1,874,733 | 33,270 | - | 1,908,003 | ||||||||||||
OPERATING EXPENSES | 487,626 | 158,774 | - | 646,400 | ||||||||||||
INCOME FROM OPERATIONS | 1,387,107 | (125,504 | ) | - | 1,261,603 | |||||||||||
OTHER EXPENSES | (8,668 | ) | (681 | ) | - | (9,349 | ) | |||||||||
INCOME BEFORE INCOME TAX EXPENSE | 1,378,439 | (126,185 | ) | - | 1,252,254 | |||||||||||
INCOME TAX EXPENSE | (145,584 | ) | - | - | (145,584 | ) | ||||||||||
NET INCOME | 1,232,855 | (126,185 | ) | - | 1,106,670 | |||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | - | - | - | - | ||||||||||||
COMPREHENSIVE INCOME | $ | 1,232,855 | $ | (126,185 | $ | - | $ | 1,106,670 | ||||||||
Net income per share - basic | $ | 0.02 | $ | -0.02 | $ | - | $ | 0.02 | ||||||||
Net income per share - diluted | $ | 0.02 | $ | -0.02 | $ | - | $ | 0.02 | ||||||||
Weighted average number of shares | ||||||||||||||||
outstanding during the year - basic | 58,317,270 | (4 | ) | 6,296,296 | (4 | ) | - | 64,613,566 | ||||||||
Weighted average number of shares | ||||||||||||||||
outstanding during the year - diluted | 58,317,270 | (4 | ) | 6,296,296 | (4 | ) | - | 64,613,566 |
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Notes to Unaudited Pro Forma Condensed Consolidated Financial Information
Note 1 — Pro forma adjustments
(1) | Shareholder of Catch-Luck exchanged 100% of their ownership of Catch-Luck for common stocks of EGLY, having an aggregate fair market value of $3.4 million, and cash in the amount of $600,000 under a sale and purchase agreement. The transfer has been accounted for as a merger of entities under common control as the companies were beneficially owned by identical shareholders and share common management. The financial statements have been prepared as if the merger had occurred retroactively. |
(2) | Reflects total consideration payable to shareholders of Catch-Luck - Cash $600,000 + 6,296,296 common shares valued at $0.54 per share = $4,000,000. |
The fair value of common stock is determined by the preceding 30-day average of the high bid and the low asking price quoted as of the closing of the transaction. | |
Had the transaction closed on September 30, 2006, the preceding 30-day average of the high bid price and the low asking price would have been $0.54 and 6,296,296 shares of EGLY’s common stock would accordingly have been issued. | |
(3) | Reflects the elimination of intercompany transactions |
(4) | Weighted average number of shares outstanding for combined entity includes 6,296,296 shares to Catch- Luck’s shareholder and 18,518,619 shares to New-Tailun’s shareholder as a result of the acquisition. |
(5) | Reflects the elimination of the assets and liabilities of New-Tailun acquired by EGLY, eliminating pre- acquisition retained earnings and recording a 100% share of New-Tailun |
(6) | Reflects total consideration payable to shareholders of Catch-Luck - Cash $2,000,000 + 18,518,519 common shares valued at $0.54 per share = $12,000,000. |
The fair value of common stock is determined by the preceding 30-day average of the high bid and the low asking price quoted as of the closing of the transaction. | |
Had the transaction closed on September 30, 2006, the preceding 30-day average of the high bid price and the low asking price would have been $0.54 and 18,518,519 shares of EGLY’s common stock would accordingly have been issued. | |
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