10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 0-28806

Ever-Glory International Group Inc.

(Exact name of registrant as specified in its charter)

Florida	65-0420146
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Ever-Glory Commercial Center,

509 Chengxin Road, Jiangning Development Zone,

Nanjing, Jiangsu Province,

People’s Republic of China

(Address of principal executive offices)

(8625) 5209-6875

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. o

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of August 8, 2014, 14,781,241 shares of the Company’s common stock, $0.001 par value, were issued and outstanding.

EVER-GLORY INTERNATIONAL GROUP, INC.

FORM 10-Q

INDEX

		Page Number
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		3
PART I.  FINANCIAL INFORMATION		4
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2014 and 2013 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013 (unaudited)	6
	Notes to the Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II.  OTHER INFORMATION		31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
SIGNATURES		32

2

Cautionary Note Regarding Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q, which are not historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, whether expressed or implied, are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated, due to a number of factors, which include, but are not limited to:

● Competition within our industry;

● Seasonality of our sales;

● Success of our investments in new product development

● Our plans and ability to open new retail stores;

● Success of our acquired businesses;

● Our relationships with our major customers;

● The popularity of our products;

● Relationships with suppliers and cost of supplies;

● Financial and economic conditions in Asia, Japan, Europe and the U.S.;

● Anticipated effective tax rates in future years;

● Regulatory requirements affecting our business;

● Currency exchange rate fluctuations;

● Our future financing needs; and

● Our ability to attract additional investment capital on attractive terms.

Forward-looking statements also include the assumptions underlying or relating to any of the foregoing or other such statements. When used in this report, the words “may,”“will,”“should,”“could,”“expect,”“plan,”“anticipate,”“believe,”“estimate,”“predict,”“continue,” and similar expressions are generally intended to identify forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the factors described in the Section entitled “Risk Factors” on Form 10-K and other documents we file from time to time with the Securities and Exchange Commission (‘SEC’).

3

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013

ASSETS

	June 30, 2014			December 31, 2013
CURRENT ASSETS
Cash and cash equivalents	$	25,012,160		$	27,772,878
Accounts receivable		60,381,956			80,317,630
Inventories		76,619,104			75,190,197
Value added tax receivable		3,883,902			2,620,277
Other receivables and prepaid expenses		2,336,675			1,821,695
Advances on inventory purchases		6,369,531			6,010,027
Amounts due from related parties		1,502,946			1,896,376
Total Current Assets		176,106,274			195,629,080
LAND USE RIGHT, NET		2,778,380			2,821,471
PROPERTY AND EQUIPMENT, NET		18,993,507			18,370,327
TOTAL ASSETS	$	197,878,161		$	216,820,878
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Bank loans	$	55,379,699		$	53,338,748
Accounts payable		49,983,235			72,855,960
Accounts payable and other payables - related parties		3,020,292			4,102,456
Other payables and accrued liabilities		14,936,652			16,128,514
Value added and other taxes payable		4,746,910			5,399,187
Income tax payable		4,289,564			489,307
Deferred tax liabilities		4,933,685			7,391,029
Total Current Liabilities		137,290,037			159,705,201
COMMITMENTS AND CONTINGENCIES
EQUITY
Stockholders' equity of the Company:
Preferred stock ($.001 par value, authorized 5,000,000 shares, no shares issued and outstanding)		-			-
Common stock ($.001 par value, authorized 50,000,000 shares, 14,781,241 and 14,781,241 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively)		14,781			14,781
Additional paid-in capital		3,572,157			3,572,157
Retained earnings		61,537,898			53,618,026
Statutory reserve		10,212,268			10,212,268
Accumulated other comprehensive income		8,440,043			8,783,425
Amounts due from related party		(23,189,023	)		(19,084,980	)
Total Stockholders' Equity		60,588,124			57,115,677
TOTAL LIABILITIES AND EQUITY	$	197,878,161		$	216,820,878

See the accompanying notes to the consolidated financial statements.

4

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED)

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
NET SALES	$	85,667,780		$	59,129,485		$	191,682,949		$	137,440,975
COST OF SALES		56,317,989			39,650,917			136,552,201			97,669,484
GROSS PROFIT		29,349,791			19,478,568			55,130,748			39,771,491
OPERATING EXPENSES
Selling expenses		14,402,662			9,898,106			30,525,958			21,749,402
General and administrative expenses		7,539,418			5,513,105			13,934,406			9,985,552
Total Operating Expenses		21,942,080			15,411,211			44,460,364			31,734,954
INCOME FROM OPERATIONS		7,407,711			4,067,357			10,670,384			8,036,537
OTHER INCOME (EXPENSES)
Interest income		336,414			342,188			577,747			637,790
Interest expense		(774,693	)		(736,695	)		(1,481,808	)		(1,528,224	)
Change in fair value of derivative liability		-			2,000			-			294,000
Other income (expenses)		440,464			(179,098	)		912,223			(147,641	)
Total Other Income (Expenses)		2,185			(571,605	)		8,162			(744,075	)
INCOME BEFORE INCOME TAX EXPENSE		7,409,896			3,495,752			10,678,546			7,292,462
INCOME TAX EXPENSE		(1,879,752	)		(768,541	)		(2,758,674	)		(1,478,172	)
NET INCOME		5,530,144			2,727,211			7,919,872			5,814,290
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation (loss) gain		356,044			850,550			(343,382	)		1,158,392
COMPREHENSIVE INCOME	$	5,886,188		$	3,577,761		$	7,576,490		$	6,972,682
EARNINGS PER SHARE
Basic and diluted	$	0.37		$	0.18		$	0.54		$	0.39
Weighted average number of shares outstanding
Basic and diluted		14,781,241			14,777,610			14,781,241			14,775,869

See the accompanying notes to the condensed consolidated financial statements.

5

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (UNAUDITED)

	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,919,872		$	5,814,290
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		3,462,128			3,690,891
Loss from sale of property and equipment		-			29,499
Change in fair value of derivative liability		-			(294,000	)
Deferred income tax		(2,409,053	)		555,716
Stock-based compensation		-			10,082
Changes in operating assets and liabilities
Accounts receivable		19,441,054			19,994,644
Inventories		(1,927,458	)		(9,730,652	)
Value added tax receivable		(1,286,005	)		(1,177,837	)
Other receivables and prepaid expenses		(529,644	)		307,455
Advances on inventory purchases		(404,581	)		(1,473,254	)
Amounts due from related parties		1,334,894			(2,760,288	)
Accounts payable		(22,393,350	)		(9,577,345	)
Accounts payable and other payables- related parties		(2,527,146	)		123,426
Other payables and accrued liabilities		(1,076,252	)		75,308
Value added and other taxes payable		(631,814	)		(77,745	)
Income tax payable		3,830,846			(389,778	)
Net cash provided by operating activities		2,803,491			5,120,412
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(4,185,207	)		(4,642,650	)
Proceeds from sale of property and equipment		-			13,583
Net cash used in investing activities		(4,185,207	)		(4,629,067	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		73,693,038			42,227,892
Repayment of bank loans		(71,260,909	)		(45,290,965	)
Repayment of payable to officers and employees		-			(2,381,512	)
Repayment of advances to related party		-			18,781,438
Interest income received from related party		1,302,400			-
Advances to related party		(5,046,800	)		(7,244,771	)
Net cash (used in) provided by financing activities		(1,312,271	)		6,092,082
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(66,731	)		187,368
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(2,760,718	)		6,770,795
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		27,772,878			9,365,958
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	25,012,160		$	16,136,753
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	1,481,808		$	1,528,224
Income taxes	$	1,354,679		$	1,199,771

See the accompanying notes to the condensed consolidated financial statements.

6

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(UNAUDITED)

NOTE 1 SUMMARY OF BUSINESS AND BASIS OF PRESENTATION

Organization and business

Ever-Glory International Group, Inc. (the “Company”), together with its subsidiaries, is an apparel manufacturer, supplier and retailer in The People's Republic of China ("China” or "PRC"), with a wholesale segment and a retail segment. The Company’s wholesale business consists of recognized brands for department and specialty stores located in China, Europe, Japan and the United States. The Company’s retail business consists of flagship stores and store-in-stores for the Company’s own-brand products.

The Company’s wholesale operations are provided primarily through the Company’s wholly-owned PRC subsidiaries, Goldenway Nanjing Garments Co. Ltd. (“Goldenway”), Nanjing Catch-Luck Garments Co. Ltd. (“Catch-Luck”), Nanjing New-Tailun Garments Co. Ltd (“New-Tailun”), Ever-Glory International Group Apparel Inc.(“Ever-Glory Apparel”) and Nanjing Tai Xin Garments Trading Company Limited (“Tai Xin”), and the Company’s wholly-owned Samoa subsidiary, Ever-Glory International Group (HK) Ltd. (“Ever-Glory HK”). The Company’s retail operations are provided through its wholly- owned subsidiaries, Shanghai LA GO GO Fashion Company Limited (“Shanghai LA GO GO”), Jiangsu LA GO GO Fashion Company Limited (“Jiangsu LA GO GO”), Tianjin LA GO GO Fashion Company Limited (“Tianjin LA GO GO”), Shanghai Ya Lan Fashion Company Limited (“Ya Lan”) and Xizang He Meida Trading Company Limited (“He Meida”).

On June 26, 2014, Shanghai LA GO GO entered into a contract with Shanghai Yiduo Fashion Company Limited (“Shanghai Yiduo”) to acquire 78% of the shares of Shanghai Yiduo for $0.75 million (RMB4.6 million).  Shanghai Yiduo is currently owned by unrelated third parties and operates design and development of women’s apparel for Mecox Lane, one of China’s leading online platforms for apparel and apparel accessories. The acquisition price is to be paid as follows. 

Payment Date	Amount
Before July 8, 2014	$	0.45 million
Before September 28, 2014		0.22 million
Within 10 days after Shanghai Yiduo collects all the accounts receivable from Mecox Lane		0.08 million
TOTAL		0.75 million

The first $0.45 million installment was paid by the Company to Shanghai Yiduo in July 2014 and was financed by working capital. The completion of the acquisition is subject to the company’s final due dilligence and Shanghai Yiduo’s ability to collect certain account receivables. In the event Shanghai Yiduo is not able to collect the account receivables in accordance to the contract, the Company may reduce the purchase price or terminate the contract and get back the first install payment.   Management of the Company believes that the acquisition will improve the Company’s design and product development ability.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheet as of June 30, 2014, the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2014 and 2013, and the condensed consolidated statements of cash flows for the six months ended June 30, 2014 and 2013. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. Wholesale revenues are generally higher in the third and fourth fiscal quarters, while retail revenues are generally higher in the first and fourth fiscal quarters. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results of operations to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, and Form 10-Q for the three and six months ended June 30, 2013.

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

Financial Instruments

Management has estimated that the carrying amounts of non-related party financial instruments approximate their fair values due to their short-term maturities. The fair value of amounts due from (to) related parties is not practicable to estimate due to the related party nature of the underlying transactions.

7

Fair Value Accounting

Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures”, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

At June 30, 2014, the Company’s financial assets (all Level 1) consist of cash placed with financial institutions that management considers to be of a high quality.

At June 30, 2014 and December 31, 2013, the Company had an outstanding forward foreign exchange option contract subject to recurring fair value measurement (Level 3) with the change in fair value recognized in earnings (Note 5).

Foreign Currency Translation and Other Comprehensive Income

The reporting currency of the Company is the U.S. dollar. The functional currency of the Company, Ever-Glory HK and Perfect Dream Limited, British Virgin Islands incorporated subsidiary of the Company (“Perfect Dream”) is the U.S. dollar. The functional currency of Goldenway, New Tailun, Catch-luck, Ever-Glory Apparel, Tai Xin, Shanghai LA GO GO, Jiangsu LA GO GO, Tianjin LA GO GO, Ya Lan and He Meida is the Chinese RMB.

For subsidiaries whose functional currency is the RMB, all assets and liabilities were translated at the exchange rate at the balance sheet date; equity was translated at historical rates and items in the statement of comprehensive income were translated at the average rate for the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Items in the cash flow statement are translated at the average exchange rate for the period.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and must be applied retrospectively. Management is currently evaluating the potential impact of this ASU on the Company’s financial statements. 

NOTE 3 INVENTORIES

Inventories at June 30, 2014 and December 31, 2013 consisted of the following:

	June 30, 2014			December 31, 2013
Raw materials	$	2,273,209		$	5,658,519
Work-in-progress		30,661,653			25,862,185
Finished goods		54,087,608			55,664,077
		87,022,470			87,184,781
Less: allowance for obsolete inventories		(10,403,366	)		(11,994,584	)
Total inventories	$	76,619,104		$	75,190,197

8

NOTE 4 BANK LOANS

Bank loans represent amounts due to various banks and are generally due on demand or within one year. These loans can be renewed with the banks. Bank loans consisted of the following at June 30, 2014 and December 31, 2013:

	June 30,		December 31,
Bank	2014		2013
Industrial and Commercial Bank of China	$	12,956,145	$	1,799,600
Nanjing Bank		10,422,414		18,526,618
Bank of Communications		9,181,755		9,245,108
Bank of Everbright		6,233,984		3,272,000
The Hong Kong and Shanghai Bank		5,551,067		3,499,552
Bank of China		5,111,053		8,210,699
China Minsheng Banking		3,248,000		4,953,069
Pin An Bank		2,675,281		2,196,102
Huaxia Bank		-		1,636,000
	$	55,379,699	$	53,338,748

On January 1, 2014, Goldenway entered into a line of credit agreement with Industrial and Commercial Bank of China, which allows the Company to borrow up to approximately $6.50 million (RMB40 million). These loans are collateralized by the Company’s property and equipment. As of June 30, 2014, Goldenway had borrowed $6.50 million (RMB40 million) under this line of credit with an annual interest rate of 6.24% and due on various dates from March to April 2015.

On January 1, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $6.50 million (RMB40 million) with Industrial and Commercial Bank of China and guaranteed by Goldenway. As of June 30, 2014, Ever-Glory Apparel had borrowed $4.79 million (RMB 29.5 million) under this line of credit with an annual interest rate of 5.6% and due on various dates from November to December 2014. Ever-Glory Apparel had also borrowed $1.67 million from Industrial and Commercial Bank of China with annual interest rates ranging from 1.02% to 1.04% and due on various dates from July to October 2014, and collateralized by approximately $2.24 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $0.04 million was unused and available under this line of credit.  Approximately $0.44 million was repaid subsequent to June 30, 2014.

On June 14, 2013, Goldenway entered into a line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately $8.12 million (RMB50 million). These loans are guaranteed by Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), an entity controlled by Mr. Kang, the Company’s Chairman and Chief Executive Officer. These loans are also collateralized by the Company’s property and equipment. As of June 30, 2014, Goldenway had borrowed $4.06 (RMB25 million) under this line of credit from Nanjing Bank with an annual interest rate of 6.16% due on August 2014. At June 30, 2014, approximately $4.06 million was unused and available under this line of credit. Approximately $4.06 million was repaid subsequent to June 30, 2014.

On June 14, 2013 and renewed on July 6, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $9.74 million (RMB60 million) with Nanjing Bank and guaranteed by Jiangsu Ever-Glory, Mr. Kang and Goldenway. As of June 30, 2014, Ever-Glory Apparel had borrowed $1.62 million (RMB 10 million) under this line of credit with an annual interest rate of 6.6% and due on September 2014. Ever-Glory Apparel had also borrowed $2.30 million from Nanjing Bank with annual interest rate of 3.1% and due on various dates from July to September 2014, and collateralized by approximately $3.16 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $5.82 million was unused and available under this line of credit.  Approximately $0.68 million was repaid subsequent to June 30, 2014.

On April 10, 2013, LA GO GO entered into a revolving line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately $3.25 million (RMB20 million). The line of credit is guaranteed by Mr. Kang. As of June 30, 2014, LA GO GO had borrowed $2.44 million (RMB15 million) under this line of credit with an annual interest rate of 6.16% and due on various dates from July to October 2014. At June 30, 2014, approximately $0.81 million (RMB5 million) was unused and available under this line of credit. Approximately $0.81 million was repaid subsequent to June 30, 2014.

On January 29, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $8.44 million (RMB52 million) with the Bank of Communications and collateralized by assets of Jiangsu Ever-Glory’s equity investee, Nanjing Knitting, under a collateral agreement executed among the Company, Jiangsu Ever-Glory, Nanjing Knitting and the bank. As of June 30, 2014, Ever-Glory Apparel had borrowed $4.06 million (RMB25 million) with an annual interest rate of 6.9% and due on various dates from February to March 2015. Ever-Glory Apparel had also borrowed $1.87 million from the Bank of Communications with an annual interest rates ranging from 3.82% to 5.75% and due in February 2015, and collateralized by approximately $2.51 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $2.51 million was unused and available under this line of credit.

On July 16, 2013, LA GO GO entered into a line of credit agreement for approximately $3.57 million (RMB22 million) with the Bank of Communications and guaranteed by Jiangsu Ever-Glory and Mr. Kang. As of June 30, 2014, LA GO GO had borrowed $3.25 million (RMB20 million) from the Bank of Communications with an annual interest rate of 6.3% and due in June 2015. At June 30, 2014, approximately $0.32 million was unused and available under this line of credit.

9

On September 1, 2013, Ever-Glory Apparel entered into a line of credit agreement for approximately $11.37 million (RMB70 million) with Everbright Bank, and collateralized by assets of Jiangsu Ever-Glory, This loan is also guaranteed by Goldenway and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $3.25 million (RMB20.0 million) from Everbright Bank, with an annual interest rate of 6.3% and due in October 2014. Ever-Glory Apparel had also borrowed $2.98 million from Everbright Bank with annual interest rate of 2.98% and due in August 2014, and collateralized by approximately $3.98 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $5.14 million was unused and available under this line of credit. Approximately $3.98 million was repaid subsequent to June 30, 2014.

On July 29, 2011, Ever-Glory Apparel and Perfect Dream collectively entered into a secured banking facility agreement for a combined revolving import facility, letter of credit, invoice financing facilities and a credit line for treasury products of up to $7.0 million with the Nanjing Branch of HSBC (China) Company Limited (“HSBC”). This agreement is guaranteed by the Company and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $5.55 million from HSBC with an annual interest rates ranging from 2.78% to 5.88%, due on various dates from July to September 2014, and collateralized by approximately $7.9 million of accounts receivable from wholesale customers. These bank loans are to be repaid upon receipt of payments from customers. As of June 30, 2014, approximately $1.45 million was unused and available.

On November 11, 2013, Ever-Glory Apparel entered into a line of credit agreement for approximately $5.68 million (RMB35 million) with the Bank of China and guaranteed by Jiangsu Ever-Glory and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $1.62 million (RMB10 million) with an annual interest rate of 6.05% and due in October 2014 under this line of credit. Ever-Glory Apparel had also borrowed $3.49 million ($1.6 million and RMB 11.6 million) from the Bank of China with annual interest rates ranging from 3.62% to 3.9% and due on various dates from July to August 2014, and collateralized by approximately $4.99 million of accounts receivable from wholesale customers. Approximately $1.60 million was repaid subsequent to June 30, 2014.  As of June 30, 2014, approximately $0.57 million was unused and available.

As of June 30, 2014, LA GO GO had borrowed $3.25 million (RMB 20 million) from China Minsheng Bank, with annual interest rate of 6.3% and due in August 2014. This loan is guaranteed by Ever-Glory Apparel and Mr. Kang.

As of June 30, 2014, Ever-Glory Apparel had borrowed $2.68 million from Ping An Bank, with annual interest rate of 3.9% and due on various dates from July to September 2014, and collateralized by approximately $3.83 million of accounts receivable from wholesale customers. Approximately $1.0 million was repaid subsequent to June 30, 2014.

Total interest expense on bank loans amounted to $774,693, $1,481,808, $736,695, and $1,528,224 for the three and six months ended June 30, 2014 and 2013, respectively.

NOTE 5 DERIVATIVES LIABILITY

At June 30, 2014, the Company had one outstanding forward foreign exchange option contract (sell US dollars for RMB), with a notional amount of US$3,000,000, that expires in September 2014. The fair value of this contract at June 30, 2014, as well as gains and losses realized on other foreign currency derivative activity during 2014 and 2013 were not significant.

Subsequent to June 30, 2014, we entered into another forward foreign exchange option contract (sell US dollars for RMB), with a notional amount of US $700,000, that expires in September 2015.

At December 31, 2012, the Company had warrants outstanding to purchase an aggregate of 840,454 shares of the Company’s common stock, which warrants required liability classification because of certain provisions that may have resulted in an adjustment to their exercise price. The warrants expired in June 2013. At the expiration date, the remaining value of the warrants not exercised ($2,000) was reduced to $0. The increase in other income resulting from the decrease in derivative warrant liability was $2,000 and $294,000 for the three and six months ended June 30, 2013, respectively.

NOTE 6 INCOME TAX

The Company’s operating subsidiaries are governed by the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (“the Income Tax Laws”).

All PRC subsidiaries are subject to income tax at the 25% statutory rate.

Perfect Dream was incorporated in the British Virgin Islands (BVI), and under the current laws of the BVI dividends and capital gains arising from the Company’s investments in the BVI are not subject to income taxes.

10

Ever-Glory HK was incorporated in Samoa, and under the current laws of Samoa has no liabilities for income taxes.

Although the Company’s parent entity is a US entity, the Company’s primary operations are through subsidiaries located in China, certain apparel manufacturing is performed outside of China in Southeast Asia, sales are made globally, and the Company has other subsidiary operations in Hong Kong and Samoa. Therefore, the Company uses significant judgment to calculate and provide for income taxes in each of the tax jurisdictions in which it operates. In the ordinary course of the Company’s business, there are transactions and calculations undertaken whose ultimate tax outcome cannot be certain. Some of these uncertainties arise as a consequence of transfer pricing for transactions with the Company’s subsidiaries, potential challenges to nexus, value added estimates, and similar matters. In September 2009, the Company formed its subsidiary, Ever-Glory HK, domiciled in Samoa, in order to engage in certain limited import and export of apparel, fabric and accessories, as well as to efficiently address currency exchange matters with international transactions. Over the past few years, the operational matters handled by this subsidiary have expanded with respect to sub-contracting of certain manufacturing work outside of China, as well as to other operational matters with non-PRC customers and vendors. Additionally, over this time period, tax guidance, rules and positions taken by the PRC with respect to transfer pricing issues have evolved, and in certain cases, become more standardized. As part of the Company’s on-going process of evaluating our tax positions, the Company considered various factors as they relate to its Samoan subsidiary and as related to intercompany transactions This evaluation resulted in a change in the Company’s estimate of exposure to potential unfavorable outcomes related to these uncertainties, and the Company recorded a tax liability of approximately $3,186,000 as of December 31, 2013 based on the probability for such outcomes.

As of June 30, 2014, the local PRC Tax Bureau is in discussions with the Company to finalize the process of payment for the approximate tax liability of $ 3,186,000. The Company and the PRC Tax Bureau have tentatively agreed that payments on the tax liability will be made by the Company prospectively over the next two to three year period. Beginning January 1, 2014, all net income generated from Ever-Glory HK has been reported as a taxable income at 25% tax rate in PRC.  

The PRC’s Enterprise Income Tax Law imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise in PRC to its immediate holding company outside China, such distributions were exempted under the previous income tax law and regulations. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company. The foreign invested enterprise became subject to the withholding tax starting from January 1, 2008. Given that the undistributed profits of the Company's subsidiaries in China are intended to be retained in China for business development and expansion purposes, no withholding tax accrual has been made.

After the tax liability adjustment resulted from the reevaluation of the Company’s tax position (resulting in the company allocating substantially all of the earnings of the Samoan subsidiary to the PRC and reporting such earnings as taxable in the PRC). PRC pre-tax income for the three and six months ended June 30, 2014 and 2013 was taxable in the following jurisdictions.

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
PRC	$	7,439,468		$	4,136,050		$	10,713,481		$	8,473,628
Samoa		-			(636,295	)		-			(1,462,766	)
BVI		(24,572	)		(1,003	)		(24,935	)		(2,318	)
Others		(5,000	)		(3,000	)		(10,000	)		283,918
	$	7,409,896		$	3,495,752		$	10,678,546		$	7,292,462

The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three and six months ended June 30, 2014 and 2013, respectively:

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
PRC statutory rate		25.0	%		25.0	%		25.0	%		25.0	%
Non-taxable items		-			-			-			(1.4	)
Effect of foreign income tax rates		0.1			(4.5	)		0.1			(5.0	)
Other		0.3			1.5			0.8			1.7
Effective income tax rate		25.4	%		22.0	%		25.8	%		20.3	%

Income tax expense for the three and six months ended June 30, 2014 and 2013 is as follows:

	Three months ended					Six months ended
	June 30,					June 30,
	2014			2013		2014			2013
Current	$	4,281,918		$	626,528	$	5,216,018		$	855,572
Deferred		(2,402,166	)		142,013		(2,457,344	)		622,600
Income tax expense	$	1,879,752		$	768,541	$	2,758,674		$	1,478,172

11

NOTE 7 EARNINGS PER SHARE

The following demonstrates the calculation for earnings per share for the three and six months ended June 30, 2014 and 2013:

	Three months ended				Six months ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income	$	5,530,144	$	2,727,211	$	7,919,872	$	5,814,290
Weighted average number of common shares –Basic and diluted		14,781,241		14,777,610		14,781,241		14,775,869
Earnings per share –Basic and diluted	$	0.37	$	0.18	$	0.54	$	0.39

NOTE 8 STOCKHOLDERS’ EQUITY

On February 28, 2013, the Company issued an aggregate of 5,340 shares of its common stock to three of the Company’s independent directors as compensation for their services in the third and fourth quarters of 2012. The shares were valued at $1.89 per share, which was the average market price of the common stock for the five days before the grant date.

On August 19, 2013, the Company issued an aggregate of 3,631 shares of its common stock to three of the Company’s independent directors as compensation for their services in the first and second quarters of 2013. The shares were valued at $2.73 per share, which was the average market price of the common stock for the five days before the grant date.

NOTE 9 RELATED PARTY TRANSACTIONS

Mr. Kang is the Company’s Chairman and Chief Executive Officer. All transactions associated with the following companies controlled by Mr. Kang are considered to be related party transactions, and it is possible that the terms of these transactions may not be the same as those that would result from transactions between unrelated parties. All related party outstanding balances are short-tem in nature and are expected to be settled in cash.

Other income from Related Parties

Included in other income for the three and six months ended June 30, 2013 is rent revenue from entities controlled by Mr. Kang under operating lease agreements as follows.  There were no such income in 2014.

	Three months ended		Six months ended
	June 30,		June 30,
	2013		2013
EsCeLav	$	3,056	$	6,038
Nanjing Eight-One-Five Hi-tech (M&E) Co., Ltd.		4,070		8,050
Total	$	7,126	$	14,088

Other expenses due to Related Parties

Included in other expenses for the three and six months ended June 30, 2014 and 2013 are rent costs due to entities controlled by Mr. Kang under operating lease agreements as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2014		2013		2014		2013
Jiangsu Ever-Glory	$	12,733	$	12,788	$	25,560	$	25,277
Kunshan Enjin		10,491		8,517		21,060		16,774
Total	$	23,224	$	21,305	$	46,620	$	42,051

12

Purchases from, and Sub-contracts with Related Parties

Shanghai Weiwen Fashion Company Ltd. (Shanghai Weiwen) was incorporated in the PRC in 2012. This company designs and sells women’s apparel utilizing the “Velwin” brand. Shanghai Weiwen is owned by Mr. Kang. Shanghai Ya Lan entered an agreement with Shanghai Weiwen in April 2014 to purchase the “Velwin” brand along with existing inventory of Shanghai Weiwen. No customer relationships, production facilities, or other operating assets were acquired. Management of the Company believes that this asset purchase will provide the Company with additional multi-brand advantages. The purchase price of the inventory and brand was approximately $2.44 million. The purchase price was based primarily on the estimated fair market value of the inventory.

Shanghai Sea to Sky Fashion Company Ltd. (Shanghai Sea to Sky) was incorporated in the PRC in 2012. This company designs and sells women’s apparel utilizing the “Sea to Sky” brand. Shanghai Sea to Sky is owned by Mr. Kang. Shanghai LA GO GO entered an agreement with Shanghai Sea to Sky in April 2014 to purchase the “Sea to Sky” brand along with existing inventory of Shanghai Sea to Sky. No customer relationships, production facilities, or other operating assets were acquired. Management of the Company believes that this asset purchase will provide the Company with additional multi-brand advantages. The purchase price of the inventory and brand was approximately $0.39 million. The purchase price was based primarily on the estimated fair market value of the inventory. 

For the three and six months ended June 30, 2014 and 2013, the Company purchased raw materials of $450,620, $884,070, $101,370, and $184,608, respectively, from Nanjing Knitting.

In addition, the Company sub-contracted certain manufacturing work to related parties totaling $4,401,992, $10,312,113, $5,102,919, and $9,088,426 for the three and six months ended June 30, 2014 and 2013, respectively. The Company provided raw materials to the sub-contractors and was charged a fixed fee for labor provided by the sub-contractors. Sub-contracts with related parties included in cost of sales for the three and six months ended June 30, 2014 and 2013 are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Nanjing Knitting	$	-	$	211,296	$	-	$	232,602
Nanjing Ever-Kyowa		426,451		255,893		861,970		523,878
Ever-Glory Vietnam		1,776,620		3,175,681		4,964,884		5,094,787
Ever-Glory Cambodia		696,136		1,446,661		2,957,190		3,221,188
EsCeLav		-		1,775		-		4,358
Shanghai Weiwen		1,502,785		-		1,502,785		-
Shanghai Sea to Sky		377,793		-		377,793		-
Jiangsu Ever-Glory		-		11,613		25,284		11,613
	$	4,779,785	$	5,102,919	$	10,689,906	$	9,088,426

Accounts Payable – Related Parties

The Company purchases raw materials from and subcontracts some of its production to related parties. Accounts payable to related parties at June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014		December 31, 2013
Nanjing Knitting	$	-	$	784,777
Nanjing Ever-Kyowa		560,076		261,955
Ever-Glory Vietnam		677,078		2,473,271
Ever-Glory Cambodia		-		582,453
Shanghai Sea to Sky		377,793		-
Shanghai Weiwen		1,405,345		-
Total	$	3,020,292	$	4,102,456

Amounts Due From Related Parties

The amounts due from related parties at June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014		December 31, 2013
EsCeLav	$	31,439	$	12,291
Nanjing Eight-One-Five Hi-tech (M&E) Co.,Ltd.		20,546		145,206
Nanjing Knitting		324,984		-
Ever-Glory Cambodia		832,160		-
Jiangsu Ever-Glory		293,817		1,738,879
Total	$	1,502,946	$	1,896,376

13

Jiangsu Ever-Glory is an entity engaged in importing/exporting, apparel-manufacture, real-estate development, car sales and other activities. Jiangsu Ever-Glory is controlled by Mr. Kang. Because of restrictions on its ability to directly import and export products, the Company had utilized Jiangsu Ever-Glory as its agent to assist the Company with its import and export transactions and its international transportation projects from 2005 through 2011. Import transactions primarily consisted of purchases of raw materials and accessories designated by the Company’s customers for use in garment manufacture. Export transactions consisted of the Company’s sales to foreign markets such as Japan, Europe and the United States. These transactions ceased at end of 2011. During six months ended June 30, 2014 and 2013, the Company and Jiangsu Ever-Glory purchased raw materials on behalf of each other in order to obtain cheaper purchase prices. The Company purchased raw materials on Jiangsu Ever-Glory’s behalf and sold to Jiangsu Ever-Glory at cost for $0 and $72,548 during the six month period ended June 30, 2014 and 2013, respectively. Jiangsu Ever-Glory purchased raw materials on the Company’s behalf and sold to the Company at cost for $19,221 and $0 during the six months ended June 30, 2014 and 2013, respectively.

Amounts Due From Related Party under Counter Guarantee Agreement

In March 2012, in consideration of the guarantees and collateral provided by Jiangsu Ever-Glory and Nanjing Knitting, the Company agreed to provide Jiangsu Ever-Glory a counter guarantee in the form of cash of not less than 70% of the maximum aggregate lines of credit obtained by the Company. Jiangsu Ever-Glory is obligated to return the full amount of the counter-guarantee funds provided upon expiration or termination of the underlying lines of credit and is to pay annual interest at the rate of 6.0% of amounts provided. As of June 30, 2014 and December 31, 2013, Jiangsu Ever-Glory has provided guarantees for approximately $48.72 million (RMB 300 million) and $43.69 million (RMB 269 million) of lines of credit obtained by the Company. Jiangsu Ever-Glory and Nanjing Knitting have also provided their assets as collateral for certain of these lines of credit. The value of the collateral, as per appraisals obtained by the banks in connection with these lines of credit is approximately $16.72 million (RMB 103 million) as of June 30, 2014 and December 31, 2013. Mr. Kang has also provided a personal guarantee for $30.5 million (RMB 188 million).

During the six months ended June 30, 2013, US$4.82 million (RMB30.25 million) was provided to Jiangsu Ever-Glory under the counter-guarantee. US$16.79 million (RMB103 million) was outstanding at December 31, 2013. During six months ended June 30, 2014, an additional $5.03 million (RMB 31 million) was provided and approximately $1.30 million (RMB 8 million) of interest income was received under the counter-guarantee agreement. As of June 30, 2014, the amount of the counter-guarantee was $21.7 million (RMB 134 million) (the difference represents currency exchange adjustment of $0.12 million), which was 44.54% of the aggregate amount of lines of credit. This amount plus accrued interest of $1.50 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G. At June 30, 2014 and 2013, the amount classified as a reduction of equity was $23.19 million and $19.08 million, respectively. Interest of 0.5% is charged on net amounts due from Jiangsu Ever-Glory at each month end. Interest income for the three and six months ended June 30, 2014 and 2013 was approximately $0.29 million, $0.5 million, $0.34 million and $0.64 million, respectively.

NOTE 10 CONCENTRATIONS AND RISKS

The Company extends unsecured credit to its customers in the normal course of business and generally does not require collateral. As a result, management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. Based on management’s assessment of the amount of probable credit losses, if any, in existing accounts receivable, management has concluded that no allowance for doubtful accounts is necessary at June 30, 2014 and December 31, 2013. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of accounts receivable. In the analysis, management primarily considers the age of the customer’s receivable and also considers the credit worthiness of the customer, the economic conditions in the customer’s industry, and general economic conditions and trends, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of accounts receivables are incorrect, adjustments to the allowance may be required, which would reduce profitability.

For the six-month period ended June 30, 2014, the Company had one wholesale customer that represented approximately 14% of the Company’s revenues. For the three-month period ended June 30, 2014, the Company had one wholesale customer that represented approximately 15% of the Company’s revenues. For the six-month period ended June 30, 2013, the Company had two wholesale customers that each represented approximately 11% of the Company’s revenues. For the three-month period ended June 30, 2013, the Company had two wholesale customers that represented approximately 14% and 10% of the Company’s revenues, respectively.

For the Company’s wholesale business during the three and six months ended June 30, 2014 and 2013, no supplier represented more than 10% of the total raw materials purchased.

For the Company’s retail business, the Company had no supplier that represented more than 10% of raw materials purchases during the three and six months ended June 30, 2014. For the Company’s retail business, the Company had no supplier that represented more than 10% of raw materials purchases during the six months ended June 30, 2013. The Company purchased 10% of its raw materials from one supplier during the three months ended June 30, 2013.

14

For the wholesale business, during the six months ended June 30, 2014, the Company relied on two manufacturers for 16% and 10% of purchased finished goods, respectively. During the six months ended June 30, 2013, the Company relied on two manufacturers for 15% and 13% of purchased finished goods, respectively. During the three months ended June 30, 2014, the Company relied on two manufacturers for 15% and 14% of purchased finished goods, respectively. During the three months ended June 30, 2013, the Company relied on two manufacturers for 17% and 16% of purchased finished goods, respectively.

For the retail business, the Company had no supplier that represented more than 10% of finished goods purchases during the six months ended June 30, 2014. The Company purchased 11% of its finished goods from one supplier during the three months ended June 30, 2014. The Company had no supplier that represented more than 10% of finished goods purchases during the three and six months ended June 30, 2013.

The Company’s revenues for the three and six months ended June 30, 2014 and 2013 were earned in the following geographic areas:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
The People’s Republic of China	$	12,929,219	$	8,616,297	$	27,527,244	$	21,647,361
Germany		5,525,792		3,305,231		11,823,952		7,676,564
United Kingdom		9,018,214		4,961,895		11,642,361		7,826,529
Europe-Other		2,061,398		3,134,666		8,517,320		7,102,281
Japan		2,431,821		5,306,554		8,674,713		9,005,388
United States		4,428,137		1,726,825		7,650,480		5,453,800
Total wholesale business		36,394,581		27,051,468		75,836,070		58,711,923
Retail business		49,273,199		32,078,017		115,846,879		78,729,052
Total	$	85,667,780	$	59,129,485	$	191,682,949	$	137,440,975

15

NOTE 11 SEGMENTS

The Company reports financial and operating information in the following two segments:

(a) Wholesale segment

(b) Retail segment

	Wholesale segment		Retail segment		Total
Six months ended June 30, 2014
Segment profit or loss:
Net revenue from external customers	$	75,836,070	$	115,846,879	$	191,682,949
Income from operations	$	3,954,431	$	6,715,953	$	10,670,384
Interest income	$	551,265	$	26,482	$	577,747
Interest expense	$	1,199,618	$	282,190	$	1,481,808
Depreciation and amortization	$	515,773	$	2,946,355	$	3,462,128
Income tax expense	$	946,118	$	1,812,556	$	2,758,674
Six months ended June 30, 2013
Segment profit or loss:
Net revenue from external customers	$	58,711,923	$	78,729,052	$	137,440,975
Income  from operations	$	5,339,873	$	2,696,664	$	8,036,537
Interest income	$	624,195	$	13,595	$	637,790
Interest expense	$	1,412,096	$	116,128	$	1,528,224
Depreciation and amortization	$	478,315	$	3,212,576	$	3,690,891
Income tax expense	$	828,834	$	649,338	$	1,478,172

	Wholesale segment		Retail segment		Total
Three months ended June 30, 2014
Segment profit or loss:
Net revenue from external customers	$	36,394,581	$	49,273,199	$	85,667,780
Income from operations	$	2,538,511	$	4,869,200	$	7,401,711
Interest income	$	324,638	$	11,776	$	336,414
Interest expense	$	633,051	$	141,642	$	774,693
Depreciation and amortization	$	251,227	$	1,319,974	$	1,571,201
Income tax expense	$	612,044	$	1,267,708	$	1,879,752
Three months ended June 30, 2013
Segment profit or loss:
Net revenue from external customers	$	27,051,468	$	32,078,017	$	59,129,485
Income from operations	$	2,547,245	$	1,520,112	$	4,067,357
Interest income	$	332,268	$	9,920	$	342,188
Interest expense	$	678,069	$	58,626	$	736,695
Depreciation and amortization	$	244,604	$	1,815,642	$	2,060,246
Income tax expense	$	400,680	$	367,861	$	768,541

16

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2013

(UNAUDITED)

ITEM 2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 2014 should be read in conjunction with the Financial Statements and corresponding notes included in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Special Note Regarding Forward-Looking Statements in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “target”, “forecast” and similar expressions to identify forward-looking statements.

Overview

Our Business

We are a leading apparel supply-chain manager and retailer in China. We are listed on the NYSE MKT under the symbol of “EVK”.

We classify our businesses into two segments: Wholesale and Retail. Our wholesale business consists of wholesale-channel sales made principally to famous brands, and department stores located throughout Europe, the U.S., Japan and the People’s Republic of China (“PRC”). We focus on well-known, middle-to-high grade casual wear, sportswear, and outerwear brands. Our retail business consists of retail-channel sales directly to consumers through retail stores located throughout the PRC.

Although we have our own manufacturing facilities, we currently outsource most of the manufacturing to our long-term contractors as part of our overall business strategy. We believe outsourcing allows us to maximize our production capacity and maintain flexibility while reducing capital expenditures and the costs of keeping skilled workers on production lines during low seasons. We oversee our long-term contractors with our advanced management solutions and inspect products manufactured by them to ensure that they meet our high quality control standards and timely delivery.

Wholesale Business

We conduct our original design manufacturing (“ODM”) operations through six wholly-owned subsidiaries which are located in the Nanjing Jiangning Economic and Technological Development Zone and Shang Fang Town in the Jiangning District in Nanjing, China: Ever-Glory International Group Apparel Inc. (“Ever-Glory Apparel”), Goldenway Nanjing Garments Company Limited (“Goldenway”), Nanjing New-Tailun Garments Company Limited (“New Tailun”), Nanjing Catch-Luck Garments Co., Ltd. (“Catch-Luck”), Ever-Glory International Group (HK) Ltd. (“Ever-Glory HK”), and Nanjing Tai Xin Garments Trading Company Limited (“Tai Xin”).

Retail Business

We conduct our retail operations through Shanghai LA GO GO Fashion Company Limited (“LA GO GO”), Jiangsu LA GO GO Fashion Company Limited (“Jiangsu LA GO GO”), Tianjin LA GO GO Fashion Company Limited (“Tianjin LA GO GO”), Shanghai Ya Lan Fashion Company Limited (“Ya Lan”) and Xizang He Meida Trading Company Limited (“He Meida”).

17

Business Objectives

Wholesale Business

We believe the enduring strength of our wholesale business is mainly due to our consistent emphasis on innovative and distinctive product designs that stand for exceptional styling and quality. We maintain long-term, satisfactory relationships with a portfolio of well-known, mid-class global brands.

The primary business objective for our wholesale segment is to expand our portfolio into higher-class brands, expand our customer base and improve our profit. We believe that our growth opportunities and continued investment initiatives include:

● Expand the global sourcing network

● Expand our overseas low-cost manufacturing base (outside of mainland China);

● Focus on high value-added products and continue our strategy to produce mid to high end apparel

● Continue to emphasize on product design and technology utilization.

● Seek strategic acquisitions of international distributors that could enhance global sales and our distribution network

● Maintain stable revenue increase in the markets while shifting focus to higher margin wholesale markets such as mainland China.

Retail Business

The business objective for our retail segment is to establish a leading brand of women’s apparel and to build a nationwide retail network in China. As of June 30, 2014, we have 1055 stores (including store-in-stores) which included 125 stores that were opened and 30 stores that were closed in first half of 2014.

On June 26, 2014, Shanghai LA GO GO entered into a contract with Shanghai Yiduo Fashion Company Limited (“Shanghai Yiduo”) to acquire 78% of the shares of Shanghai Yiduo for $0.75 million (RMB4.6 million).  Shanghai Yiduo is currently owned by unrelated third parties and operates design and development of women’s apparel for Mecox Lane, one of China’s leading online platforms for apparel accessories. The acquisition price is to be paid as follows. 

Payment Date	Amount
Before July 8, 2014	$	0.45 million
Before September 28, 2014		0.22 million
Within 10 days after Shanghai Yiduo collects all the accounts receivable from Mecox Lane		0.08 million
TOTAL		0.75 million

The first $0.45 million installment was paid by the Company to Shanghai Yiduo in July 2014 and was financed by working capital. The completion of the acquisition is subject to the company’s final due diligence and Shanghai Yiduo’s ability to collect certain account receivables. In the event Shanghai Yiduo is not able to collect the account receivables in accordance with the contract, the Company may reduce the purchase price or terminate the contract and get back the first installment payment.  Management of the Company believes that the acquisition will improve the Company’s design and product development ability.

We believe that our growth opportunities and continued investment initiatives include:

● Build the LA GO GO brand to be recognized as a major player in the mid-end women's apparel market in China;

● Expand the LA GO GO retail network throughout China

● Improve the LA GO GO retail stores’ efficiency and increase same-store sales

● Continue to launch LA GO GO flagship stores in Tier-1 Cities and increase penetration and coverage in Tier-2 and Tier-3 Cities

● Become a multi-brand operator by seeking opportunities for long-term cooperation with reputable international brands and by facilitating international brands entry into the Chinese market.

Seasonality of Business

Our business is affected by seasonal trends, with higher levels of wholesale sales in our third and fourth quarters and higher retail sales in our first and fourth quarters. These trends primarily result from the timing of seasonal wholesale shipments and holiday periods in the retail segment.

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Collection Policy

Wholesale business

For our new customers, we generally require orders placed to be backed by letters of credit. For our long-term and established customers with a good payment track record, we generally provide payment terms between 30 to 180 days following delivery of finished goods.

Retail business

For store-in-store shops, we generally receive payments from the stores between 60 to 90 days following the date of the register receipt. For our own flagship stores, we receive payments at the same time as the register receipt. For the sales in e-commerce platform such as Tmall, Dangdang mall, and Jingdong mall, we generally receive payments from these e-commerce companies between 5 to 15 days following the date of the register receipt.

Global Economic Uncertainty

Our business is dependent on consumer demand for our products. We believe that the significant uncertainty in the global economy and a slowdown in the United States and European economies have increased our clients’ sensitivity to the cost of our products. We have experienced continued pricing pressure. If the global economic environment continues to be weak, these worsening economic conditions could have a negative impact on our sales growth and operating margins in our wholesale segment in 2014.

In addition, economic conditions in the United States and in foreign markets in which we operate could substantially affect our sales and profitability and our cash position and collection of accounts receivable. Global credit and capital markets have experienced unprecedented volatility and disruption. Business credit and liquidity have tightened in much of the world. Some of our suppliers and customers may face credit issues and could experience cash flow problems and other financial hardships. These factors currently have not had an impact on the timeliness of receivable collections from our customers. We cannot predict at this time how this situation will develop and whether accounts receivable may need to be allowed for or written off in the coming quarters.

Despite the various risks and uncertainties associated with the current global economy, we believe our core strengths will continue to allow us to execute our strategy for long-term sustainable growth in revenue, net income and operating cash flow.

Summary of Critical Accounting Policies

We have identified critical accounting policies that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operation involved could result in material changes to our financial position or results of operations under different conditions or using different assumptions.

Revenue Recognition

We recognize wholesale revenue from product sales, net of value-added taxes, upon delivery for local sales and upon shipment of the products for export sales, at such time title passes to the customer provided however that (i) there are no uncertainties regarding customer acceptance (ii) persuasive evidence of an arrangement exists (iii) the sales price is fixed and determinable, and (iv) collectability is deemed probable. We recognize wholesale revenue from manufacturing fees charged to buyers for the assembly of garments from materials provided by the buyers upon completion of the manufacturing process and shipment of the products for export sales, provided that (i) there are no uncertainties regarding customer acceptance (ii) persuasive evidence of an arrangement exists (iii) the sales price is fixed and determinable, and (iv) collectability is deemed probable. Retail sales are recorded at the time of register receipt. Retail sales through e-commerce companies are recognized when products are delivered and payments from customers are received.

Estimates and Assumptions

In preparing our consolidated financial statements, we use estimates and assumptions that affect the reported amounts and disclosures. Our estimates are often based on complex judgments, probabilities and assumptions that we believe to be reasonable, but that are inherently uncertain and unpredictable. We are also subject to other risks and uncertainties that may cause actual results to differ from estimated amounts. Significant estimates in 2014 and 2013 include the assumptions used to value warrants and the estimates of the allowance for deferred tax assets.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and must be applied retrospectively. Management is currently evaluating the potential impact of this ASU on the Company’s financial statements. 

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Results of Operations for the three months ended June 30, 2014 and 2013

The following table summarizes our results of operations for the three months ended June 30, 2014 and 2013. The table and the discussion below should be read in conjunction with our condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.

	Three Months Ended June 30,
	2014				2013
	(in U.S. Dollars, except for percentages)
Sales	$	85,667,780	100.0	%	$	59,129,485		100.0	%
Gross Profit	$	29,349,791	34.3	%	$	19,478,568		32.9	%
Operating Expense	$	21,942,080	25.6	%	$	15,411,211		26.0	%
Income From Operations	$	7,407,711	8.6	%	$	4,067,357		6.9	%
Other Income (Expenses)	$	2,185	0.1	%	$	(571,605	)	(1.0	)%
Income tax expense	$	1,879,752	2.2	%	$	768,541		1.3	%
Net Income	$	5,530,144	6.5	%	$	2,727,211		4.6	%

Revenue

The following table sets forth a breakdown of our total sales, by region, for the three months ended June 30, 2014 and 2013.

	2014		% of total sales			2013		% of total sales			Growth in 2014 compared with 2013
Wholesales business
The People’s Republic of China	$	12,929,219		15.1	%	$	8,616,297		14.6	%		50.1	%
Germany		5,525,792		6.5			3,305,231		5.6			67.2
United Kingdom		9,018,214		10.5			4,961,895		8.4			81.7
Europe-Other		2,061,398		2.4			3,314,666		5.3			(34.2	)
Japan		2,431,821		2.8			5,306,554		9.0			(54.2	)
United States		4,428,137		5.2			1,726,825		2.9			156.4
Total wholesale business		36,394,581		42.5			27,051,468		45.7			34.5
Retail business		49,273,199		57.5			32,078,017		54.3			53.6
Total	$	85,667,780		100.0	%	$	59,129,485		100.0	%		44.9	%

Sales for the three months ended June 30, 2014 were $85.7 million, an increase of 44.9% from the three months ended June 30, 2013. This increase was primarily attributable to a 53.6% increased sales in our retail business as well as a 34.5% increased sales in wholesales business.

Sales generated from our wholesale business contributed 42.5% or $36.4 million of our total sales for the three months ended June 30, 2014, an increase of 34.5% compared to $27.1 million in the three months ended June 30, 2013. This increase was primarily attributable to increased sales in P.R.C, Germany, the United Kingdom and the United States.

Sales generated from our retail business contributed 57.5% or $49.3 million of our total sales for the three months ended June 30, 2014, an increase of 53.6% compared to 54.3% or $32.1 million in the three months ended June 30, 2013. This increase was primarily due to the increase in same store sales and new stores opened. We had 1055 retail stores as of June 30, 2014, compared to 831 retail stores at June 30, 2013.

Costs and Expenses

Cost of Sales and Gross Margin

Cost of goods sold includes the direct raw material cost, direct labor cost, and manufacturing overhead including depreciation of production equipment and rent, consistent with the revenue earned. Cost of goods sold excludes warehousing costs, which historically have not been significant.

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The following table sets forth the components of our cost of sales and gross profit both in amounts and as a percentage of total sales for the three months ended June 30, 2014 and 2013.

									Growth
									(Decrease) in
	Three months ended June 30,								2014 Compared
	2014				2013				with 2013
	(in U.S. dollars, except for percentages)
Net Sales for Wholesale Sales	$	36,394,581	100.0	%	$	27,051,468	100.0	%		34.5	%
Raw Materials		16,454,991	45.2			12,038,807	44.5			36.7
Labor		1,211,243	3.3			1,231,609	4.6			(1.7	)
Outsourced Production Costs		10,059,316	27.6			6,942,002	25.7			44.9
Other and Overhead		131,151	0.4			140,929	0.5			(6.9	)
Total Cost of Sales for Wholesale		27,856,701	76.5			20,353,347	75.2			36.9
Gross Profit for Wholesale		8,537,880	23.5			6,698,121	24.8			27.5
Net Sales for Retail		49,273,199	100.0			32,078,017	100.0			53.6
Production Costs		13,193,339	26.8			9,455,948	29.5			39.5
Rent		15,267,949	31.0			9,841,622	30.7			55.1
Total Cost of Sales for Retail		28,461,288	57.8			19,297,570	60.2			47.5
Gross Profit for Retail		20,811,911	42.2			12,780,447	39.8			62.8
Total Cost of Sales		56,317,989	65.7			39,650,917	67.1			42.0
Gross Profit	$	29,349,791	34.3	%	$	19,478,568	32.9	%		50.7	%

Raw material costs for our wholesale business were 45.2% of our total wholesale business sales in the three months ended June 30, 2014, compared to 44.5% in the three months ended June 30, 2013. The increase was mainly due to increased raw materials prices.

Labor costs for our wholesale business were 3.3% of our total wholesale business sales in the three months ended June 30, 2014, compared to 4.6% in the three months ended June 30, 2013. The decrease was mainly due to the fact that we outsourced most of the new orders in 2014.

Outsourced manufacturing costs for our wholesale business were 27.6% of our total wholesale business sales in the three months ended June 30, 2014, compared to 25.7% in the three months ended June 30, 2013. This increase was primarily attributable to increased average salaries of the employees in our outsourced manufacturing factories.

Overhead and other expenses for our wholesale business accounted for 0.4% of our total wholesale business sales for the three months ended June 30, 2014, compared to 0.5% of total sales for the three months ended June 30, 2013.

Wholesale business gross profit for the three months ended June 30, 2014 and 2013 was $8.5 and $6.7 million, respectively. As a percentage of wholesale sales, gross profit accounted for 23.5% of our total wholesale sales for the three months ended June 30, 2014, a decrease of 1.3% compared to 24.8% for the three months ended June 30, 2013. The decrease was mainly due to increased raw material prices and outsourced manufacturing costs.

Production costs for our retail business were $13.2 million during the three months ended June 30, 2014 compared to $9.5 million during the three months ended June 30, 2013. As a percentage of retail sales, retail production costs accounted for 26.8% of our total retail sales in the three months ended June 30, 2014, compared to 29.5% of total retail sales in the three months ended June 30, 2013. The decrease was due to our procurement cost controlling in the three months ended June 30, 2014 being better than the same period of the prior year.

Rent costs for our retail business were $15.3 million for the three months ended June 30, 2014 compared to $9.8 million for the three months ended June 30, 2013. As a percentage of sales, rent costs accounted for 31.0% of our total retail sales for the three months ended June 30, 2014, compared to 30.7% of total retail sales for the three months ended June 30, 2013.

Gross profit in our retail business for the three months ended June 30, 2014 was $20.8 million and gross margin was 42.2%. Gross profit in our retail business for the three months ended June 30, 2013 was $12.8 million and gross margin was 39.8%.

Total cost of sales for the three months ended June 30, 2014 was $56.3 million, compared to $39.7 million for the three months ended June 30, 2013, an increase of 42.0%. As a percentage of total sales, cost of sales decreased to 65.7% of total sales for the three months ended June 30, 2014, compared to 67.1% of total sales for the three months ended June 30, 2013. Consequently, gross margin increased to 34.3% for the three months ended June 30, 2014 from 32.9% for the three months ended June 30, 2013.

Selling, General and Administrative Expenses

Our selling expenses consist primarily of local transportation, unloading charges, product inspection charges, salaries for retail staff and decoration and marketing expenses associated with our retail business.

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Our general and administrative expenses include administrative salaries, office expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that are not directly attributable to our revenues.

Costs of our distribution network that are excluded from cost of sales consist of local transportation and unloading charges, and product inspection charges. Accordingly our gross profit amounts may not be comparable to those of other companies who include these amounts in cost of sales.

	Three Months Ended June 30,
	2014				2013				Increase
	(in U.S. Dollars, except for percentages)
Gross Profit	$	29,349,791	34.3	%	$	19,478,568	32.9	%		50.7	%
Operating Expenses:
Selling Expenses		14,402,662	16.8			9,898,106	16.7			45.5
General and Administrative Expenses		7,539,418	8.8			5,513,105	9.3			36.8
Total		21,942,080	25.6			15,411,211	26.0			42.4
Income from Operations	$	7,407,711	8.6	%	$	4,067,357	6.9	%		82.1	%

Selling expenses increased 45.5% to $14.4 million for the three months ended June 30, 2014 from $9.9 million for the three months ended June 30, 2013. The increase was attributable to the increased average salaries, and increased number of stores, leading to increased number of retail employees, as well as increased store decoration and marketing expenses associated with the promotion of the LA GO GO brand.

General and administrative expenses increased 36.8% to $7.5 million for the three months ended June 30, 2014 from $5.5 million for the three months ended June 30, 2013. The increase was attributable to an increase in payroll for additional management and design and marketing staff as a result of our business expansion. As a percentage of total sales, general and administrative expenses decreased to 8.8% of total sales for the three months ended June 30, 2014, compared to 9.3% of total sales for the three months ended June 30, 2013.  The percentage decrease was attributable to the increase in our sales.

Income from Operations

Income from operations increased 82.1% to $7.4 million for the three months ended June 30, 2014 from $4.1 million for the three months ended June 30, 2013. As a percentage of sales, income from operations accounted for 8.6% of our total sales for the three months ended June 30, 2014, an increase of 1.7% compared to the three months ended June 30, 2013 as a result of increasing gross profit.

Interest Expense

Interest expense was $0.7 million for the three months ended June 30, 2014, an increase of 2.3% compared to the same period in 2013.

Change in fair value of derivative liability

Change in fair value of derivative liability was a gain of $0.002 million and $0.2 million, based on the Binnomial Lattice model, for the three months ended June 30, 2013.

Income Tax Expenses

Income tax expense for the three months ended June 30, 2014 was $1.9 million, an increase of 145% compared to the same period of 2013. The increase was primarily due to increased profits of LA GO GO.

Our PRC subsidiaries are governed by the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws. Each of our consolidated entities files its own separate income tax return.

All PRC subsidiaries are subject to the 25% income tax rate.

Perfect Dream Limited was incorporated in the British Virgin Islands on July 1, 2004, and has no income tax.

Ever-Glory International Group (HK) Ltd was incorporated in Samoa on September 15, 2009, and has no liabilities for income tax.

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Although our parent entity is a US entity, our primary operations are through subsidiaries located in China, certain apparel manufacturing is performed outside of China in Southeast Asia, sales are made globally, and we have other subsidiary operations in Hong Kong and Samoa. Therefore, the Company uses significant judgment to calculate and provide for income taxes in each of the tax jurisdictions in which it operates. In the ordinary course of the Company’s business, there are transactions and calculations undertaken whose ultimate tax outcome cannot be certain. Some of these uncertainties arise as a consequence of transfer pricing for transactions our subsidiaries, potential challenges to nexus, value added estimates, and similar matters. In September 2009, we formed its subsidiary, Ever-Glory HK, domiciled in Samoa, in order to engage in certain limited import and export of apparel, fabric and accessories, as well as to efficiently address currency exchange matters with international transactions. Over the past few years, the operational matters handled by this subsidiary have expanded with respect to sub-contracting of certain manufacturing work outside of China, as well as to other operational matters with non-PRC customers and vendors. Additionally, over this time period, tax guidance, rules and positions taken by the PRC with respect to transfer pricing issues have evolved, and in certain cases, become more standardized. As part of the Company’s on-going process of evaluating our tax positions, we considered various factors as they relate to its Samoan subsidiary and as related to intercompany transactions. This evaluation resulted in a change in our estimate of exposure to potential unfavorable outcomes related to these uncertainties, and we recorded a tax liability of approximately $3,186,000 as of December 31, 2013 based on the probability for such outcomes.

As of June 30, 2014, the local PRC Tax Bureau is in discussions with the Company to finalize the process of payment for the approximate tax liability of $ 3,186,000. The Company and the PRC Tax Bureau have tentatively agreed that payments on the tax liability will be made by the Company prospectively over the next two to three year period. Beginning January 1, 2014, all net income generated from Ever-Glory HK has been reported as a taxable income at 25% tax rate in PRC.

Ever-Glory International Group Inc. was incorporated in the United States and has incurred net operating losses for income tax purposes through June 30, 2014. The net operating loss carry forwards for United States income taxes may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through 2031. Management believes that the realization of the benefits from these losses is uncertain due to our limited operating history and continuing losses for United States income tax purposes. Accordingly, we provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero.

Net Income

Net income for the three months ended June 30, 2014 was $5.5 million, an increase of 103% compared to the same period in 2013. Our basic and diluted earnings per share were $0.37 and $0.18 for the three months ended June 30, 2014 and 2013, respectively.

Results of Operations for the six months ended June 30, 2014 and 2013

The following table summarizes our results of operations for the six months ended June 30, 2014 and 2013. The table and the discussion below should be read in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this report.

	Six Months Ended June 30,
	2014				2013
	(in U.S. Dollars, except for percentages)
Sales	$	191,682,949	100.0	%	$	137,440,975		100.0	%
Gross Profit		55,130,748	28.8			39,771,491		28.9
Operating Expense		44,460,364	23.2			31,734,954		23.1
Income From Operations		10,670,384	5.6			8,036,537		5.8
Other Income (Expenses)		8,162	0			(744,075	)	(0.5	)
Income tax expense		2,758,674	1.4			1,478,172		1.1
Net Income	$	7,919,872	4.1	%	$	5,814,290		4.2	%

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Revenue

The following table sets forth a breakdown of our total sales, by region, for the six months ended June 30, 2014 and 2013.

	2014		% of total sales			2013		% of total sales			Growth in 2014 compared with 2013
Wholesales business
The People’s Republic of China	$	27,527,244		14.4	%	$	21,647,361		15.8	%		27.2	%
Germany		11,823,952		6.2			7,676,564		5.6			54.0
United Kingdom		11,642,361		6.1			7,826,529		5.7			48.8
Europe-Other		8,517,320		4.4			7,102,281		5.2			19.9
Japan		8,674,713		4.5			9,005,388		6.6			(3.7	)
United States		7,650,480		4.0			5,453,800		4.0			40.3
Total wholesale business		75,836,070		39.6			58,711,923		42.7			29.2
Retail business		115,846,879		60.4			78,729,052		57.3			47.1
Total	$	191,682,949		100.0	%	$	137,440,975		100.0	%		39.5	%

Sales for the six months ended June 30, 2014 were $191.7 million, an increase of 39.5% from the six months ended June 30, 2013. This increase was primarily attributable to a 47.1% increased sales in our retail business as well as a 29.2% increased sales in wholesale business.

Sales generated from our wholesale business contributed 39.6% or $75.8 million of our total sales for the six months ended June 30, 2014, an increase of 29.2% compared to $58.7 million in the six months ended June 30, 2013. This increase was primarily attributable to increased sales in PRC, Germany, the United Kingdom and the United States.

Sales generated from our retail business contributed 60.4% or $115.8 million of our total sales for the six months ended June 30, 2014, an increase of 47.1% compared to $78.7 million in the six months ended June 30, 2013. This increase was primarily due to the increase in same store sales and new stores opened. We had 1055 retail stores as of June 30, 2014, compared to 831 retail stores at June 30, 2013.

Total retail store square footage and sales per square foot for the six months ended June 30, 2014 and 2013 are as follows:

	2014		2013
Total store square footage		956,436		754,870
Number of stores		1,055		831
Average store size, square feet		907		908
Total store sales	$	115,846,879	$	78,729,052
Sales per square foot	$	121	$	104

Same store sales and newly opened store sales for the six months ended June 30, 2014 and 2013 are as follows:

	2014		2013
Sales from stores open a full year	$	81,508,931	$	49,510,906
Newly opened store sales		31,877,375		26,054,394
Other*		2,460,573		3,163,752
Total	$	115,846,879	$	78,729,052

*Primarily sales from stores that were closed in the current reporting period.

We remodeled or relocated 123 stores in 2014, and we plan to relocate or remodel 150 stores in 2014. Remodels and relocations typically drive incremental same-store sales growth. A relocation typically results in an improved, more visible and accessible location, and usually includes increased square footage. We believe we will continue to have opportunities for additional remodels and relocations beyond 2014. Same-store sales are calculated based upon stores that were open at least 12 full fiscal months in each reporting period and remain open at the end of each reporting period.

Costs and Expenses

Cost of Sales and Gross Margin

Cost of goods sold includes the direct raw material cost, direct labor cost, and manufacturing overhead including depreciation of production equipment and rent, consistent with the revenue earned. Cost of goods sold excludes warehousing costs, which historically have not been significant.

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The following table sets forth the components of our cost of sales and gross profit both in amounts and as a percentage of total sales for the six months ended June 30, 2014 and 2013.

									Growth in
	Six months ended June 30,								2014 compared
	2014				2013				with 2013
	(in U.S. dollars, except for percentages)
Net Sales for Wholesale Sales	$	75,836,070	100.0	%	$	58,711,923	100.0	%		29.2	%
Raw Materials		36,052,958	47.5			26,041,183	44.4			38.4
Labor		2,411,739	3.2			2,287,662	3.9			5.4
Outsourced Production Costs		22,414,004	29.6			16,896,224	28.8			32.7
Other and Overhead		279,240	0.4			271,514	0.5			2.8
Total Cost of Sales for Wholesale		61,157,941	80.6			45,496,583	77.5			34.4
Gross Profit for Wholesale		14,678,129	19.4			13,215,340	22.5			11.1
Net Sales for Retail		115,846,879	100.0			78,729,052	100.0			47.1
Production Costs		33,835,880	29.2			24,512,666	31.1			38.0
Rent		41,558,380	35.9			27,660,235	35.1			50.2
Total Cost of Sales for Retail		75,394,260	65.1			52,172,901	66.3			44.5
Gross Profit for Retail		40,452,619	34.9			26,556,151	33.7			52.3
Total Cost of Sales		136,552,201	71.2			97,669,484	71.1			39.8
Gross Profit	$	55,130,748	28.8	%	$	39,771,491	28.9	%		38.6	%

Raw material costs for our wholesale business were 47.5% of our total wholesale business sales in the six months ended June 30, 2014, compared to 44.4% in the six months ended June 30, 2013. The increase was mainly due to increased raw materials prices.

Labor costs for our wholesale business were 3.2% of our total wholesale business sales in the six months ended June 30, 2014, compared to 3.9% in the six months ended June 30, 2013. The decrease was mainly due to the fact that we outsourced most of the new orders in 2014.

Outsourced manufacturing costs for our wholesale business were 29.6% of our total sales in the six months ended June 30, 2014, compared to 28.8% in the six months ended June 30, 2013. This increase was primarily attributable to increased average salaries of the employees in our outsourced manufacturing factories.

Overhead and other expenses for our wholesale business accounted for 0.4% and 0.5% of our total sales for the six months ended June 30, 2014 and 2013 respectively.

Gross profit in our wholesale business for the six months ended June 30, 2014 was $14.7 million, an increase of 11.1% compared to the six months ended June 30, 2013. As a percentage of wholesale sales, gross profit accounted for 19.4% of our total wholesale sales for the six months ended June 30, 2014, a decrease of 3.1% compared to 22.5% for the six months ended June 30, 2013. The decrease was mainly due to increased raw materials prices and outsourced manufacturing costs.

Production costs for our retail business were $33.8 million during the six months ended June 30, 2014 versus $24.5 million during the six months ended June 30, 2013. As a percentage of total retail sales, Production costs for our retail business were 29.2% of our total retail sales during the six months ended June 30, 2014, a decreased of 1.9% compared to 31.1% during the six months ended June 30, 2013. The decrease was due to our procurement cost controlling in the six months ended June 30, 2014 being better than the same period of the prior year.

Rent costs for our retail business were $41.6 million or 35.9% of our total retail sales during the six months ended June 30, 2014 versus $27.7 million or 35.1% during the six months ended June 30, 2013.

Gross profit in our retail business for the six months ended June 30, 2014 was $40.5 million and gross margin was 34.9%. Gross profit in our retail business for the six months ended June 30, 2013 was $26.6 million and gross margin was 33.7%.

Total cost of sales for the six months ended June 30, 2014 was $136.6 million, an increase of 39.8% compared to the six months ended June 30, 2013. As a percentage of total sales, cost of sales increased to 71.2% for the six months ended June 30, 2014, compared to 71.1% for the six months ended June 30, 2013. Consequently, gross margin decreased to 28.8% for the six months ended June 30, 2014 from 28.9% for the six months ended June 30, 2013.

We purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers. For our wholesale business, purchases from our five largest suppliers represented approximately 20.9% and 22.9% of raw material purchases for the six months ended June 30, 2014 and 2013, respectively. No one supplier provided more than 10.0% of our raw material purchases for the six months ended June 30, 2014 and 2013. For our retail business, purchases from our five largest suppliers represented approximately 29.8% and 31.0% of raw material purchases for the six months ended June 30, 2014 and 2013 respectively. No one supplier provided more than 10% of our total purchases for the six months ended June 30, 2014 and 2013. We have not experienced difficulty in obtaining raw materials essential to our business, and we believe we maintain good relationships with our suppliers.

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We also purchase finished goods from contract manufacturers. For our wholesale business, purchases from our five largest contract manufacturers represented approximately 46.8 and 46.6% of finished goods purchases for the six months ended June 30, 2014 and 2013 respectively. Two contract manufacturers provided approximately 16.0% and 10.3% of our finished goods purchases for the six months ended June 30, 2014. Two contract manufacturers provided approximately 15.4% and 13.1% of our finished goods purchases for the six months ended June 30, 2013. For our retail business, our five largest contract manufacturers represented approximately 20% and 16.0% of finished goods purchases for the six months ended June 30, 2014 and 2013, respectively. One manufacturer provided approximately 11.0% of our finished goods purchases for the six months ended June 30, 2014. No manufacturer provided more than 10% of our finished goods purchases for the six months ended June 30, 2013. We have not experienced difficulty in obtaining finished products from our contract manufacturers and we believe we maintain good relationships with our contract manufacturers.

Selling, General and Administrative Expenses

Our selling expenses consist primarily of local transportation, unloading charges, product inspection charges, salaries for retail staff and decoration and marketing expenses associated with our retail business.

Our general and administrative expenses include administrative salaries, office expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that are not directly attributable to our revenues.

Costs of our distribution network that are excluded from cost of sales consist of local transportation and unloading charges, and product inspection charges. Accordingly our gross profit amounts may not be comparable to those of other companies who include these amounts in costs of sales.

	Six months ended June 30,
	2014				2013				Increase %
	(in U.S. Dollars, except for percentages)
Gross Profit	$	55,130,748	28.8	%	$	39,771,491	28.9	%		38.6	%
Operating Expenses:
Selling Expenses		30,525,958	15.9			21,749,402	15.8			40.4
General and Administrative Expenses		13,934,406	7.3			9,985,552	7.3			39.5
Total		44,460,364	23.2			31,734,954	23.1			40.1
Income from Operations	$	10,670,384	5.6	%	$	8,036,537	5.8	%		32.8	%

Selling expenses were $30.5 million in the six months ended June 30, 2014, an increase of 40.4% or $8.8 million compared to the six months ended June 30, 2013. The increase was attributable to increased average salaries, and increased number of stores, leading to increased number of retail employees, as well as increased store decoration and marketing expenses associated with the promotion of LA GO GO brand.

General and administrative expenses were $13.9 million in the six months ended June 30, 2014, an increase of 39.5% compared to the six months ended June 30, 2013. As a percentage of total sales, general and administrative expenses were 7.3% of total sales for the six months ended June 30, 2014 and 2013.

Income from Operations

Income from operations increased 32.8% to $10.7 million for the six months ended June 30, 2014 from $8.0 million for the six months ended June 30, 2013. This increase was due to our increased gross profit.

Interest Expense

Interest expense was $1.5 million for the six months ended June 30, 2014 and 2013 respectively.

Change in fair value of derivative liability

Change in fair value of derivative liability was a gain of $0.29 million, based on the Binnomial Lattice model, for the six months ended June 30, 2013. This related to outstanding warrants, which expired in June 2013 (described in Note 5 to the financial statements).

26

Income Tax Expenses

Income tax expense for the six months ended June 30, 2014 was $2.8 million, an increase of 87.0% compared to the same period of 2013. This increase was primarily due to increased profits of LA GO GO.

Net Income

Net income for the six months ended June 30, 2014 was $7.9 million, an increase of 36.5% compared to the same period in 2013. Our diluted earnings per share were $0.54 and $0.39 for the six months ended June 30, 2014 and 2013, respectively.

Summary of Cash Flows

Net cash provided by operating activities was $2.80 million for the six months ended June 30, 2014, compared with $5.12 million during the six months ended June 30, 2013. The decrease was primarily due to a decrease in Accounts payable.

Net cash used in investing activities was $4.2 million for the six months ended June 30, 2014, compared with $4.6 million during the six months ended June 30, 2013. The decrease was mainly due to decreased equipment purchases.

Net cash used in financing activities was $1.3 million for the six months ended June 30, 2014, compared with net cash provided by financing activities of $6.1 million during the six months ended June 30, 2013. During the six months ended June 30, 2014, we repaid $71.3 million of bank loans and received bank loan proceeds of $73.7 million. Also, under the counter-guarantee agreement, we advanced $5.1 million to the related party and received $1.3 million Interest income from the related party during the six months ended June 30, 2014.

Liquidity and Capital Resources

As of June 30, 2014, we had cash and cash equivalents of $25.0 million, other current assets of $151.1 million and current liabilities of $137.3 million. We presently finance our operations primarily from cash flows from operations and bank loans and we anticipate that these will continue to be our primary sources of funds to finance our short-term cash needs.

Bank Loans

On January 1, 2014, Goldenway entered into a line of credit agreement with Industrial and Commercial Bank of China, which allows the Company to borrow up to approximately $6.50 million (RMB40 million). These loans are collateralized by the Company’s property and equipment. As of June 30, 2014, Goldenway had borrowed $6.50 million (RMB40 million) under this line of credit with an annual interest rate of 6.24% and due on various dates from March to April 2015.

On January 1, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $6.50 million (RMB40 million) with Industrial and Commercial Bank of China and guaranteed by Goldenway. As of June 30, 2014, Ever-Glory Apparel had borrowed $4.79 million (RMB 29.5 million) under this line of credit with an annual interest rate of 5.6% and due on various dates from November to December 2014. Ever-Glory Apparel had also borrowed $1.67 million from Industrial and Commercial Bank of China with annual interest rates ranging from 1.02% to 1.04% and due on various dates from July to October 2014, and collateralized by approximately $2.24 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $0.04 million was unused and available under this line of credit.  Approximately $0.44 million was repaid subsequent to June 30, 2014.

On June 14, 2013, Goldenway entered into a line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately $8.12 million (RMB50 million). These loans are guaranteed by Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), an entity controlled by Mr. Kang, the Company’s Chairman and Chief Executive Officer. These loans are also collateralized by the Company’s property and equipment. As of June 30, 2014, Goldenway had borrowed $4.06 (RMB25 million) under this line of credit from Nanjing Bank with an annual interest rate of 6.16% due on August 2014. At June 30, 2014, approximately $4.06 million was unused and available under this line of credit. Approximately $4.06 million was repaid subsequent to June 30, 2014.

On June 14, 2013 and renewed on July 6, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $9.74 million (RMB60 million) with Nanjing Bank and guaranteed by Jiangsu Ever-Glory, Mr. Kang and Goldenway. As of June 30, 2014, Ever-Glory Apparel had borrowed $1.62 million (RMB 10 million) under this line of credit with an annual interest rate of 6.6% and due on September 2014. Ever-Glory Apparel had also borrowed $2.30 million from Nanjing Bank with annual interest rate of 3.1% and due on various dates from July to September 2014, and collateralized by approximately $3.16 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $5.82 million was unused and available under this line of credit.  Approximately $0.68 million was repaid subsequent to June 30, 2014.

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On April 10, 2013, LA GO GO entered into a revolving line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately $3.25 million (RMB20 million). The line of credit is guaranteed by Mr. Kang. As of June 30, 2014, LA GO GO had borrowed $2.44 million (RMB15 million) under this line of credit with an annual interest rate of 6.16% and due on various dates from July to October 2014. At June 30, 2014, approximately $0.81 million (RMB5 million) was unused and available under this line of credit. Approximately $0.81 million was repaid subsequent to June 30, 2014.

On January 29, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $8.44 million (RMB52 million) with the Bank of Communications and collateralized by assets of Jiangsu Ever-Glory’s equity investee, Nanjing Knitting, under a collateral agreement executed among the Company, Jiangsu Ever-Glory, Nanjing Knitting and the bank. As of June 30, 2014, Ever-Glory Apparel had borrowed $4.06 million (RMB25 million) with an annual interest rate of 6.9% and due on various dates from February to March 2015. Ever-Glory Apparel had also borrowed $1.87 million from the Bank of Communications with an annual interest rates ranging from 3.82% to 5.75% and due in February 2015, and collateralized by approximately $2.51 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $2.51 million was unused and available under this line of credit.

On July 16, 2013, LA GO GO entered into a line of credit agreement for approximately $3.57 million (RMB22 million) with the Bank of Communications and guaranteed by Jiangsu Ever-Glory and Mr. Kang. As of June 30, 2014, LA GO GO had borrowed $3.25 million (RMB20 million) from the Bank of Communications with an annual interest rate of 6.3% and due in June 2015. At June 30, 2014, approximately $0.32 million was unused and available under this line of credit.

On September 1, 2013, Ever-Glory Apparel entered into a line of credit agreement for approximately $11.37 million (RMB70 million) with Everbright Bank, and collateralized by assets of Jiangsu Ever-Glory, This loan is also guaranteed by Goldenway and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $3.25 million (RMB20.0 million) from Everbright Bank, with an annual interest rate of 6.3% and due in October 2014. Ever-Glory Apparel had also borrowed $2.98 million from Everbright Bank with annual interest rate of 2.98% and due in August 2014, and collateralized by approximately $3.98 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $5.14 million was unused and available under this line of credit. Approximately $3.98 million was repaid subsequent to June 30, 2014.

On July 29, 2011, Ever-Glory Apparel and Perfect Dream collectively entered into a secured banking facility agreement for a combined revolving import facility, letter of credit, invoice financing facilities and a credit line for treasury products of up to $7.0 million with the Nanjing Branch of HSBC (China) Company Limited (“HSBC”). This agreement is guaranteed by the Company and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $5.55 million from HSBC with an annual interest rates ranging from 2.78% to 5.88%, due on various dates from July to September 2014, and collateralized by approximately $7.9 million of accounts receivable from wholesale customers. These bank loans are to be repaid upon receipt of payments from customers. As of June 30, 2014, approximately $1.45 million was unused and available.

On November 11, 2013, Ever-Glory Apparel entered into a line of credit agreement for approximately $5.68 million (RMB35 million) with the Bank of China and guaranteed by Jiangsu Ever-Glory and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $1.62 million (RMB10 million) with an annual interest rate of 6.05% and due in October 2014 under this line of credit. Ever-Glory Apparel had also borrowed $3.49 million ($1.6 million and RMB 11.6 million) from the Bank of China with annual interest rates ranging from 3.62% to 3.9% and due on various dates from July to August 2014, and collateralized by approximately $4.99 million of accounts receivable from wholesale customers. Approximately $1.60 million was repaid subsequent to June 30, 2014.  As of June 30, 2014, approximately $0.57 million was unused and available.

As of June 30, 2014, LA GO GO had borrowed $3.25 million (RMB 20 million) from China Minsheng Bank, with annual interest rate of 6.3% and due in August 2014. This loan is guaranteed by Ever-Glory Apparel and Mr. Kang.

As of June 30, 2014, Ever-Glory Apparel had borrowed $2.68 million from Ping An Bank, with annual interest rate of 3.9% and due on various dates from July to September 2014, and collateralized by approximately $3.83 million of accounts receivable from wholesale customers. Approximately $1.0 million was repaid subsequent to June 30, 2014.

All bank loans are used to fund our daily operations.

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Amounts due from related party

In March 2012, in consideration of the guarantees and collateral provided by Jiangsu Ever-Glory and Nanjing Knitting, the Company agreed to provide Jiangsu Ever-Glory a counter guarantee in the form of cash of not less than 70% of the maximum aggregate lines of credit obtained by the Company. Jiangsu Ever-Glory is obligated to return the full amount of the counter-guarantee funds provided upon expiration or termination of the underlying lines of credit and is to pay annual interest at the rate of 6.0% of amounts provided. As of June 30, 2014 and December 31, 2013, Jiangsu Ever-Glory has provided guarantees for approximately $48.72 million (RMB 300 million) and $43.69 million (RMB 269 million) of lines of credit obtained by the Company. Jiangsu Ever-Glory and Nanjing Knitting have also provided their assets as collateral for certain of these lines of credit. The value of the collateral, as per appraisals obtained by the banks in connection with these lines of credit is approximately $16.72 million (RMB 103 million) as of June 30, 2014 and December 31, 2013. Mr. Kang has also provided a personal guarantee for $30.5 million (RMB 188 million). During six months ended June 30, 2014, an additional $5.03 million (RMB 31 million) was provided and approximately $1.30 million (RMB 8 million) of interest income was received under the counter-guarantee agreement. As of June 30, 2014, the amount of the counter-guarantee was $21.7 million (RMB 134 million) (the difference represents currency exchange adjustment of $0.12 million), which was 44.54% of the aggregate amount of lines of credit. This amount plus accrued interest of $1.50 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G.

Shanghai Weiwen Fashion Company Ltd. (Shanghai Weiwen) was incorporated in the PRC in 2012. This company designs and sells women’s apparel utilizing the “Velwin” brand. Shanghai Weiwen is owned by Mr. Kang. Shanghai Ya Lan entered an agreement with Shanghai Weiwen in April 2014 to purchase the “Velwin” brand along with existing inventory of Shanghai Weiwen. No customer relationships, production facilities or other operating assets were acquired. Management of the Company believes that this asset purchase will provide the Company with additional multi-brand advantages. The purchase price of the inventory and brand was approximately $2.44 million. The purchase price was based primarily on the estimated fair market value of the inventory.

Shanghai Sea to Sky Fashion Company Ltd. (Shanghai Sea to Sky) was incorporated in the PRC in 2012. This company designs and sells women’s apparel utilizing the “Sea to Sky” brand. Shanghai Sea to Sky is owned by Mr. Kang. Shanghai LA GO GO entered an agreement with Shanghai Sea to Sky in April 2014 to purchase the “Sea to Sky” brand along with existing inventory of Shanghai Sea to Sky. No customer relationships, production facilities or other operating assets were acquired. Management of the Company believes that this asset purchase will provide the Company with additional multi-brand advantage. The purchase price of the inventory and brand was approximately $0.39 million. The purchase price was based primarily on the estimated fair market value of the inventory. 

Capital Commitments

We have a continuing program for the purpose of improving our manufacturing facilities and extending our LA GO GO stores. We anticipate that cash flows from operations and borrowings from banks will be used to pay for these capital commitments.

Uses of Liquidity

Our cash requirements for the next twelve months will be primarily to fund daily operations and the growth of our business, some of this being used to fund new stores.

Sources of Liquidity

Our primary sources of liquidity for our short-term cash needs are expected to be from cash flows generated from operations, and cash equivalents currently on hand. We believe that we will be able to borrow additional funds if necessary.

We believe our cash flows from operations together with our cash and cash equivalents currently on hand will be sufficient to meet our needs for working capital, capital expenditure and other commitments for the next twelve months. No assurance can be made that additional financing will be available to us if required, and adequate funds may not be available on terms acceptable to us. If funding is insufficient at any time in the future, we will develop or enhance our products or services and expand our business through our own cash flows from operations.

As of June 30, 2014, we had access to $70.2 million in lines of credit, of which $20.7 million was unused and is currently available. These credit facilities do not include any covenants.

Foreign Currency Translation Risk

Our operations are, for the most part, located in the PRC, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the United States dollar and the Chinese RMB. Most of our sales are in United States (U.S.) dollars. During 2003 and 2004 the exchange rate of RMB to the U.S. dollar remained constant at 8.26 RMB to the dollar. On July 21, 2005, the Chinese government adjusted the exchange rate from 8.26 to 8.09 RMB to the U.S. dollar. From that time, the RMB continued to appreciate against the U.S. dollar. As of June 30, 2014, the foreign exchange rate had increased to 6.16 RMB to one U.S. dollar. We are continuously negotiating price adjustments with most of our customers based on the daily market foreign exchange rates, which we believe will reduce our exposure to exchange rate fluctuations in the future, and we will pass some of the increased cost to our customers.

In addition, the financial statements of Goldenway, New-Tailun, Catch-Luck, Ever-Glory Apparel, Taixin, Shanghai LA GO GO, Tianjin LA GO GO, Shanghai Yalan, He meida and Jiangsu LA GO GO (whose functional currency is RMB) are translated into US dollars using the closing rate method. The balance sheet items are translated into US dollars using the exchange rates at the respective balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expense items are translated at the average exchange rate for the period. All exchange differences are recorded within equity. The foreign currency translation gain (loss) for the three and six months ended June 30, 2014 and 2013 was $356,057, $(343,382), $850,555, $1,158,392, respectively.

29

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable, bank loans and long-term obligations. We consider investments in highly-liquid instruments purchased with a remaining maturity of 90 days or less from the date of purchase to be cash equivalents.

Interest Rates: Our exposure to market risk for changes in interest rates relates primarily to our short-term investments and short-term obligations; thus, fluctuations in interest rates would not have a material impact on the fair value of these securities. On June 30, 2014, we had $25.0 million in cash and cash equivalents. A hypothetical 5% increase or decrease in either the short term or long term interest rates would not have any material impact on our earnings or loss, or the fair market value or cash flows of these instruments.

Foreign Exchange Rates: We pay our suppliers and employees in Chinese RMB, however, most of our wholesales customers are located in the U.S., Japan and Europe and we generate sales from them in U.S. Dollars, Euros and British Pounds. Accordingly, our business has substantial exposure to changes in exchange rates between and among the Chinese RMB, the U.S. Dollar, the Euro and the British Pound. In the last decade, the RMB has been pegged at 8.26 RMB to one U.S. Dollar. On July 21, 2005 it was revalued to 8.09 per U.S. Dollar. Following the removal of the peg to the U.S. Dollar and pressure from the United States, the People’s Bank of China also announced that the RMB would be pegged to a basket of foreign currencies, rather than being strictly tied to the U.S. Dollar, and would be allowed to float trade within a narrow 0.3% daily band against this basket of currencies. The PRC government has stated that the basket is dominated by the U.S. Dollar, Euro, Japanese Yen and South Korean Won, with a smaller proportion made up of the British Pound, Thai Baht, Russian Ruble, Australian Dollar, Canadian Dollar and Singapore Dollar. There can be no assurance that the relationship between the RMB and these currencies will remain stable over time, especially in light of the significant political pressure on the Chinese government to permit the free flotation of the RMB, which could result in greater and more frequent fluctuations in the exchange rate between the RMB, the U.S. Dollar and the Euro. On June 30, 2014, the exchange rate between the RMB and U.S. Dollar was 6.16 RMB to one U.S. Dollar. For additional discussion regarding our foreign currency risk, see the section titled Risk Factors in the Annual Report on Form 10-K for fiscal year ended on December 31, 2013. Fluctuation in the value of Chinese RMB relative to other currencies may have a material adverse effect on our business and/or an investment in our shares.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended ( the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures. As of June 30, 2014, the end of the fiscal quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not operating effectively as of June 30, 2014. Our disclosure controls and procedures were not effective because of certain “material weaknesses” described in the “Management’s Annual Report on Internal Control over Financial Reporting” section in Item 9 of our annual report for fiscal year ended December 31, 2013. As of June 30, 2014, we had not completed the remediation of these material weaknesses.

Limitations on the Effectiveness of Disclosure Controls. Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control over Financial Reporting

Our management has worked, and will continue to work to improve our internal controls over financial reporting. During the three months ended June 30, 2014, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

30

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no pending legal proceedings to which we are a party which are material or potentially material, either individually or in the aggregate. We are from time to time, during the normal course of our business operations, subject to various litigation claims and legal disputes. We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our financial position, results of operations or liquidity.

ITEM 1A. RISK FACTORS

There has been no material change in the information provided in Item 1A of Form 10-K Annual Report for the year ended December 31, 2013 filed with the SEC on April 14, 2014.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed herewith:

Exhibit No.	Description
31.1	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document (**)
101.SCH	XBRL Taxonomy Extension Schema Document (**)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (**)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (**)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (**)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (**)

* Filed herein

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

31

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

August 14, 2014	EVER-GLORY INTERNATIONAL GROUP, INC.
	By:	/s/ Edward Yihua Kang
		Edward Yihua Kang
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Jiansong Wang
		Jiansong Wang
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

32

EX-31.1

EXHIBIT 31.1

I, Edward Yihua Kang, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ending June 30, 2014 of Ever-Glory International Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 14, 2014	/s/ Edward Yihua Kang
	Edward Yihua Kang
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

I, Jiansong Wang, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ending June 30, 2014 of Ever-Glory International Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 14, 2014	/s/ Jiansong Wang
	Jiansong Wang
	Chief Finance Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification Pursuant To

Section 906 of Sarbanes-Oxley Act of 2002

I, Edward Yihua Kang, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The quarterly report on Form 10-Q  of the Company for the fiscal quarter ended June 30, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2014	/s/ Edward Yihua Kang
	Edward Yihua Kang
	Chief Executive Officer
	(Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

EX-32.2

EXHIBIT 32.2

Certification Pursuant To

Section 906 of Sarbanes-Oxley Act of 2002

I, Jiansong Wang, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The quarterly report on Form 10-Q  of the Company for the fiscal quarter ended June 30, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2014	/s/ Jiansong Wang
	Jiansong Wang
	Chief Finance Officer
	(Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

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Related Party Transactions (Details 1) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Summary of other expenses due to related parties
Total	$ 23,224	$ 21,305	$ 46,620	$ 42,051
Jiangsu Ever-Glory [Member]
Summary of other expenses due to related parties
Total	12,733	12,788	25,560	25,277
Kunshan Enjin [Member]
Summary of other expenses due to related parties
Total	$ 10,491	$ 8,517	$ 21,060	$ 16,774

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Segments (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Summary of segment profit or loss:
Net revenue from external customers	$ 85,667,780	$ 59,129,485	$ 191,682,949	$ 137,440,975
Income from operations	7,407,711	4,067,357	10,670,384	8,036,537
Interest income	336,414	342,188	577,747	637,790
Interest expense	774,693	736,695	1,481,808	1,528,224
Depreciation and amortization	1,571,201	2,060,246	3,462,128	3,690,891
Income tax expense	1,879,752	768,541	2,758,674	1,478,172
Wholesale segment [Member]
Summary of segment profit or loss:
Net revenue from external customers	36,394,581	27,051,468	75,836,070	58,711,923
Income from operations	2,538,511	2,547,245	3,954,431	5,339,873
Interest income	324,638	332,268	551,265	624,195
Interest expense	633,051	678,069	1,199,618	1,412,096
Depreciation and amortization	251,227	244,604	515,773	478,315
Income tax expense	612,044	400,680	946,118	828,834
Retail segment [Member]
Summary of segment profit or loss:
Net revenue from external customers	49,273,199	32,078,017	115,846,879	78,729,052
Income from operations	4,869,200	1,520,112	6,715,953	2,696,664
Interest income	11,776	9,920	26,482	13,595
Interest expense	141,642	58,626	282,190	116,128
Depreciation and amortization	1,319,974	1,815,642	2,946,355	3,212,576
Income tax expense	$ 1,267,708	$ 367,861	$ 1,812,556	$ 649,338

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Income Tax (Details 1) (PRC [Member])	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
PRC [Member]
Summary of Reconciliation of PRC statutory rates to the Company's effective tax rate
PRC statutory rate	25.00%	25.00%	25.00%	25.00%
Non-taxable items				(1.40%)
Effect of foreign income tax rates	0.10%	(4.50%)	0.10%	(5.00%)
Other	0.30%	1.50%	0.80%	1.70%
Effective income tax rate	25.40%	22.00%	25.80%	20.30%

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Segments (Tables)

6 Months Ended

Jun. 30, 2014

Segments [Abstract]

Company's financial and operating information

	Wholesale segment		Retail segment		Total
Six months ended June 30, 2014
Segment profit or loss:
Net revenue from external customers	$	75,836,070	$	115,846,879	$	191,682,949
Income from operations	$	3,954,431	$	6,715,953	$	10,670,384
Interest income	$	551,265	$	26,482	$	577,747
Interest expense	$	1,199,618	$	282,190	$	1,481,808
Depreciation and amortization	$	515,773	$	2,946,355	$	3,462,128
Income tax expense	$	946,118	$	1,812,556	$	2,758,674
Six months ended June 30, 2013
Segment profit or loss:
Net revenue from external customers	$	58,711,923	$	78,729,052	$	137,440,975
Income  from operations	$	5,339,873	$	2,696,664	$	8,036,537
Interest income	$	624,195	$	13,595	$	637,790
Interest expense	$	1,412,096	$	116,128	$	1,528,224
Depreciation and amortization	$	478,315	$	3,212,576	$	3,690,891
Income tax expense	$	828,834	$	649,338	$	1,478,172

	Wholesale segment		Retail segment		Total
Three months ended June 30, 2014
Segment profit or loss:
Net revenue from external customers	$	36,394,581	$	49,273,199	$	85,667,780
Income from operations	$	2,538,511	$	4,869,200	$	7,401,711
Interest income	$	324,638	$	11,776	$	336,414
Interest expense	$	633,051	$	141,642	$	774,693
Depreciation and amortization	$	251,227	$	1,319,974	$	1,571,201
Income tax expense	$	612,044	$	1,267,708	$	1,879,752
Three months ended June 30, 2013
Segment profit or loss:
Net revenue from external customers	$	27,051,468	$	32,078,017	$	59,129,485
Income from operations	$	2,547,245	$	1,520,112	$	4,067,357
Interest income	$	332,268	$	9,920	$	342,188
Interest expense	$	678,069	$	58,626	$	736,695
Depreciation and amortization	$	244,604	$	1,815,642	$	2,060,246
Income tax expense	$	400,680	$	367,861	$	768,541

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Related Party Transactions (Details 4) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Summary of amounts due from related parties
Total	$ 1,502,946	$ 1,896,376
EsCeLav [Member]
Summary of amounts due from related parties
Total	31,349	12,291
Nanjing Eight-One-Five Hi-Tech (M&E) Co., Ltd. [Member]
Summary of amounts due from related parties
Total	20,546	145,206
Nanjing Knitting [Member]
Summary of amounts due from related parties
Total	324,984
Ever-Glory Cambodia [Member]
Summary of amounts due from related parties
Total	832,160
Jiangsu Ever-Glory [Member]
Summary of amounts due from related parties
Total	$ 293,817	$ 1,738,879

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Stockholders' Equity (Details) (Three Independent Directors [Member], USD $)	6 Months Ended
	Jun. 30, 2014	Aug. 19, 2013	Feb. 28, 2013
Three Independent Directors [Member]
Stockholders' Equity (Textual)
Common stock shares issued to independent directors		3,631	5,340
Common stock issued at five days average market price		$ 2.73	$ 1.89
Number of days used to calculation average market price of common stock	Five days before the grant date.

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Bank Loans

6 Months Ended

Jun. 30, 2014

Bank Loans [Abstract]

BANK LOANS

NOTE 4 BANK LOANS

Bank loans represent amounts due to various banks and are generally due on demand or within one year. These loans can be renewed with the banks. Bank loans consisted of the following at June 30, 2014 and December 31, 2013:

	June 30,		December 31,
Bank	2014		2013
Industrial and Commercial Bank of China	$	12,956,145	$	1,799,600
Nanjing Bank		10,422,414		18,526,618
Bank of Communications		9,181,755		9,245,108
Bank of Everbright		6,233,984		3,272,000
The Hong Kong and Shanghai Bank		5,551,067		3,499,552
Bank of China		5,111,053		8,210,699
China Minsheng Banking		3,248,000		4,953,069
Pin An Bank		2,675,281		2,196,102
Huaxia Bank		-		1,636,000
	$	55,379,699	$	53,338,748

On January 1, 2014, Goldenway entered into a line of credit agreement with Industrial and Commercial Bank of China, which allows the Company to borrow up to approximately $6.50 million (RMB40 million). These loans are collateralized by the Company’s property and equipment. As of June 30, 2014, Goldenway had borrowed $6.50 million (RMB40 million) under this line of credit with an annual interest rate of 6.24% and due on various dates from March to April 2015.

On January 1, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $6.50 million (RMB40 million) with Industrial and Commercial Bank of China and guaranteed by Goldenway. As of June 30, 2014, Ever-Glory Apparel had borrowed $4.79 million (RMB 29.5 million) under this line of credit with an annual interest rate of 5.6% and due on various dates from November to December 2014. Ever-Glory Apparel had also borrowed $1.67 million from Industrial and Commercial Bank of China with annual interest rates ranging from 1.02% to 1.04% and due on various dates from July to October 2014, and collateralized by approximately $2.24 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $0.04 million was unused and available under this line of credit. Approximately $0.44 million was repaid subsequent to June 30, 2014.

On June 14, 2013, Goldenway entered into a line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately $8.12 million (RMB50 million). These loans are guaranteed by Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), an entity controlled by Mr. Kang, the Company’s Chairman and Chief Executive Officer. These loans are also collateralized by the Company’s property and equipment. As of June 30, 2014, Goldenway had borrowed $4.06 (RMB25 million) under this line of credit from Nanjing Bank with an annual interest rate of 6.16% due on August 2014. At June 30, 2014, approximately $4.06 million was unused and available under this line of credit. Approximately $4.06 million was repaid subsequent to June 30, 2014.

On June 14, 2013 and renewed on July 6, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $9.74 million (RMB60 million) with Nanjing Bank and guaranteed by Jiangsu Ever-Glory, Mr. Kang and Goldenway. As of June 30, 2014, Ever-Glory Apparel had borrowed $1.62 million (RMB 10 million) under this line of credit with an annual interest rate of 6.6% and due on September 2014. Ever-Glory Apparel had also borrowed $2.30 million from Nanjing Bank with annual interest rate of 3.1% and due on various dates from July to September 2014, and collateralized by approximately $3.16 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $5.82 million was unused and available under this line of credit.  Approximately $0.68 million was repaid subsequent to June 30, 2014.

On April 10, 2013, LA GO GO entered into a revolving line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately $3.25 million (RMB20 million). The line of credit is guaranteed by Mr. Kang. As of June 30, 2014, LA GO GO had borrowed $2.44 million (RMB15 million) under this line of credit with an annual interest rate of 6.16% and due on various dates from July to October 2014. At June 30, 2014, approximately $0.81 million (RMB5 million) was unused and available under this line of credit. Approximately $0.81 million was repaid subsequent to June 30, 2014.

On January 29, 2014, Ever-Glory Apparel entered into a line of credit agreement for approximately $8.44 million (RMB52 million) with the Bank of Communications and collateralized by assets of Jiangsu Ever-Glory’s equity investee, Nanjing Knitting, under a collateral agreement executed among the Company, Jiangsu Ever-Glory, Nanjing Knitting and the bank. As of June 30, 2014, Ever-Glory Apparel had borrowed $4.06 million (RMB25 million) with an annual interest rate of 6.9% and due on various dates from February to March 2015. Ever-Glory Apparel had also borrowed $1.87 million from the Bank of Communications with an annual interest rates ranging from 3.82% to 5.75% and due in February 2015, and collateralized by approximately $2.51 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $2.51 million was unused and available under this line of credit.

On July 16, 2013, LA GO GO entered into a line of credit agreement for approximately $3.57 million (RMB22 million) with the Bank of Communications and guaranteed by Jiangsu Ever-Glory and Mr. Kang. As of June 30, 2014, LA GO GO had borrowed $3.25 million (RMB20 million) from the Bank of Communications with an annual interest rate of 6.3% and due in June 2015. At June 30, 2014, approximately $0.32 million was unused and available under this line of credit.

On September 1, 2013, Ever-Glory Apparel entered into a line of credit agreement for approximately $11.37 million (RMB70 million) with Everbright Bank, and collateralized by assets of Jiangsu Ever-Glory, This loan is also guaranteed by Goldenway and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $3.25 million (RMB20.0 million) from Everbright Bank, with an annual interest rate of 6.3% and due in October 2014. Ever-Glory Apparel had also borrowed $2.98 million from Everbright Bank with annual interest rate of 2.98% and due in August 2014, and collateralized by approximately $3.98 million of accounts receivable from wholesale customers. At June 30, 2014, approximately $5.14 million was unused and available under this line of credit. Approximately $3.98 million was repaid subsequent to June 30, 2014.

On July 29, 2011, Ever-Glory Apparel and Perfect Dream collectively entered into a secured banking facility agreement for a combined revolving import facility, letter of credit, invoice financing facilities and a credit line for treasury products of up to $7.0 million with the Nanjing Branch of HSBC (China) Company Limited (“HSBC”). This agreement is guaranteed by the Company and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $5.55 million from HSBC with an annual interest rates ranging from 2.78% to 5.88%, due on various dates from July to September 2014, and collateralized by approximately $7.9 million of accounts receivable from wholesale customers. These bank loans are to be repaid upon receipt of payments from customers. As of June 30, 2014, approximately $1.45 million was unused and available.

On November 11, 2013, Ever-Glory Apparel entered into a line of credit agreement for approximately $5.68 million (RMB35 million) with the Bank of China and guaranteed by Jiangsu Ever-Glory and Mr. Kang. As of June 30, 2014, Ever-Glory Apparel had borrowed $1.62 million (RMB10 million) with an annual interest rate of 6.05% and due in October 2014 under this line of credit. Ever-Glory Apparel had also borrowed $3.49 million ($1.6 million and RMB 11.6 million) from the Bank of China with annual interest rates ranging from 3.62% to 3.9% and due on various dates from July to August 2014, and collateralized by approximately $4.99 million of accounts receivable from wholesale customers. Approximately $1.60 million was repaid subsequent to June 30, 2014.  As of June 30, 2014, approximately $0.57 million was unused and available.

As of June 30, 2014, LA GO GO had borrowed $3.25 million (RMB 20 million) from China Minsheng Bank, with annual interest rate of 6.3% and due in August 2014. This loan is guaranteed by Ever-Glory Apparel and Mr. Kang.

As of June 30, 2014, Ever-Glory Apparel had borrowed $2.68 million from Ping An Bank, with annual interest rate of 3.9% and due on various dates from July to September 2014, and collateralized by approximately $3.83 million of accounts receivable from wholesale customers. Approximately $1.0 million was repaid subsequent to June 30, 2014.

Total interest expense on bank loans amounted to $774,693, $1,481,808, $736,695, and $1,528,224 for the three and six months ended June 30, 2014 and 2013, respectively.

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Related Party Transactions (Details Textual)	3 Months Ended		6 Months Ended		0 Months Ended	3 Months Ended		6 Months Ended				12 Months Ended		3 Months Ended		6 Months Ended			12 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended
	Jun. 30, 2014 USD ($)	Jun. 30, 2013 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2013 USD ($)	Mar. 31, 2012 Jiangsu Ever-Glory [Member]	Jun. 30, 2014 Jiangsu Ever-Glory [Member] USD ($)	Jun. 30, 2013 Jiangsu Ever-Glory [Member] USD ($)	Jun. 30, 2014 Jiangsu Ever-Glory [Member] USD ($)	Jun. 30, 2014 Jiangsu Ever-Glory [Member] CNY	Jun. 30, 2013 Jiangsu Ever-Glory [Member] USD ($)	Jun. 30, 2013 Jiangsu Ever-Glory [Member] CNY	Dec. 31, 2013 Jiangsu Ever-Glory [Member] USD ($)	Dec. 31, 2013 Jiangsu Ever-Glory [Member] CNY	Jun. 30, 2014 Nanjing Knitting [Member] USD ($)	Jun. 30, 2013 Nanjing Knitting [Member] USD ($)	Jun. 30, 2014 Nanjing Knitting [Member] USD ($)	Jun. 30, 2014 Nanjing Knitting [Member] CNY	Jun. 30, 2013 Nanjing Knitting [Member] USD ($)	Dec. 31, 2013 Nanjing Knitting [Member] USD ($)	Dec. 31, 2013 Nanjing Knitting [Member] CNY	Jun. 30, 2014 Edward Yihua Kang [Member] USD ($)	Jun. 30, 2014 Edward Yihua Kang [Member] CNY	Apr. 30, 2014 Shanghai Weiwen [Member] USD ($)	Jun. 30, 2014 Shanghai Sea to Sky [Member] USD ($)	Jun. 30, 2013 Shanghai Sea to Sky [Member] USD ($)	Jun. 30, 2014 Shanghai Sea to Sky [Member] USD ($)	Jun. 30, 2013 Shanghai Sea to Sky [Member] USD ($)	Apr. 30, 2014 Shanghai Sea to Sky [Member] USD ($)
Related Party Transactions (Textual)
Purchase of raw material								$ 0		$ 72,548				$ 450,620	$ 101,370	$ 884,070		$ 184,608
Sub-contracts with related parties	4,779,785	5,102,919	10,689,906	9,088,426			11,613	25,284		11,613					211,296			232,602						377,793		377,793
Company sold raw materials								19,221		0
Line of credit facility, collateral amount																16,720,000	103,000,000		16,720,000	103,000,000
Transactions ceased under counter guarantee										4,820,000	30,250,000
Guaranty on lines of credit								48,720,000	300,000,000			43,690,000	269,000,000								30,500,000	188,000,000
Minimum amount of counter guarantee								5,030,000	31,000,000			16,790,000	103,000,000
Minimum percentage counter-guaranty on lines of credit					70.00%
Line of credit facility, Interest rate at expiration or termination					6.00%
Interest charged on net amounts due								0.50%	0.50%
Interest income received from related party			(1,302,400)					1,300,000	8,000,000
Interest income						290,000	340,000	500,000		640,000
Accrued interest, classified as a reduction of equity						23,190,000	19,080,000	23,190,000		19,080,000
Reduction in counter guarantee amount as percentage of line of credit						44.54%		44.54%	44.54%
Amount of Guarantee reduced								21,700,000	134,000,000
Currency exchange adjustment								120,000
Accrued interest								1,500,000
Purchase price of the inventory and brand																							$ 244,000,000					$ 39,000,000

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Bank Loans (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Schedule of bank loans
Bank loans	$ 55,379,699	$ 53,338,748
Industrial and Commercial Bank of China [Member]
Schedule of bank loans
Bank loans	12,956,145	1,799,600
Nanjing Bank [Member]
Schedule of bank loans
Bank loans	10,422,414	18,526,618
Bank of Communications [Member]
Schedule of bank loans
Bank loans	9,181,755	9,245,108
Bank of Everbright [Member]
Schedule of bank loans
Bank loans	6,233,984	3,272,000
The Hong Kong And Shanghai Bank [Member]
Schedule of bank loans
Bank loans	5,551,067	3,499,552
Bank of China [Member]
Schedule of bank loans
Bank loans	5,111,053	8,210,699
China Minsheng Bank [Member]
Schedule of bank loans
Bank loans	3,248,000	4,953,069
Ping An Bank [Member]
Schedule of bank loans
Bank loans	2,675,281	2,196,102
Hua Xia Bank [Member]
Schedule of bank loans
Bank loans		$ 1,636,000

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Inventories (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Schedule of inventory
Raw materials	$ 2,273,209	$ 5,658,519
Work-in-progress	30,661,653	25,862,185
Finished goods	54,087,608	55,664,077
Inventory gross	87,022,470	87,184,781
Less: allowance for obsolete inventories	(10,403,366)	(11,994,584)
Total inventories	$ 76,619,104	$ 75,190,197

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Concentrations and Risks (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Company's revenues as per geographic areas
Net revenue	$ 85,667,780	$ 59,129,485	$ 191,682,949	$ 137,440,975
Wholesale business [Member]
Company's revenues as per geographic areas
Net revenue	36,394,581	27,051,468	75,836,070	58,711,923
Retail business [Member]
Company's revenues as per geographic areas
Net revenue	49,273,199	32,078,017	115,846,879	78,729,052
The People's Republic of China(PRC) [Member]
Company's revenues as per geographic areas
Net revenue	12,929,219	8,616,297	27,527,244	21,647,361
Germany [Member]
Company's revenues as per geographic areas
Net revenue	5,525,792	3,305,231	11,823,952	7,676,564
United Kingdom [Member]
Company's revenues as per geographic areas
Net revenue	9,018,214	4,961,895	11,642,361	7,826,529
Europe-Other [Member]
Company's revenues as per geographic areas
Net revenue	2,061,398	3,134,666	8,517,320	7,102,281
Japan [Member]
Company's revenues as per geographic areas
Net revenue	2,431,821	5,306,554	8,674,713	9,005,388
United States [Member]
Company's revenues as per geographic areas
Net revenue	$ 4,428,137	$ 1,726,825	$ 7,650,480	$ 5,453,800

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Bank Loans (Details Textual)	3 Months Ended		6 Months Ended							6 Months Ended				6 Months Ended				6 Months Ended				6 Months Ended				6 Months Ended						6 Months Ended						6 Months Ended				6 Months Ended		6 Months Ended						6 Months Ended
	Jun. 30, 2014 USD ($)	Jun. 30, 2013 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2013 USD ($)	Jun. 30, 2014 Nanjing Bank [Member]	Jun. 30, 2014 Nanjing Bank [Member] Goldenway [Member] USD ($)	Jun. 30, 2014 Nanjing Bank [Member] Goldenway [Member] CNY	Jun. 14, 2013 Nanjing Bank [Member] Goldenway [Member] USD ($)	Jun. 14, 2013 Nanjing Bank [Member] Goldenway [Member] CNY	Jun. 30, 2014 Nanjing Bank [Member] Ever Glory Apparel [Member] USD ($)	Jun. 30, 2014 Nanjing Bank [Member] Ever Glory Apparel [Member] CNY	Jun. 14, 2013 Nanjing Bank [Member] Ever Glory Apparel [Member] USD ($)	Jun. 14, 2013 Nanjing Bank [Member] Ever Glory Apparel [Member] CNY	Jun. 30, 2014 Nanjing Bank [Member] La Go Go [Member] USD ($)	Jun. 30, 2014 Nanjing Bank [Member] La Go Go [Member] CNY	Apr. 10, 2013 Nanjing Bank [Member] La Go Go [Member] USD ($)	Apr. 10, 2013 Nanjing Bank [Member] La Go Go [Member] CNY	Jun. 30, 2014 Industrial and Commercial Bank of China [Member] Goldenway [Member] USD ($)	Jun. 30, 2014 Industrial and Commercial Bank of China [Member] Goldenway [Member] CNY	Jan. 01, 2014 Industrial and Commercial Bank of China [Member] Goldenway [Member] USD ($)	Jan. 01, 2014 Industrial and Commercial Bank of China [Member] Goldenway [Member] CNY	Jun. 30, 2014 Industrial and Commercial Bank of China [Member] Ever Glory Apparel [Member] USD ($)	Jun. 30, 2014 Industrial and Commercial Bank of China [Member] Ever Glory Apparel [Member] CNY	Jan. 01, 2014 Industrial and Commercial Bank of China [Member] Ever Glory Apparel [Member] USD ($)	Jan. 01, 2014 Industrial and Commercial Bank of China [Member] Ever Glory Apparel [Member] CNY	Jun. 30, 2014 Industrial and Commercial Bank of China [Member] Ever Glory Apparel [Member] Minimum [Member]	Jun. 30, 2014 Industrial and Commercial Bank of China [Member] Ever Glory Apparel [Member] Maximum [Member]	Jun. 30, 2014 Bank of Communications [Member] Ever Glory Apparel [Member] USD ($)	Jun. 30, 2014 Bank of Communications [Member] Ever Glory Apparel [Member] CNY	Jan. 29, 2014 Bank of Communications [Member] Ever Glory Apparel [Member] USD ($)	Jan. 29, 2014 Bank of Communications [Member] Ever Glory Apparel [Member] CNY	Jun. 30, 2014 Bank of Communications [Member] Ever Glory Apparel [Member] Minimum [Member]	Jun. 30, 2014 Bank of Communications [Member] Ever Glory Apparel [Member] Maximum [Member]	Jun. 30, 2014 Bank of Communications [Member] La Go Go [Member] USD ($)	Jun. 30, 2014 Bank of Communications [Member] La Go Go [Member] CNY	Jul. 16, 2013 Bank of Communications [Member] La Go Go [Member] USD ($)	Jul. 16, 2013 Bank of Communications [Member] La Go Go [Member] CNY	Jun. 30, 2014 Bank of China [Member] Ever Glory Apparel [Member] USD ($)	Jun. 30, 2014 Bank of China [Member] Ever Glory Apparel [Member] CNY	Nov. 11, 2013 Bank of China [Member] Ever Glory Apparel [Member] USD ($)	Nov. 11, 2013 Bank of China [Member] Ever Glory Apparel [Member] CNY	Jun. 30, 2014 HSBC [Member] Ever Glory Apparel [Member] USD ($)	Jul. 29, 2011 HSBC [Member] Ever Glory Apparel [Member] USD ($)	Jun. 30, 2014 HSBC [Member] Ever Glory Apparel [Member] Minimum [Member]	Jun. 30, 2014 HSBC [Member] Ever Glory Apparel [Member] Maximum [Member]	Jun. 30, 2014 Everbright Bank [Member] Ever Glory Apparel [Member] USD ($)	Jun. 30, 2014 Everbright Bank [Member] Ever Glory Apparel [Member] CNY	Sep. 01, 2013 Everbright Bank [Member] Ever Glory Apparel [Member] USD ($)	Sep. 01, 2013 Everbright Bank [Member] Ever Glory Apparel [Member] CNY	Jun. 30, 2014 China Minsheng Bank [Member] La Go Go [Member] USD ($)	Jun. 30, 2014 China Minsheng Bank [Member] La Go Go [Member] CNY	Jun. 30, 2014 Ping An Bank [Member] Ever Glory Apparel [Member] USD ($)
Bank Loans (Textual)
Revolving line of credit agreement, maximum borrowing capacity								$ 8,120,000	50,000,000			$ 9,740,000	60,000,000			$ 3,250,000	20,000,000			$ 6,500,000	40,000,000			$ 6,500,000	40,000,000					$ 8,440,000	52,000,000					$ 3,570,000	22,000,000			$ 5,680,000	35,000,000		$ 7,000,000					$ 11,370,000	70,000,000	$ 3,250,000	20,000,000	$ 2,680,000
Revolving line of credit agreement, amount borrowed						4,060,000	25,000,000			1,620,000	10,000,000			2,440,000	15,000,000			6,500,000	40,000,000			4,790,000	29,500,000					4,060,000	25,000,000					3,250,000	20,000,000			1,620,000	10,000,000			5,550,000				3,250,000	20,000,000
Revolving line of credit agreement, borrowed																						1,670,000																1,600,000	11,600							2,980,000
Effective interest rate during the period						6.16%				6.60%				6.16%				6.24%	6.24%			5.60%						6.90%						6.30%	6.30%			6.05%						2.78%	5.88%	6.30%				6.30%	6.30%	3.90%
Due date of revolving line of credit agreement										September 2014												November to December 2014						February to March, 2015						July 2014	July 2014			October 2014				July to September 2014				October 2014				August 2014	August 2014	July to September 2014
Revolving line of credit agreement, unused capacity						4,060,000				5,820,000				810,000	5,000,000							40,000						2,510,000						320,000								1,450,000				5,130,000
Due date of additional borrowing					July 2013	August 2014				July to September 2014				July to October 2014				April 2015	April 2015			July to October 2014						February 2015										July to August 2014								August 2014
Aggregate revolving line of credit agreement, additional borrowings										2,300,000																		1,870,000										3,490,000
Line of credit interest rate on additional borrowing										3.10%																0.86%	1.34%					3.82%	5.75%					3.90%								2.98%
Revolving line of credit agreement, repaid subsequent to current period						4,060,000								810,000																								1,600,000				1,080,000				3,980,000						1,000,000
Accounts receivable from wholesale customers										3,160,000												2,240,000						2,510,000										4,990,000				7,900,000				3,980,000						3,830,000
Total interest expense	774,693	736,695	1,481,808	1,528,224
Repayments of line of credit										$ 680,000												$ 440,000																$ 570,000

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Derivative Liability (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2012
Derivative Warrant Liability (Textual)
Derivative notional amount	$ 3,000,000		$ 3,000,000
Derivative Notional Amount One	700,000		700,000
Common stock shares purchasable by warrants outstanding					840,454
Reduction in remaining value of warrants					At the expiration date, the remaining value of the warrants not exercised ($2,000) was reduced to $0.
Change in fair value of derivative liability		2,000		294,000
Warrants expiration date			Sep. 30, 2014		Jun. 30, 2013
Foreign currency derivative activity

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Inventories

6 Months Ended

Jun. 30, 2014

Inventories [Abstract]

INVENTORIES

NOTE 3 INVENTORIES

Inventories at June 30, 2014 and December 31, 2013 consisted of the following:

	June 30,  2014			December 31,  2013
Raw materials	$	2,273,209		$	5,658,519
Work-in-progress		30,661,653			25,862,185
Finished goods		54,087,608			55,664,077
		87,022,470			87,184,781
Less: allowance for obsolete inventories		(10,403,366	)		(11,994,584	)
Total inventories	$	76,619,104		$	75,190,197

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Income Tax (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Summary of Pre-tax income in jurisdictions
Pre-tax income	$ 7,409,896	$ 3,495,752	$ 10,678,546	$ 7,292,462
PRC [Member]
Summary of Pre-tax income in jurisdictions
Pre-tax income	7,439,468	4,136,050	10,713,481	8,473,628
Samoa [Member]
Summary of Pre-tax income in jurisdictions
Pre-tax income		(636,295)		(1,462,766)
BVI [Member]
Summary of Pre-tax income in jurisdictions
Pre-tax income	(24,572)	(1,003)	(24,935)	(2,318)
Others [Member]
Summary of Pre-tax income in jurisdictions
Pre-tax income	$ (5,000)	$ (3,000)	$ (10,000)	$ 283,918

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Related Party Transactions (Details 2) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Summary of sub-contracts with related parties
Total	$ 4,779,785	$ 5,102,919	$ 10,689,906	$ 9,088,426
Nanjing Knitting [Member]
Summary of sub-contracts with related parties
Total		211,296		232,602
Nanjing Ever-Kyowa [Member]
Summary of sub-contracts with related parties
Total	426,451	255,893	861,970	523,878
Ever-Glory Vietnam [Member]
Summary of sub-contracts with related parties
Total	1,776,620	3,175,681	4,964,884	5,094,787
Ever-Glory Cambodia [Member]
Summary of sub-contracts with related parties
Total	696,136	1,446,661	2,957,490	3,221,188
EsCeLav [Member]
Summary of sub-contracts with related parties
Total		1,775		4,358
Shanghai Weiwen [Member]
Summary of sub-contracts with related parties
Total	1,502,785		1,502,785
Jiangsu Ever-Glory [Member]
Summary of sub-contracts with related parties
Total		11,613	25,284	11,613
Shanghai Sea to Sky [Member]
Summary of sub-contracts with related parties
Total	$ 377,793		$ 377,793

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Condensed Consolidated Balance Sheets (Unaudited) (USD $)	Jun. 30, 2014	Dec. 31, 2013
CURRENT ASSETS
Cash and cash equivalents	$ 25,012,160	$ 27,772,878
Accounts receivable	60,381,956	80,317,630
Inventories	76,619,104	75,190,197
Value added tax receivable	3,883,902	2,620,277
Other receivables and prepaid expenses	2,336,675	1,821,695
Advances on inventory purchases	6,369,531	6,010,027
Amounts due from related parties	1,502,946	1,896,376
Total Current Assets	176,106,274	195,629,080
LAND USE RIGHT, NET	2,778,380	2,821,471
PROPERTY AND EQUIPMENT, NET	18,993,507	18,370,327
TOTAL ASSETS	197,878,161	216,820,878
CURRENT LIABILITIES
Bank loans	55,379,699	53,338,748
Accounts payable	49,983,235	72,855,960
Accounts payable and other payables - related parties	3,020,292	4,102,456
Other payables and accrued liabilities	14,936,652	16,128,514
Value added and other taxes payable	4,746,910	5,399,187
Income tax payable	4,289,564	489,307
Deferred tax liabilities	4,933,685	7,391,029
Total Current Liabilities	137,290,037	159,705,201
COMMITMENTS AND CONTINGENCIES
Stockholders' equity of the Company:
Preferred stock ($.001 par value, authorized 5,000,000 shares, no shares issued and outstanding)
Common stock ($.001 par value, authorized 50,000,000 shares, 14,781,241 and 14,781,241 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively)	14,781	14,781
Additional paid-in capital	3,572,157	3,572,157
Retained earnings	61,537,898	53,618,026
Statutory reserve	10,212,268	10,212,268
Accumulated other comprehensive income	8,440,043	8,783,425
Amounts due from related party	(23,189,023)	(19,084,980)
Total Stockholders' Equity	60,588,124	57,115,677
TOTAL LIABILITIES AND EQUITY	$ 197,878,161	$ 216,820,878

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Concentrations and Risks (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2014 Customer	Jun. 30, 2013 Customer	Jun. 30, 2014 Customer Manufacturer	Jun. 30, 2013 Manufacturer Customer
Wholesale business [Member]
Concentrations and Risks (Textual)
Number of wholesale customer	1	2	1	2
Percentage of revenues hold by wholesale customer one	15.00%	14.00%	14.00%	11.00%
Percentage of revenues hold by wholesale customer two		10.00%		11.00%
Percentage of raw materials purchases represented by supplier one	11.00%
Percentage of raw materials not relied on supplier	10.00%	10.00%	10.00%	10.00%
Number of manufacturers of finished goods	2	2	2	2
Percentage of purchased finished goods represented by manufacturer one	15.00%	17.00%	16.00%	15.00%
Percentage of purchased finished goods represented by manufacturer two	14.00%	16.00%	10.00%	13.00%
Retail business [Member]
Concentrations and Risks (Textual)
Number of raw materials suppliers		1
Percentage of purchased finished goods represented by manufacturer two	10.00%	10.00%	10.00%	10.00%
Percentage of finished goods not relied on supplier	10.00%	10.00%	10.00%	10.00%

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Summary of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2014

Summary of Business and Basis of Presentation [Abstract]

SUMMARY OF BUSINESS AND BASIS OF PRESENTATION

NOTE 1 SUMMARY OF BUSINESS AND BASIS OF PRESENTATION

Organization and business

Ever-Glory International Group, Inc. (the “Company”), together with its subsidiaries, is an apparel manufacturer, supplier and retailer in The People's Republic of China ("China” or "PRC"), with a wholesale segment and a retail segment. The Company’s wholesale business consists of recognized brands for department and specialty stores located in China, Europe, Japan and the United States. The Company’s retail business consists of flagship stores and store-in-stores for the Company’s own-brand products.

The Company’s wholesale operations are provided primarily through the Company’s wholly-owned PRC subsidiaries, Goldenway Nanjing Garments Co. Ltd. (“Goldenway”), Nanjing Catch-Luck Garments Co. Ltd. (“Catch-Luck”), Nanjing New-Tailun Garments Co. Ltd (“New-Tailun”), Ever-Glory International Group Apparel Inc.(“Ever-Glory Apparel”) and Nanjing Tai Xin Garments Trading Company Limited (“Tai Xin”), and the Company’s wholly-owned Samoa subsidiary, Ever-Glory International Group (HK) Ltd. (“Ever-Glory HK”). The Company’s retail operations are provided through its wholly- owned subsidiaries, Shanghai LA GO GO Fashion Company Limited (“Shanghai LA GO GO”), Jiangsu LA GO GO Fashion Company Limited (“Jiangsu LA GO GO”), Tianjin LA GO GO Fashion Company Limited (“Tianjin LA GO GO”), Shanghai Ya Lan Fashion Company Limited (“Ya Lan”) and Xizang He Meida Trading Company Limited (“He Meida”).

On June 26, 2014, Shanghai LA GO GO entered into a contract with Shanghai Yiduo Fashion Company Limited (“Shanghai Yiduo”) to acquire 78% of the shares of Shanghai Yiduo for $0.75 million (RMB4.6 million).  Shanghai Yiduo is currently owned by unrelated third parties and operates design and development of women’s apparel for Mecox Lane, one of China’s leading online platforms for apparel and apparel accessories. The acquisition price is to be paid as follows. 

Payment Date	Amount
Before July 8, 2014	$	0.45 million
Before September 28, 2014		0.22 million
Within 10 days after Shanghai Yiduo collects all the accounts receivable from Mecox Lane		0.08 million
TOTAL		0.75 million

The first $0.45 million installment was paid by the Company to Shanghai Yiduo in July 2014 and was financed by working capital. The completion of the acquisition is subject to the company’s final due dilligence and Shanghai Yiduo’s ability to collect certain account receivables. In the event Shanghai Yiduo is not able to collect the account receivables in accordance to the contract, the Company may reduce the purchase price or terminate the contract and get back the first install payment.   Management of the Company believes that the acquisition will improve the Company’s design and product development ability.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheet as of June 30, 2014, the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2014 and 2013, and the condensed consolidated statements of cash flows for the six months ended June 30, 2014 and 2013. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. Wholesale revenues are generally higher in the third and fourth fiscal quarters, while retail revenues are generally higher in the first and fourth fiscal quarters. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results of operations to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, and Form 10-Q for the three and six months ended June 30, 2013.

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Income Tax (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
PRC [Member]
Income Tax (Textual)
PRC statutory rate	25.00%	25.00%	25.00%	25.00%
Tax liability	$ 3,186,000		$ 3,186,000		$ 3,186,000
Withholding tax rate for dividends distribution			10.00%
HK [ Member]
Income Tax (Textual)
PRC statutory rate			25.00%

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Summary of Basic and diluted earnings per share

	Three Months Ended June 30,				Six Months Ended  June 30,
	2014		2013		2014		2013
Nanjing Knitting	$	-	$	211,296	$	-	$	232,602
Nanjing Ever-Kyowa		426,451		255,893		861,970		523,878
Ever-Glory Vietnam		1,776,620		3,175,681		4,964,884		5,094,787
Ever-Glory Cambodia		696,136		1,446,661		2,957,190		3,221,188
EsCeLav		-		1,775		-		4,358
Shanghai Weiwen		1,502,785		-		1,502,785		-
Shanghai Sea to Sky		377,793		-		377,793		-
Jiangsu Ever-Glory		-		11,613		25,284		11,613
	$	4,779,785	$	5,102,919	$	10,689,906	$	9,088,426

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Earnings Per Share (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Summary of Basic and diluted earnings per share
Net income	$ 5,530,144	$ 2,727,211	$ 7,919,872	$ 5,814,290
Weighted average number of common shares- Basic and diluted	14,781,241	14,777,610	14,781,241	14,775,869
Earnings per share - Basic and diluted	$ 0.37	$ 0.18	$ 0.54	$ 0.39

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Concentrations and Risks (Tables)

6 Months Ended

Jun. 30, 2014

Concentrations and Risks [Abstract]

Company's revenues as per geographic areas

	Three months ended  June 30,				Six months ended  June 30,
	2014		2013		2014		2013
The People’s Republic of China	$	12,929,219	$	8,616,297	$	27,527,244	$	21,647,361
Germany		5,525,792		3,305,231		11,823,952		7,676,564
United Kingdom		9,018,214		4,961,895		11,642,361		7,826,529
Europe-Other		2,061,398		3,134,666		8,517,320		7,102,281
Japan		2,431,821		5,306,554		8,674,713		9,005,388
United States		4,428,137		1,726,825		7,650,480		5,453,800
Total wholesale business		36,394,581		27,051,468		75,836,070		58,711,923
Retail business		49,273,199		32,078,017		115,846,879		78,729,052
Total	$	85,667,780	$	59,129,485	$	191,682,949	$	137,440,975

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Significant Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

Financial Instruments

Management has estimated that the carrying amounts of non-related party financial instruments approximate their fair values due to their short-term maturities. The fair value of amounts due from (to) related parties is not practicable to estimate due to the related party nature of the underlying transactions.

Fair Value Accounting

Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures”, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

At June 30, 2014, the Company’s financial assets (all Level 1) consist of cash placed with financial institutions that management considers to be of a high quality.

At June 30, 2014 and December 31, 2013, the Company had an outstanding forward foreign exchange option contract subject to recurring fair value measurement (Level 3) with the change in fair value recognized in earnings (Note 5).

Foreign Currency Translation and Other Comprehensive Income

The reporting currency of the Company is the U.S. dollar. The functional currency of the Company, Ever-Glory HK and Perfect Dream Limited, British Virgin Islands incorporated subsidiary of the Company (“Perfect Dream”) is the U.S. dollar. The functional currency of Goldenway, New Tailun, Catch-luck, Ever-Glory Apparel, Tai Xin, Shanghai LA GO GO, Jiangsu LA GO GO, Tianjin LA GO GO, Ya Lan and He Meida is the Chinese RMB.

For subsidiaries whose functional currency is the RMB, all assets and liabilities were translated at the exchange rate at the balance sheet date; equity was translated at historical rates and items in the statement of comprehensive income were translated at the average rate for the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Items in the cash flow statement are translated at the average exchange rate for the period.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and must be applied retrospectively. Management is currently evaluating the potential impact of this ASU on the Company’s financial statements. 

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Balance Sheets [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	14,781,241	14,781,241
Common stock, shares outstanding	14,781,241	14,781,241

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Significant Accounting Policies [Abstract]

Financial Instruments

Financial Instruments

Management has estimated that the carrying amounts of non-related party financial instruments approximate their fair values due to their short-term maturities. The fair value of amounts due from (to) related parties is not practicable to estimate due to the related party nature of the underlying transactions.

Fair Value Accounting

Fair Value Accounting

Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures”, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

At June 30, 2014, the Company’s financial assets (all Level 1) consist of cash placed with financial institutions that management considers to be of a high quality.

At June 30, 2014 and December 31, 2013, the Company had an outstanding forward foreign exchange option contract subject to recurring fair value measurement (Level 3) with the change in fair value recognized in earnings (Note 5).

Foreign Currency Translation and Other Comprehensive Income

Foreign Currency Translation and Other Comprehensive Income

The reporting currency of the Company is the U.S. dollar. The functional currency of the Company, Ever-Glory HK and Perfect Dream Limited, British Virgin Islands incorporated subsidiary of the Company (“Perfect Dream”) is the U.S. dollar. The functional currency of Goldenway, New Tailun, Catch-luck, Ever-Glory Apparel, Tai Xin, Shanghai LA GO GO, Jiangsu LA GO GO, Tianjin LA GO GO, Ya Lan and He Meida is the Chinese RMB.

For subsidiaries whose functional currency is the RMB, all assets and liabilities were translated at the exchange rate at the balance sheet date; equity was translated at historical rates and items in the statement of comprehensive income were translated at the average rate for the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Items in the cash flow statement are translated at the average exchange rate for the period.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and must be applied retrospectively. Management is currently evaluating the potential impact of this ASU on the Company’s financial statements. 

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 08, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Ever-Glory International Group, Inc.
Entity Central Index Key	0000943184
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		14,781,241

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Summary of Business and Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Business and Basis of Presentation [Abstract]

Summary of Business Acquisition Price

Payment Date	Amount
Before July 8, 2014	$	0.45 million
Before September 28, 2014		0.22 million
Within 10 days after Shanghai Yiduo collects all the accounts receivable from Mecox Lane		0.08 million
TOTAL		0.75 million

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Consolidated Statements Of Comprehensive Income [Abstract]
NET SALES	$ 85,667,780	$ 59,129,485	$ 191,682,949	$ 137,440,975
COST OF SALES	56,317,989	39,650,917	136,552,201	97,669,484
GROSS PROFIT	29,349,791	19,478,568	55,130,748	39,771,491
OPERATING EXPENSES
Selling expenses	14,402,662	9,898,106	30,525,958	21,749,402
General and administrative expenses	7,539,418	5,513,105	13,934,406	9,985,552
Total Operating Expenses	21,942,080	15,411,211	44,460,364	31,734,954
INCOME FROM OPERATIONS	7,407,711	4,067,357	10,670,384	8,036,537
OTHER INCOME (EXPENSES)
Interest income	336,414	342,188	577,747	637,790
Interest expense	(774,693)	(736,695)	(1,481,808)	(1,528,224)
Change in fair value of derivative liability		2,000		294,000
Other income (expenses)	440,464	(179,098)	912,223	(147,641)
Total Other Income (Expenses)	2,185	(571,605)	8,162	(744,075)
INCOME BEFORE INCOME TAX EXPENSE	7,409,896	3,495,752	10,678,546	7,292,462
INCOME TAX EXPENSE	(1,879,752)	(768,541)	(2,758,674)	(1,478,172)
NET INCOME	5,530,144	2,727,211	7,919,872	5,814,290
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation (loss) gain	356,044	850,550	(343,382)	1,158,392
COMPREHENSIVE INCOME	$ 5,886,188	$ 3,577,761	$ 7,576,490	$ 6,972,682
EARNINGS PER SHARE
Basic and diluted	$ 0.37	$ 0.18	$ 0.54	$ 0.39
Weighted average number of shares outstanding
Basic and diluted	14,781,241	14,777,610	14,781,241	14,775,869

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Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 7 EARNINGS PER SHARE

The following demonstrates the calculation for earnings per share for the three and six months ended June 30, 2014 and 2013:

	Three months ended				Six months ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income	$	5,530,144	$	2,727,211	$	7,919,872	$	5,814,290
Weighted average number of common shares –Basic and diluted		14,781,241		14,777,610		14,781,241		14,775,869
Earnings per share –Basic and diluted	$	0.37	$	0.18	$	0.54	$	0.39

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Income Tax

6 Months Ended

Jun. 30, 2014

Income Tax [Abstract]

INCOME TAX

NOTE 6 INCOME TAX

The Company’s operating subsidiaries are governed by the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (“the Income Tax Laws”).

All PRC subsidiaries are subject to income tax at the 25% statutory rate.

Perfect Dream was incorporated in the British Virgin Islands (BVI), and under the current laws of the BVI dividends and capital gains arising from the Company’s investments in the BVI are not subject to income taxes.

Ever-Glory HK was incorporated in Samoa, and under the current laws of Samoa has no liabilities for income taxes.

Although the Company’s parent entity is a US entity, the Company’s primary operations are through subsidiaries located in China, certain apparel manufacturing is performed outside of China in Southeast Asia, sales are made globally, and the Company has other subsidiary operations in Hong Kong and Samoa. Therefore, the Company uses significant judgment to calculate and provide for income taxes in each of the tax jurisdictions in which it operates. In the ordinary course of the Company’s business, there are transactions and calculations undertaken whose ultimate tax outcome cannot be certain. Some of these uncertainties arise as a consequence of transfer pricing for transactions with the Company’s subsidiaries, potential challenges to nexus, value added estimates, and similar matters. In September 2009, the Company formed its subsidiary, Ever-Glory HK, domiciled in Samoa, in order to engage in certain limited import and export of apparel, fabric and accessories, as well as to efficiently address currency exchange matters with international transactions. Over the past few years, the operational matters handled by this subsidiary have expanded with respect to sub-contracting of certain manufacturing work outside of China, as well as to other operational matters with non-PRC customers and vendors. Additionally, over this time period, tax guidance, rules and positions taken by the PRC with respect to transfer pricing issues have evolved, and in certain cases, become more standardized. As part of the Company’s on-going process of evaluating our tax positions, the Company considered various factors as they relate to its Samoan subsidiary and as related to intercompany transactions This evaluation resulted in a change in the Company’s estimate of exposure to potential unfavorable outcomes related to these uncertainties, and the Company recorded a tax liability of approximately $3,186,000 as of December 31, 2013 based on the probability for such outcomes.

As of June 30, 2014, the local PRC Tax Bureau is in discussions with the Company to finalize the process of payment for the approximate tax liability of $ 3,186,000. The Company and the PRC Tax Bureau have tentatively agreed that payments on the tax liability will be made by the Company prospectively over the next two to three year period. Beginning January 1, 2014, all net income generated from Ever-Glory HK has been reported as a taxable income at 25% tax rate in PRC.  

The PRC’s Enterprise Income Tax Law imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise in PRC to its immediate holding company outside China, such distributions were exempted under the previous income tax law and regulations. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company. The foreign invested enterprise became subject to the withholding tax starting from January 1, 2008. Given that the undistributed profits of the Company's subsidiaries in China are intended to be retained in China for business development and expansion purposes, no withholding tax accrual has been made.

After the tax liability adjustment resulted from the reevaluation of the Company’s tax position (resulting in the company allocating substantially all of the earnings of the Samoan subsidiary to the PRC and reporting such earnings as taxable in the PRC). PRC pre-tax income for the three and six months ended June 30, 2014 and 2013 was taxable in the following jurisdictions.

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
PRC	$	7,439,468		$	4,136,050		$	10,713,481		$	8,473,628
Samoa		-			(636,295	)		-			(1,462,766	)
BVI		(24,572	)		(1,003	)		(24,935	)		(2,318	)
Others		(5,000	)		(3,000	)		(10,000	)		283,918
	$	7,409,896		$	3,495,752		$	10,678,546		$	7,292,462

The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three and six months ended June 30, 2014 and 2013, respectively:

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
PRC statutory rate		25.0	%		25.0	%		25.0	%		25.0	%
Non-taxable items		-			-			-			(1.4	)
Effect of foreign income tax rates		0.1			(4.5	)		0.1			(5.0	)
Other		0.3			1.5			0.8			1.7
Effective income tax rate		25.4	%		22.0	%		25.8	%		20.3	%

Income tax expense for the three and six months ended June 30, 2014 and 2013 is as follows:

	Three months ended					Six months ended
	June 30,					June 30,
	2014			2013		2014			2013
Current	$	4,281,918		$	626,528	$	5,216,018		$	855,572
Deferred		(2,402,166	)		142,013		(2,457,344	)		622,600
Income tax expense	$	1,879,752		$	768,541	$	2,758,674		$	1,478,172

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Summary of other income from related parties

	Three months ended		Six months ended
	June 30,		June 30,
	2013		2013
EsCeLav	$	3,056	$	6,038
Nanjing Eight-One-Five Hi-tech (M&E) Co., Ltd.		4,070		8,050
Total	$	7,126	$	14,088

Summary of other expenses due to related parties

	Three months ended				Six months ended
	June 30,				June 30,
	2014		2013		2014		2013
Jiangsu Ever-Glory	$	12,733	$	12,788	$	25,560	$	25,277
Kunshan Enjin		10,491		8,517		21,060		16,774
Total	$	23,224	$	21,305	$	46,620	$	42,051

	Three Months Ended June 30,				Six Months Ended  June 30,
	2014		2013		2014		2013
Nanjing Knitting	$	-	$	211,296	$	-	$	232,602
Nanjing Ever-Kyowa		426,451		255,893		861,970		523,878
Ever-Glory Vietnam		1,776,620		3,175,681		4,964,884		5,094,787
Ever-Glory Cambodia		696,136		1,446,661		2,957,190		3,221,188
EsCeLav		-		1,775		-		4,358
Shanghai Weiwen		1,502,785		-		1,502,785		-
Shanghai Sea to Sky		377,793		-		377,793		-
Jiangsu Ever-Glory		-		11,613		25,284		11,613
	$	4,779,785	$	5,102,919	$	10,689,906	$	9,088,426

Summary of sub-contracts with related parties

	Three Months Ended June 30,				Six Months Ended  June 30,
	2014		2013		2014		2013
Nanjing Knitting	$	-	$	211,296	$	-	$	232,602
Nanjing Ever-Kyowa		426,451		255,893		861,970		523,878
Ever-Glory Vietnam		1,776,620		3,175,681		4,964,884		5,094,787
Ever-Glory Cambodia		696,136		1,446,661		2,957,190		3,221,188
EsCeLav		-		1,775		-		4,358
Shanghai Weiwen		1,502,785		-		1,502,785		-
Shanghai Sea to Sky		377,793		-		377,793		-
Jiangsu Ever-Glory		-		11,613		25,284		11,613
	$	4,779,785	$	5,102,919	$	10,689,906	$	9,088,426

Summary of accounts payable - related parties

	June 30,  2014		December 31,  2013
Nanjing Knitting	$	-	$	784,777
Nanjing Ever-Kyowa		560,076		261,955
Ever-Glory Vietnam		677,078		2,473,271
Ever-Glory Cambodia		-		582,453
Shanghai Sea to Sky		377,793		-
Shanghai Weiwen		1,405,345		-
Total	$	3,020,292	$	4,102,456

Summary of amounts due from related party

	June 30,  2014		December 31,  2013
EsCeLav	$	31,439	$	12,291
Nanjing Eight-One-Five Hi-tech (M&E) Co.,Ltd.		20,546		145,206
Nanjing Knitting		324,984		-
Ever-Glory Cambodia		832,160		-
Jiangsu Ever-Glory		293,817		1,738,879
Total	$	1,502,946	$	1,896,376

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Inventories (Tables)

6 Months Ended

Jun. 30, 2014

Inventories [Abstract]

Schedule of inventory

	June 30,  2014			December 31,  2013
Raw materials	$	2,273,209		$	5,658,519
Work-in-progress		30,661,653			25,862,185
Finished goods		54,087,608			55,664,077
		87,022,470			87,184,781
Less: allowance for obsolete inventories		(10,403,366	)		(11,994,584	)
Total inventories	$	76,619,104		$	75,190,197

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Concentrations and Risks

6 Months Ended

Jun. 30, 2014

Concentrations and Risks [Abstract]

CONCENTRATIONS AND RISKS

NOTE 10 CONCENTRATIONS AND RISKS

The Company extends unsecured credit to its customers in the normal course of business and generally does not require collateral. As a result, management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. Based on management’s assessment of the amount of probable credit losses, if any, in existing accounts receivable, management has concluded that no allowance for doubtful accounts is necessary at June 30, 2014 and December 31, 2013. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of accounts receivable. In the analysis, management primarily considers the age of the customer’s receivable and also considers the credit worthiness of the customer, the economic conditions in the customer’s industry, and general economic conditions and trends, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of accounts receivables are incorrect, adjustments to the allowance may be required, which would reduce profitability.

For the six-month period ended June 30, 2014, the Company had one wholesale customer that represented approximately 14% of the Company’s revenues. For the three-month period ended June 30, 2014, the Company had one wholesale customer that represented approximately 15% of the Company’s revenues. For the six-month period ended June 30, 2013, the Company had two wholesale customers that each represented approximately 11% of the Company’s revenues. For the three-month period ended June 30, 2013, the Company had two wholesale customers that represented approximately 14% and 10% of the Company’s revenues, respectively.

For the Company’s wholesale business during the three and six months ended June 30, 2014 and 2013, no supplier represented more than 10% of the total raw materials purchased.

For the Company’s retail business, the Company had no supplier that represented more than 10% of raw materials purchases during the three and six months ended June 30, 2014. For the Company’s retail business, the Company had no supplier that represented more than 10% of raw materials purchases during the six months ended June 30, 2013. The Company purchased 10% of its raw materials from one supplier during the three months ended June 30, 2013.

For the wholesale business, during the six months ended June 30, 2014, the Company relied on two manufacturers for 16% and 10% of purchased finished goods, respectively. During the six months ended June 30, 2013, the Company relied on two manufacturers for 15% and 13% of purchased finished goods, respectively. During the three months ended June 30, 2014, the Company relied on two manufacturers for 15% and 14% of purchased finished goods, respectively. During the three months ended June 30, 2013, the Company relied on two manufacturers for 17% and 16% of purchased finished goods, respectively.

For the retail business, the Company had no supplier that represented more than 10% of finished goods purchases during the six months ended June 30, 2014. The Company purchased 11% of its finished goods from one supplier during the three months ended June 30, 2014. The Company had no supplier that represented more than 10% of finished goods purchases during the three and six months ended June 30, 2013.

The Company’s revenues for the three and six months ended June 30, 2014 and 2013 were earned in the following geographic areas:

	Three months ended  June 30,				Six months ended  June 30,
	2014		2013		2014		2013
The People’s Republic of China	$	12,929,219	$	8,616,297	$	27,527,244	$	21,647,361
Germany		5,525,792		3,305,231		11,823,952		7,676,564
United Kingdom		9,018,214		4,961,895		11,642,361		7,826,529
Europe-Other		2,061,398		3,134,666		8,517,320		7,102,281
Japan		2,431,821		5,306,554		8,674,713		9,005,388
United States		4,428,137		1,726,825		7,650,480		5,453,800
Total wholesale business		36,394,581		27,051,468		75,836,070		58,711,923
Retail business		49,273,199		32,078,017		115,846,879		78,729,052
Total	$	85,667,780	$	59,129,485	$	191,682,949	$	137,440,975

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Stockholders' Equity

6 Months Ended

Jun. 30, 2014

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 8 STOCKHOLDERS’ EQUITY

On February 28, 2013, the Company issued an aggregate of 5,340 shares of its common stock to three of the Company’s independent directors as compensation for their services in the third and fourth quarters of 2012. The shares were valued at $1.89 per share, which was the average market price of the common stock for the five days before the grant date.

On August 19, 2013, the Company issued an aggregate of 3,631 shares of its common stock to three of the Company’s independent directors as compensation for their services in the first and second quarters of 2013. The shares were valued at $2.73 per share, which was the average market price of the common stock for the five days before the grant date.

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Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 9 RELATED PARTY TRANSACTIONS

Mr. Kang is the Company’s Chairman and Chief Executive Officer. All transactions associated with the following companies controlled by Mr. Kang are considered to be related party transactions, and it is possible that the terms of these transactions may not be the same as those that would result from transactions between unrelated parties. All related party outstanding balances are short-tem in nature and are expected to be settled in cash.

Other income from Related Parties

Included in other income for the three and six months ended June 30, 2013 is rent revenue from entities controlled by Mr. Kang under operating lease agreements as follows.  There were no such income in 2014.

	Three months ended		Six months ended
	June 30,		June 30,
	2013		2013
EsCeLav	$	3,056	$	6,038
Nanjing Eight-One-Five Hi-tech (M&E) Co., Ltd.		4,070		8,050
Total	$	7,126	$	14,088

Other expenses due to Related Parties

Included in other expenses for the three and six months ended June 30, 2014 and 2013 are rent costs due to entities controlled by Mr. Kang under operating lease agreements as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2014		2013		2014		2013
Jiangsu Ever-Glory	$	12,733	$	12,788	$	25,560	$	25,277
Kunshan Enjin		10,491		8,517		21,060		16,774
Total	$	23,224	$	21,305	$	46,620	$	42,051

Purchases from, and Sub-contracts with Related Parties

Shanghai Weiwen Fashion Company Ltd. (Shanghai Weiwen) was incorporated in the PRC in 2012. This company designs and sells women’s apparel utilizing the “Velwin” brand. Shanghai Weiwen is owned by Mr. Kang. Shanghai Ya Lan entered an agreement with Shanghai Weiwen in April 2014 to purchase the “Velwin” brand along with existing inventory of Shanghai Weiwen. No customer relationships, production facilities, or other operating assets were acquired. Management of the Company believes that this asset purchase will provide the Company with additional multi-brand advantages. The purchase price of the inventory and brand was approximately $2.44 million. The purchase price was based primarily on the estimated fair market value of the inventory.

Shanghai Sea to Sky Fashion Company Ltd. (Shanghai Sea to Sky) was incorporated in the PRC in 2012. This company designs and sells women’s apparel utilizing the “Sea to Sky” brand. Shanghai Sea to Sky is owned by Mr. Kang. Shanghai LA GO GO entered an agreement with Shanghai Sea to Sky in April 2014 to purchase the “Sea to Sky” brand along with existing inventory of Shanghai Sea to Sky. No customer relationships, production facilities, or other operating assets were acquired. Management of the Company believes that this asset purchase will provide the Company with a multi-brand advantages. The purchase price of the inventory and brand was approximately $0.39 million. The purchase price was based primarily on the estimated fair market value of the inventory. 

For the three and six months ended June 30, 2014 and 2013, the Company purchased raw materials of $450,620, $884,070, $101,370, and $184,608, respectively, from Nanjing Knitting.

In addition, the Company sub-contracted certain manufacturing work to related parties totaling $4,401,992, $10,312,113, $5,102,919, and $9,088,426 for the three and six months ended June 30, 2014 and 2013, respectively. The Company provided raw materials to the sub-contractors and was charged a fixed fee for labor provided by the sub-contractors. Sub-contracts with related parties included in cost of sales for the three and six months ended June 30, 2014 and 2013 are as follows:

	Three Months Ended June 30,				Six Months Ended  June 30,
	2014		2013		2014		2013
Nanjing Knitting	$	-	$	211,296	$	-	$	232,602
Nanjing Ever-Kyowa		426,451		255,893		861,970		523,878
Ever-Glory Vietnam		1,776,620		3,175,681		4,964,884		5,094,787
Ever-Glory Cambodia		696,136		1,446,661		2,957,190		3,221,188
EsCeLav		-		1,775		-		4,358
Shanghai Weiwen		1,502,785		-		1,502,785		-
Shanghai Sea to Sky		377,793		-		377,793		-
Jiangsu Ever-Glory		-		11,613		25,284		11,613
	$	4,779,785	$	5,102,919	$	10,689,906	$	9,088,426

Accounts Payable – Related Parties

The Company purchases raw materials from and subcontracts some of its production to related parties. Accounts payable to related parties at June 30, 2014 and December 31, 2013 are as follows:

	June 30,  2014		December 31,  2013
Nanjing Knitting	$	-	$	784,777
Nanjing Ever-Kyowa		560,076		261,955
Ever-Glory Vietnam		677,078		2,473,271
Ever-Glory Cambodia		-		582,453
Shanghai Sea to Sky		377,793		-
Shanghai Weiwen		1,405,345		-
Total	$	3,020,292	$	4,102,456

Amounts Due From Related Parties

The amounts due from related parties at June 30, 2014 and December 31, 2013 are as follows:

	June 30,  2014		December 31,  2013
EsCeLav	$	31,439	$	12,291
Nanjing Eight-One-Five Hi-tech (M&E) Co.,Ltd.		20,546		145,206
Nanjing Knitting		324,984		-
Ever-Glory Cambodia		832,160		-
Jiangsu Ever-Glory		293,817		1,738,879
Total	$	1,502,946	$	1,896,376

Jiangsu Ever-Glory is an entity engaged in importing/exporting, apparel-manufacture, real-estate development, car sales and other activities. Jiangsu Ever-Glory is controlled by Mr. Kang. Because of restrictions on its ability to directly import and export products, the Company had utilized Jiangsu Ever-Glory as its agent to assist the Company with its import and export transactions and its international transportation projects from 2005 through 2011. Import transactions primarily consisted of purchases of raw materials and accessories designated by the Company’s customers for use in garment manufacture. Export transactions consisted of the Company’s sales to foreign markets such as Japan, Europe and the United States. These transactions ceased at end of 2011. During six months ended June 30, 2014 and 2013, the Company and Jiangsu Ever-Glory purchased raw materials on behalf of each other in order to obtain cheaper purchase prices. The Company purchased raw materials on Jiangsu Ever-Glory’s behalf and sold to Jiangsu Ever-Glory at cost for $0 and $72,548 during the six month period ended June 30, 2014 and 2013, respectively. Jiangsu Ever-Glory purchased raw materials on the Company’s behalf and sold to the Company at cost for $19,221 and $0 during the six months ended June 30, 2014 and 2013, respectively.

Amounts Due From Related Party under Counter Guarantee Agreement

In March 2012, in consideration of the guarantees and collateral provided by Jiangsu Ever-Glory and Nanjing Knitting, the Company agreed to provide Jiangsu Ever-Glory a counter guarantee in the form of cash of not less than 70% of the maximum aggregate lines of credit obtained by the Company. Jiangsu Ever-Glory is obligated to return the full amount of the counter-guarantee funds provided upon expiration or termination of the underlying lines of credit and is to pay annual interest at the rate of 6.0% of amounts provided. As of June 30, 2014 and December 31, 2013, Jiangsu Ever-Glory has provided guarantees for approximately $48.72 million (RMB 300 million) and $43.69 million (RMB 269 million) of lines of credit obtained by the Company. Jiangsu Ever-Glory and Nanjing Knitting have also provided their assets as collateral for certain of these lines of credit. The value of the collateral, as per appraisals obtained by the banks in connection with these lines of credit is approximately $16.72 million (RMB 103 million) as of June 30, 2014 and December 31, 2013. Mr. Kang has also provided a personal guarantee for $30.5 million (RMB 188 million).

During the six months ended June 30, 2013, US$4.82 million (RMB30.25 million) was provided to Jiangsu Ever-Glory under the counter-guarantee. US$16.79 million (RMB103 million) was outstanding at December 31, 2013. During six months ended June 30, 2014, an additional $5.03 million (RMB 31 million) was provided and approximately $1.30 million (RMB 8 million) of interest income was received under the counter-guarantee agreement. As of June 30, 2014, the amount of the counter-guarantee was $21.7 million (RMB 134 million) (the difference represents currency exchange adjustment of $0.12 million), which was 44.54% of the aggregate amount of lines of credit. This amount plus accrued interest of $1.50 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G. At June 30, 2014 and 2013, the amount classified as a reduction of equity was $23.19 million and $19.08 million, respectively. Interest of 0.5% is charged on net amounts due from Jiangsu Ever-Glory at each month end. Interest income for the three and six months ended June 30, 2014 and 2013 was approximately $0.29 million, $0.5 million, $0.34 million and $0.64 million, respectively.

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Segments

6 Months Ended

Jun. 30, 2014

Segments [Abstract]

SEGMENTS

NOTE 11 SEGMENTS

The Company reports financial and operating information in the following two segments:

(a) Wholesale segment

(b) Retail segment

	Wholesale segment		Retail segment		Total
Six months ended June 30, 2014
Segment profit or loss:
Net revenue from external customers	$	75,836,070	$	115,846,879	$	191,682,949
Income from operations	$	3,954,431	$	6,715,953	$	10,670,384
Interest income	$	551,265	$	26,482	$	577,747
Interest expense	$	1,199,618	$	282,190	$	1,481,808
Depreciation and amortization	$	515,773	$	2,946,355	$	3,462,128
Income tax expense	$	946,118	$	1,812,556	$	2,758,674
Six months ended June 30, 2013
Segment profit or loss:
Net revenue from external customers	$	58,711,923	$	78,729,052	$	137,440,975
Income  from operations	$	5,339,873	$	2,696,664	$	8,036,537
Interest income	$	624,195	$	13,595	$	637,790
Interest expense	$	1,412,096	$	116,128	$	1,528,224
Depreciation and amortization	$	478,315	$	3,212,576	$	3,690,891
Income tax expense	$	828,834	$	649,338	$	1,478,172

	Wholesale segment		Retail segment		Total
Three months ended June 30, 2014
Segment profit or loss:
Net revenue from external customers	$	36,394,581	$	49,273,199	$	85,667,780
Income from operations	$	2,538,511	$	4,869,200	$	7,401,711
Interest income	$	324,638	$	11,776	$	336,414
Interest expense	$	633,051	$	141,642	$	774,693
Depreciation and amortization	$	251,227	$	1,319,974	$	1,571,201
Income tax expense	$	612,044	$	1,267,708	$	1,879,752
Three months ended June 30, 2013
Segment profit or loss:
Net revenue from external customers	$	27,051,468	$	32,078,017	$	59,129,485
Income from operations	$	2,547,245	$	1,520,112	$	4,067,357
Interest income	$	332,268	$	9,920	$	342,188
Interest expense	$	678,069	$	58,626	$	736,695
Depreciation and amortization	$	244,604	$	1,815,642	$	2,060,246
Income tax expense	$	400,680	$	367,861	$	768,541

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Income Tax (Details 2) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Summary of Components of income tax expense
Current	$ 4,281,918	$ 626,528	$ 5,216,018	$ 855,572
Deferred	(2,402,166)	142,013	(2,409,053)	555,716
Income tax expense	$ 1,879,752	$ 768,541	$ 2,758,674	$ 1,478,172

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Income Tax (Tables)

6 Months Ended

Jun. 30, 2014

Income Tax [Abstract]

Summary of Pre-tax income in jurisdictions

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
PRC	$	7,439,468		$	4,136,050		$	10,713,481		$	8,473,628
Samoa		-			(636,295	)		-			(1,462,766	)
BVI		(24,572	)		(1,003	)		(24,935	)		(2,318	)
Others		(5,000	)		(3,000	)		(10,000	)		283,918
	$	7,409,896		$	3,495,752		$	10,678,546		$	7,292,462

Summary of Reconciliation of PRC statutory rates to the Company's effective tax rate

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
PRC statutory rate		25.0	%		25.0	%		25.0	%		25.0	%
Non-taxable items		-			-			-			(1.4	)
Effect of foreign income tax rates		0.1			(4.5	)		0.1			(5.0	)
Other		0.3			1.5			0.8			1.7
Effective income tax rate		25.4	%		22.0	%		25.8	%		20.3	%

Summary of Components of income tax expense

	Three months ended					Six months ended
	June 30,					June 30,
	2014			2013		2014			2013
Current	$	4,281,918		$	626,528	$	5,216,018		$	855,572
Deferred		(2,402,166	)		142,013		(2,457,344	)		622,600
Income tax expense	$	1,879,752		$	768,541	$	2,758,674		$	1,478,172

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Summary of Business and Basis of Presentation (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross	$ 0.75
Before July 8, 2014 [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross	0.45
Before September 28, 2014 [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross	0.22
Within 10 days after Shanghai Yiduo collects all the accounts receivable from Mecox Lane
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross	$ 0.08

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Related Party Transactions (Details 3) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Summary of accounts payable - related parties
Total	$ 3,020,292	$ 4,102,456
Nanjing Knitting [Member]
Summary of accounts payable - related parties
Total		784,777
Nanjing Ever-Kyowa [Member]
Summary of accounts payable - related parties
Total	560,076	261,955
Ever-Glory Vietnam [Member]
Summary of accounts payable - related parties
Total	677,078	2,473,271
Ever-Glory Cambodia [Member]
Summary of accounts payable - related parties
Total		582,453
Shanghai Weiwen [Member]
Summary of accounts payable - related parties
Total	1,405,345
Shanghai Sea to Sky [Member]
Summary of accounts payable - related parties
Total	$ 377,793

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 7,919,872	$ 5,814,290
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	3,462,128	3,690,891
Loss from sale of property and equipment		29,499
Change in fair value of derivative liability	0	(294,000)
Deferred income tax	(2,409,053)	555,716
Stock-based compensation		10,082
Changes in operating assets and liabilities
Accounts receivable	19,441,054	19,994,644
Inventories	(1,927,458)	(9,730,652)
Value added tax receivable	(1,286,005)	(1,177,837)
Other receivables and prepaid expenses	(529,644)	307,455
Advances on inventory purchases	(404,581)	(1,473,254)
Amounts due from related parties	1,334,894	(2,760,288)
Accounts payable	(22,393,350)	(9,577,345)
Accounts payable and other payables- related parties	(2,527,146)	123,426
Other payables and accrued liabilities	(1,076,252)	75,308
Value added and other taxes payable	(631,814)	(77,745)
Income tax payable	3,830,846	(389,778)
Net cash provided by operating activities	2,803,491	5,120,412
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(4,185,207)	(4,642,650)
Proceeds from sale of property and equipment		13,583
Net cash used in investing activities	(4,185,207)	(4,629,067)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans	73,693,038	42,227,892
Repayment of bank loans	(71,260,909)	(45,290,965)
Repayment of payable to officers and employees		(2,381,512)
Repayment of advances to related party		18,781,438
Interest income received from related party	1,302,400
Advances to related party	(5,046,800)	(7,244,771)
Net cash (used in) provided by financing activities	(1,312,271)	6,092,082
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(66,731)	187,368
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(2,760,718)	6,770,795
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	27,772,878	9,365,958
CASH AND CASH EQUIVALENTS AT END OF PERIOD	25,012,160	16,136,753
Cash paid during the period for:
Interest	1,481,808	1,528,224
Income taxes	$ 1,354,679	$ 1,199,771

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Derivative Liability

6 Months Ended

Jun. 30, 2014

Derivatives Liability [Abstract]

DERIVATIVES LIABILITY

NOTE 5 DERIVATIVES LIABILITY

At June 30, 2014, the Company had one outstanding forward foreign exchange option contract (sell US dollars for RMB), with a notional amount of US$3,000,000, that expires in September 2014. The fair value of this contract at June 30, 2014, as well as gains and losses realized on other foreign currency derivative activity during 2014 and 2013 were not significant.

Subsequent to June 30, 2014, we entered into another forward foreign exchange option contract (sell US dollars for RMB), with a notional amount of US $700,000, that expires in September 2015.

At December 31, 2012, the Company had warrants outstanding to purchase an aggregate of 840,454 shares of the Company’s common stock, which warrants required liability classification because of certain provisions that may have resulted in an adjustment to their exercise price. The warrants expired in June 2013. At the expiration date, the remaining value of the warrants not exercised ($2,000) was reduced to $0. The increase in other income resulting from the decrease in derivative warrant liability was $2,000 and $294,000 for the three and six months ended June 30, 2013, respectively.

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Summary of Business and Basis of Presentation (Details Textual) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended
	Jul. 08, 2014 USD ($)	Jun. 26, 2014 USD ($)	Jun. 26, 2014 CNY
Summary of Business and Basis of Presentation [Abstract]
Cash paid to Shanghai La Go Go		$ 0.75	4.60
Percentage of acquisition		78.00%	78.00%
Payment made of first Installment to Shanghai Yiduo	$ 0.45

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Related Party Transactions (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Summary of other income from Related Parties
Total	$ 7,126	$ 14,088
EsCeLav [Member]
Summary of other income from Related Parties
Total	3,056	6,038
Nanjing Eight-One-Five Hi-Tech (M&E) Co., Ltd. [Member]
Summary of other income from Related Parties
Total	$ 4,070	$ 8,050

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Bank Loans (Tables)

6 Months Ended

Jun. 30, 2014

Bank Loans [Abstract]

Schedule of bank loans

	June 30,		December 31,
Bank	2014		2013
Industrial and Commercial Bank of China	$	12,956,145	$	1,799,600
Nanjing Bank		10,422,414		18,526,618
Bank of Communications		9,181,755		9,245,108
Bank of Everbright		6,233,984		3,272,000
The Hong Kong and Shanghai Bank		5,551,067		3,499,552
Bank of China		5,111,053		8,210,699
China Minsheng Banking		3,248,000		4,953,069
Pin An Bank		2,675,281		2,196,102
Huaxia Bank		-		1,636,000
	$	55,379,699	$	53,338,748