EX-99.2 5 ex99_2.htm

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.

 

1

 

 

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 

 

 

2

 

 

 

  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  

 

3

 

 

 

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  

 

4

 

 

 

  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  

 

 

5

 

 

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.
 

 

 

 

 

6