10QSB

U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-QSB

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 2007

o TRANSITION REPORT UNDER 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 small business issuer as specified in its charter)

Florida	65-0420146
(State or other jurisdiction of	(IRS Employer identification No.)
incorporation or organization)

100 N. Barranca Ave. #810

West Covina, California 91791

(Address of principal executive offices)

(626) 839-9116

(Issuer’s telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Number of shares of common stock outstanding as of June 30, 2007: 19,971,758

Transitional Small Business Disclosure Format: Yes o No x

1

EVER-GLORY INTERNATIONAL GROUP, INC.

FORM 10-QSB

INDEX

		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			3
PARTI. FINANCIAL INFORMATION			4
Item 1.	Financial Statements (Unaudited)		4
	Condensed Consolidated Balance Sheet as of June 30, 2007		4
	Condensed Consolidated Statements of Operations and Comprehensive income for three and six months ended June 30, 2007 and 2006		5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006		6
	Notes to the Condensed Consolidated Financial Statements as of June 30, 2007		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Controls and Procedures		26
PARTII. OTHER INFORMATION			27
Item 1.	Legal proceedings		27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 3.	Defaults Upon Senior Securities		27
Item 4	Submission of Matters to a Vote of Security Holders		27
Item 5.	Other Information		27
Item 6.	Exhibits		28
SIGNATURES			29

2

Forward-Looking Statements

This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to growth and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “will,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to:

• the ability to timely and accurately complete product orders;

• the ability to coordinate product design with its customers;

• its dependence on a limited number of larger customers;

• political and economic factors in the Peoples’ Republic of China;

• the ability of the Company’s internal production operations to increase production volumes on finished goods in a timely fashion in response to increasing demand and enable the Company to achieve timely delivery of finished goods to its customers;

• the Company’s ability to expand and grow its distribution channels;

• unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders;

• a weakening of economic conditions which would reduce demand for products sold by the Company and could adversely affect profitability;

• the effect of terrorist acts, or the threat thereof, on consumer confidence and spending, or the production and distribution of product and raw materials which could, as a result, adversely affect the Company’s operations and financial performance;

• the acceptance in the marketplace of the Company’s new products and changes in consumer preferences;

• reductions in sales of products, either as the result of economic or other conditions, or reduced consumer acceptance of a product, could result in a buildup of inventory;

• the ability to source raw materials and finished products at favorable prices to the Company;

• the potential impact of power crises on the Company’s operations including temporary blackouts at the Company’s facilities;

• foreign currency exchange rate fluctuations;

• earthquakes or other natural disasters;

• the Company’s ability to identify and successfully execute cost control initiatives;

• the impact of quotas, tariffs, or safeguards on the importation or exportation of the Company’s products; and

• other risks outlined above and in the Company’s other filings made periodically by the Company.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update this forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

3

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2007 (UNAUDITED)

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	430,217
Accounts receivable, net		5,907,370
Accounts receivable - related companies		153,721
Inventories, net		973,777
Other receivables and prepaid expenses		185,219
Total Current Assets		7,650,304
PROPERTY AND EQUIPMENT, NET		10,906,513
LAND USE RIGHTS, NET		2,555,790
TOTAL ASSETS	$	21,112,607
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,495,840
Accounts payable - related companies		1,272,674
Other payables and accrued liabilities		409,554
Due to related parties		2,214,688
Notes payable		1,967,265
Value added tax		176,445
Other tax payables		20,831
Total Current Liabilities		7,557,297
LONG-TERM LIABILITIES
Due to a related company		4,356,755
TOTAL LIABILITIES		11,914,052
COMMITMENTS AND CONTINGENCIES		-
STOCKHOLDERS' EQUITY
Preferred stock ($.0001 par value, authorized 5,000,000 shares,
Nil shares issued and outstanding)		-
Series A Convertible Preferred Stock ($.0001 par value,
authorized 10,000 shares, 7,883 shares issued and outstanding)		1
Common stock ($.0001 par value, authorized 100,000,000 shares,
issued and outstanding 19,971,758 shares)		1,997
Common stock to be issued for acquisition (20,833,333 shares)		2,083
Additional paid-in capital		161,666
Retained earnings
Unappropriated		5,635,829
Appropriated		2,425,711
Accumulated other comprehensive income		971,268
Total Stockholders' Equity		9,198,555
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	21,112,607

The accompanying notes are an integral part of these condensed consolidated financial statements

4

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME

(UNAUDITED)

				For the three						For the six
	For the three			months ended			For the six			months ended
	months ended			June 30, 2006			months ended			June 30, 2006
	June 30, 2007			(Restated)			June 30, 2007			(Restated)
NET SALES
To related parties	$	119,844		$	13,019		$	146,860		$	13,019
To third parties		9,457,270			9,213,532			20,859,971			14,443,052
Total net sales		9,577,114			9,226,551			21,006,831			14,456,071
COST OF SALES
From related parties		(243,975	)		(1,482,686	)		(899,785	)		(2,292,860	)
From third parties		(7,911,144	)		(6,273,546	)		(16,980,266	)		(9,784,012	)
Total cost of sales		(8,155,119	)		(7,756,232	)		(17,880,051	)		(12,076,872	)
GROSS PROFIT		1,421,995			1,470,319			3,126,780			2,379,199
OPERATING EXPENSES
Selling expenses		108,936			150,509			264,195			269,684
Professional fees		139,607			173,759			318,097			346,520
General and administrative expenses		497,843			287,637			934,443			436,470
Depreciation and amortization		73,534			8,151			134,273			16,860
Total Operating Expenses		819,920			620,056			1,651,008			1,069,534
INCOME FROM OPERATIONS		602,075			850,263			1,475,772			1,309,665
OTHER INCOME (EXPENSES)
Interest income		2,159			629			3,537			1,370
Interest expenses		(129,600	)		(48,194	)		(261,890	)		(58,130	)
Other income		5,424			4,848			5,450			12,083
Other expenses		(41	)		-			(125	)		-
Total Other Expenses, net		(122,058	)		(42,717	)		(253,028	)		(44,677	)
INCOME BEFORE INCOME TAX EXPENSE		480,017			807,546			1,222,744			1,264,988
INCOME TAX EXPENSE		(6,629	)		(75,679	)		(82,323	)		(142,531	)
NET INCOME		473,388			731,867			1,140,421			1,122,457
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain		231,744			151,246			362,080			238,307
COMPREHENSIVE INCOME	$	705,132		$	883,113		$	1,502,501		$	1,360,764
Net income per share-basic	$	0.01		$	0.02		$	0.03		$	0.03
Net income per share-diluted	$	0.00		$	0.01		$	0.01		$	0.01
Weighted average number of shares
outstanding during the period-basic		40,805,091			40,805,091			40,805,091			40,805,091
Weighted average number of shares
outstanding during the period-diluted		100,720,079			100,720,079			100,720,079			100,720,079

The accompanying notes are an integral part of these 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, 2007 AND 2006 (UNAUDITED)

				For the six months
	For the six months			ended June 30, 2006
	ended June 30, 2007			(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,140,421		$	1,122,457
Adjusted to reconcile net income to cash (used in) provided
by operating activities:
Depreciation and amortization - cost of sales		222,980			94,565
Depreciation and amortization		134,273			16,860
Loss on disposal of fixed assets		-			2,467
Changes in operating assets and liabilities
(Increase)decrease in:
Accounts receivable		462,349			(1,211,181	)
Accounts receivable - related companies		3,996,241			(3,449,231	)
Other receivable and prepaid expenses		(98,158	)		(41,533	)
Inventories		(206,105	)		(88,570	)
Increase (decrease) in:
Accounts payable		568,736			513,915
Accounts payable - related companies		(1,774,575	)		2,196,303
Other payables and accrued liabilities		(161,697	)		(169,563	)
Value added tax payables		(30,258	)		308,260
Income tax and other tax payables		(41,615	)		(47,969	)
Net cash provided by (used in) operating activities		4,212,592			(753,220	)
CASH FLOWS FROM INVESTING ACTIVITIES
Contribution by stockholder		-			900,000
Purchase of property and equipment		(1,538,683	)		(2,143,764	)
Net cash used in investing activities		(1,538,683	)		(1,243,764	)
CASH FLOWS FROM FINANCING ACTIVITIES
Due to a related parties		(286,263	)		2,595,158
Repayment of notes payable		(4,527,814	)		-
Proceeds from notes payable		1,940,492			-
Net cash (used in) provided by financing activities		(2,873,585	)		2,595,158
EFFECT OF EXCHANGE RATE ON CASH		(30,203	)		105,189
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(229,879	)		703,363
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		660,096			1,467,245
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	430,217		$	2,170,608
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest expenses	$	128,061		$	19,778
Cash paid during the period for:
Income taxes	$	124,373		$	190,387

The accompanying notes are an integral part of these condensed consolidated financial statements

6

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2007 (UNAUDITED)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Ever-Glory International Group, Inc. (“EGLY”) was incorporated in Florida on October 19, 1994.

Perfect Dream Limited (“Perfect Dream”) a wholly owned subsidiary of EGLY, was incorporated in the British Virgin Islands on July 1, 2004. Goldenway Nanjing Garments Company Limited (“Goldenway”), a wholly owned subsidiary of Perfect Dream, was incorporated in the People's Republic of China ("PRC") on December 31, 1993. Goldenway is principally engaged in the manufacturing and sale of garments.

On November 9, 2006, Perfect Dream entered into a purchase agreement with Ever-Glory Enterprises (HK) Limited (“Ever-Glory Hong Kong”) whereby Ever-Glory Hong Kong sold 100% interest of Nanjing New-Tailun Garments Company Limited (“New Tailun”) to Perfect Dream (the “New-Tailun transaction”). Pursuant to the terms of the purchases agreement, Perfect Dream paid Ever-Glory Hong Kong an amount of $2,000,000 in cash in June 2007 and will issue 20,833,333 shares of the EGLY’s restricted common stock having a value of $10,000,000, such value of shares were based on the preceding 30-day average of high bid and the low ask price for the EGLY’s common stock on the date of the transfer within 90 days of the closing of the New-Tailun transaction. The New-Tailun transaction closed on December 30, 2006.

New-Tailun is a wholly foreign-owned enterprise incorporated in PRC on March 27, 2006 with its principal place of business in Nanjing, PRC and is principally engaged in the manufacturing and sale of garments.

EGLY, Perfect Dream, Goldenway and New Tailun are hereinafter referred to as (“the Company”).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments consisting only of normal recurring accruals considered necessary to present fairly the Company’s financial position at June 30, 2007, the results of operations for the three-month and six-month periods ended June 30, 2007 and 2006, and cash flows for the six months ended June 30, 2007 and 2006. The results for the period ended June 30, 2007 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2007.

NOTE 2. PRINCIPLES OF CONSOLIDATION

The accompanying June 30, 2007 unaudited condensed consolidated financial statements include the accounts of EGLY and its 100% owned subsidiaries Perfect Dream, Goldenway and New-Tailun. All significant inter-company balances and transactions have been eliminated in consolidation.

7

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2007 (UNAUDITED)

NOTE 3.   BUSINESS COMBINATIONS BETWEEN ENTITIES UNDER COMMON CONTROL

The Company entered into a purchase agreement, dated November 9, 2006, with Ever-Glory Hong Kong to acquire 100% interest of New-Tailun. Pursuant to the terms of the purchases agreement, the Company paid Ever-Glory Hong Kong an amount of $2,000,000 in cash in June 2007 and will issue 20,833,333 shares of the company’s restricted common stock having a value of $10,000,000, such value of shares were based on the preceding 30-day average of high bid and the low ask price for the common stock on the date of the transfer within 90 days of the closing of transaction. The New-Tailun transaction closed on December 30, 2006.

This transaction was accounted for as a merger of entities under common control. Accordingly, the operations of New-Tailun for the period from March 27, 2006 (inception) to June 30, 2006 was included in the consolidated financial statements as if the transactions had occurred at the beginning of the first period presented, each account stated at its historical cost. In this regard, the prior year’s financial statements and financial information have been restated to combine the previously separate entities to furnish comparative information. The results of the restatement were to increase the total assets as of June 30, 2006, the total liabilities as of June 30, 2006 and the net income for the six months ended June 30, 2006 by $1,738,325, $2,492,807 and 345,271 respectively, and to decrease the shareholder’s equity by $754,482.

NOTE 4. USE OF ESTIMATES

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE 5. CASH AND CASH EQUIVALENTS

For purpose of the unaudited condensed consolidated statements of cash flows, cash and cash equivalents include cash on hand and demand deposits with a bank with a maturity of less than 3 months.

NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, “Disclosure About Fair Value of Financial Instruments,” requires certain disclosures regarding the fair value of financial instruments. Trade accounts receivable, accounts payable, and accrued liabilities are reflected in the financial statements at fair value because of the short-term maturity of the instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.

The carrying value of cash and cash equivalents, accounts receivable (trade and others), accounts payable (trade and related party) and accrued liabilities approximate their fair value because of the short-term nature of these instruments. The Company places its cash and cash equivalents with what it believes to be high credit quality financial institutions. The Company has a diversified customer base, most of which are in Europe, Japan, the United States and the PRC. The Company controls credit risk related to accounts receivable through credit approvals, credit limit and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

8

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2007 (UNAUDITED)

NOTE 7. REVENUE AND COST RECOGNITION

The Company recognizes revenue upon delivery for local sales and upon shipment of the products for export sales, at which time title passes to the customer provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an arrangement exists; the sales price is fixed and determinable; and collectability is deemed probable.

Local transportation, unloading charges and export quota fees are included in selling expenses.

Cost of goods sold includes the appropriate materials purchasing, receiving and inspection costs, inbound freight where applicable, direct labor cost and manufacturing overheads consistent with the revenue earned.

NOTE 8. FOREIGN CURRENCY TRANSACTIONS

EGLY, Perfect Dream, Goldenway and New-Tailun maintain their accounting records in their functional currencies of US$, US$, RMB and RMB respectively.

Foreign currency transactions during the period are translated to the functional currency at the approximate rates of exchange on the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the approximate rates of exchange at that date. No-monetary assets and liabilities are translated at the rates of exchange prevailing at the time the asset or liability was acquired. Exchange gains or losses are recorded in the statement of operations.

NOTE 9. FOREIGN CURRENCY TRANSLATION

The financial statements of Goldenway and New-Tailun (whose functional currency is the RMB) are translated into US$ using the closing rate method. The balance sheet items are translated into US$ 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 expenses items are translated at the average exchange rate for the period. All exchange differences are recorded within equity. Translation gain for the periods ended June 30, 2007 and 2006 were $362,080 and $238,307 respectively.

NOTE 10. COMPREHENSIVE INCOME

The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to United States Dollar is reported as other comprehensive income in the statements of operations and stockholders’ equity.

NOTE 11. RECLASSIFICATION

Certain 2006 balances in the Statement of Operation have been reclassified to conform with the 2007 presentation.

NOTE 12. INCOME PER SHARE

Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

9

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2007 (UNAUDITED)

NOTE 13. SEGMENTS

The Company adopted Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information “(“SFAS 131”). SFAS establishes standards for operating information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decision how to allocate resources and assess performance. The information disclosed herein, materially represents all of the financial information related to the Company’s principal operating segments. The Company operates in a single segment.

NOTE 14. RECENT ACCOUNTING PRONOUNCEMENTS

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement 109” (“FIN 48”), which clarifies the accounting for uncertainty in tax positions. This Interpretation provides that the tax effects from an uncertain tax position can be recognized in the Company’s financial statements, only if the position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective as of the beginning of fiscal 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. We do not expect the adoption of FIN 48 to have an impact on the Company’s results of operations or financial condition.

In September 2006, FASB issued Statement 157, “Fair Value Measurements”. This statement defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles (GAAP). More precisely, this statement sets forth a standard definition of fair value as it applies to assets or liabilities, the principle market (or most advantageous market) for determining fair value (price), the market participants, inputs and the application of the derived fair value to those assets and liabilities. The effective date of this pronouncement is for all full fiscal and interim periods beginning after November 15, 2007. We do not expect the adoption of SFAS 157 to have an impact on the Company’s results of operations or financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159) which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 will become effective for us on January 1, 2008. The Company is currently evaluating the impact this new Standard, but believes that it will not have a material impact on the Company’s financial position.

NOTE 15. INVENTORIES

Inventories at June 30, 2007 consisted of the following:

Raw materials	$	261,499
Work-in-progress		118,600
Finished goods		593,678
		973,777
Less: provision of obsolescence		-
Inventories, net	$	973,777

10

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2007 (UNAUDITED)

NOTE 16. NOTES PAYABLE

Balance at June 30, 2007:

Note payable to a bank, interest rate of 0.45035% per month,		655,755
collateralized by buildings of the Company, due August 14, 2007
Note payable to a bank, interest rate of 0.51166% per month,		655,755
collateralized by buildings of the Company, due December 6, 2007
Note payable to a bank, interest rate of 0.52796% per month,		655,755
collateralized by buildings of the Company, due December 18, 2007
		1,967,265
Less: current maturities		(1,967,265	)
	$	-

Maturities are as follows:

For the period ending June 30,
2008	$	1,967,265

Interest paid for the six months ended June 30, 2007 and 2006 was $128,061and $19,778 respectively.

NOTE 17. NET INCOME PER SHARE

The following is net income per share information at June 30:

	2007		2006
Net income	$	1,140,421	$	1,122,457
Basic weighted-average common stock outstanding		40,805,091		40,805,091
Effect of dilutive securities
Series A Convertible Perferred Stock		59,914,988		59,914,988
Diluted weighted-average common stock outstanding		100,720,079		100,720,079
Net income per share - basic	$	0.03	$	0.03
Net income per share - diluted	$	0.01	$	0.01

11

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2007 (UNAUDITED)

NOTE 18. STOCKHOLDERS’ EQUITY

(A) Series A Convertible Preferred stock

The Company authorized 10,000 shares of Series A Convertible Preferred Stock, with a par value of $0.0001 per share.

Each share of the Series A Convertible Preferred Stock had upon issuance the same voting, dividend and liquidation rights as 1,000 shares of common stock and will convert back into common stock at such time as the Company is able to increase the number of authorized shares of common stock. Effective November 8, 2005, the Company effected a 7.6-for-1 forward stock split on the remaining outstanding 2,627,861 shares, which increased the number of outstanding shares to 19,971,743 shares. Under the adjustment provisions of the Series A Convertible Preferred Stock, the conversion, voting, dividend and liquidation ratios of the Series A Convertible Preferred Stock were all increased by the forward stock split from 1,000 for one to 7,600 for one (a total of 59,914,988 shares of common stock fully converted). The Series A Convertible Preferred Stock will be converted back into common stock at such time as the number of shares of authorized common stock is increased to 100,000,000 or more via a proposed amendment to the Articles of Incorporation. The relative voting and equity ownership of the Company’s stockholders was unchanged by the exchange for Series A Convertible Preferred Stock and the forward stock split. If all the Series A Convertible Preferred Stock were converted as of June 30, 2007, there would be 79,886,746 outstanding shares of common stock.

(B) Appropriated retained earnings

The Company’s PRC subsidiaries are required to make appropriations to reserve funds, comprising the statutory surplus reserve based on after-tax net income determined in accordance with generally accepted accounting principles of the People’s Republic of China (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital.

NOTE 19. RELATED PARTY TRANSACTIONS

During 2007 and 2006, the Company sub-contracted certain manufacturing work valued at $775,117 and $2,114,885 respectively to six related companies which are controlled by a shareholder and director of the Company. The Company provided the raw materials to the sub-contractor who charged the Company a fixed labor charge for the sub-contracting work.

During 2007 and 2006, the Company purchased raw materials valued at $124,668 and $177,975 respectively from a related company which is controlled by a shareholder and director of the Company.

As of June 30, 2007 the Company owed $295,225, to four related companies which are controlled by a shareholder and director of the Company for sub-contracting work done and inventory purchases made.

During 2007 and 2006, the Company sold products and provided sub-contracting services totaling $146,860 and 13,019 respectively to a related company which is controlled by a shareholder and director of the Company. As of June 30, 2007 accounts receivable from two related companies amounted to $153,721 for products sold and sub-contracting services provided.

A related company which is controlled by a shareholder and director of the Company provides treasury services to the Company by negotiating all of the Company’s letters of credit and receiving proceeds thereon and paying creditors for inventory purchases made by the Company. As of June 30, 2007, Company owed $977,449 to a related company.

During 2007 and 2006, the Company received rental income of $Nil and $9,375 respectively for the lease of factory space to a related company which is controlled by a shareholder and director of the Company.

During 2007, the Company paid rent of $12,937 for factory and office spaces leased from a related company which is controlled by a shareholder and director of the Company.

As of June 30, 2007 the Company owed an aggregate of $4,356,755 to a related company which is controlled by a shareholder and director of the Company for advances made. Interest is charged at 6% per annum on the amounts due. The loan is repayable to the related company between July 2010 and April 2011. During 2007 and 2006, the Company paid interest of $118,229 and $38,352 respectively to the related company.

As of June 30, 2007, the Company owed a related company owned by a stockholder $1,650,000 for a short term advance which is interest free and repayable on demand.

12

As of June 30, 2007, the Company owed $564,688 for advances to a related company which is owned by a stockholder. Interest is charged at 6% per annum on the amounts due. During 2007, the Company paid interest of $15,600 to the related company.

On November 9, 2006, the Company entered into a purchase agreement with a related company which is controlled by a shareholder and director of the Company whereby the related company sold all of its shares in New-Tailun to the Company. The Company paid to a related company an amount of $2,000,000 in cash in June 2007 and will issue common stock of EGLY equivalent to $10,000,000.

On June 26, 2006, the Company entered into an Agreement for the purchase and sale of stock (the “Agreement”) with Ever-Glory Hong Kong and Nanjing Catch-Luck Garments Co, Limited (“Catch-Luck”) for the sale of all of Ever-Glory Hong Kong’s ownership interest in Catch-Luck to the Company (the “Catch-Luck transaction”). Pursuant to the terms of the Agreement, the Company will pay to Ever-Glory Hong Kong an amount of $600,000 in cash and common stock of EGLY equivalent to $9,400,000 on the date of the transfer within 90 days of the closing of the Catch-Luck transaction.

On August 31, 2006, the Company entered into an amendment to the Agreement (“the Amendment”) whereupon the terms of payment on the purchase consideration was amended as follows:

1.   The Company will pay to Ever-Glory Hong Kong an amount of $600,000 in cash and common stock of EGLY equivalent to $3,400,000 on the date of the transfer within 90 days of the closing of the Catch-Luck transaction. The number of shares of common stock to be issued to the Ever-Glory Hong Kong in satisfaction of the Stock Purchase Price shall be calculated based on the preceding 30-average high and low price for the Company’s common stock as quoted on the Over-the-Counter Bulletin Board as of the date of the closing;

2.   At the end of the first full fiscal year ending December 31, 2006 in which Catch-Luck generates gross revenues of at least $19,000,000 and net profit of at least $1,500,000, the Company will issue to Ever-Glory Hong Kong that number of shares of EGLY’s common stock having an aggregate fair market value of $3,000,000; and

3.   At the end of the second full fiscal year ending December 31, 2007 in which Catch-Luck generates gross revenues of at least $19,000,000 and net profit of at least $1,500,000, the Company will issue to Ever-Glory Hong Kong that number of shares of EGLY’s common stock having an aggregate fair market value of $3,000,000.

On August 1, 2007, the Company filed the Definitive 14C information statement for the acquisition of Nanjing Catch-Luck Garments Company Limited. The Information Statement was mailed to the shareholders on August 7, 2007 and the Catch-Luck transaction is expected to be legally closed on August 27, 2007.

NOTE 20.  COMMITMENTS AND CONTINGENCIES

(A) Commitments

According to the Articles of Association of Goldenway, Goldenway has to fulfill registered capital requirements of $17,487,894 within three years from February 2, 2005. As of June 30, 2007, the Company has fulfilled $2,630,000 of its registered capital requirements and has a registered capital commitment of $14,857,894, which is payable by February 1, 2008.

(B) Operating lease commitment

The Company leases factory and office spaces from a related company under an operating lease which expires on March 31, 2008 at an annual rental of $25,873. Accordingly, for the period ended June 30, 2007, the Company recognized rental expense for these spaces in the amount of $12,937

As of June 30, 2007, the Company has outstanding commitments of $19,405 with respect to the above non-cancelable operating lease, which are due in 2008.

13

NOTE 21.  CONTINGENCIES

The Company accounts for loss contingencies in accordance with SFAS 5 “Accounting for Loss Contingencies”, and other related guidance. Set forth below is a description of certain loss contingencies as of June 30, 2007 and management’s opinion as to the likelihood of loss in respect of each loss contingency.

On February 22, 2006, the Company is a named defendant in an action filed by Plaintiff Douglas G. Furth in the United States District Court for the Northern District of Ohio. The action alleges that Company breached an agreement with the plaintiff to provide 1,000,000 shares of its common stock in exchange for certain assistance in marketing and financial public relation services. The Plaintiff seeks an award of damages in excess of $75,000. After vigorously defending itself, the Company was voluntarily dismissed by the Plaintiff without prejudice from an action pending in the U.S. District Court for the Northern District of Ohio. No payment was made and no settlement agreement was entered into between the Company and the plaintiff.

On April 17, 2006, Mark B. Aronson filed a Complaint against the Company in the United States Court of common pleas of Allegheny County Pennsylvania. The action alleges that Company violated the Pennsylvania Unsolicited Telecommunication Advertisement Act to spam emails to plaintiff to purchase its shares of common stock. The action seeks an award of damages in excess of $12,100. The Company denies that it was a party to such email spamming activities and intends to vigorously defend its legal position, with the case now in the initial phase of discovery.

On January 4, 2007, the case was dismissed without prejudice by the Plaintiff. To date, no settlement agreement has been discussed between the Company and the Plaintiff

In May, 2007, Plaintiff Douglas G. Furth has filed a Second Amended Complaint in the Litigation asserting claims against EGLY and other principal parties. The Company denied all the claims and has filed the responses and objections to Plaintiff’s First Request and asked for the dismissal with prejudice by the plaintiff. No payment was made to plaintiff and no settlement has been discussed between the Company and the Plaintiff.

Accordingly, no provision has been made to the above claim as of June 30, 2007.

NOTE 22. CONCENTRATIONS AND RISKS

During 2007 and 2006, 100% of the Company’s assets are located in China.

The Company principally relied on two customers for its revenue for the six months ended June 30, 2007 and on three customers for its revenue for the six months ended June 30, 2006, detail of which are as follows:

	Customer A			Customer B			Customer C
During
2007		36	%		21	%
2006		26	%		26	%		14	%

At June 30, 2007, accounts receivable to those customers totaled $3,971,077.

The Company relied on one supplier for 16% and 26% respectively of its materials for the six months ended June 30, 2007 and 2006.

The following is geographic information of the Company’s revenue earned for the period ended June 30:

	2007		2006
Europe	$	11,346,160	$	7,655,016
United States		5,764,206		3,310,159
Japan		3,185,660		2,316,020
The People Republic of China		698,418		666,001
Canada		12,387		243,553
Russia		-		265,322
	$	21,006,831	$	14,456,071

NOTE 23. SUBSEQUENT EVENTS

As stated on note 19 on August 1, 2007 the Company filed the Definitive 14C information statement for the acquisition of Nanjing Catch-Luck Garments Company Limited. The Information Statement was mailed to the shareholders on August 7, 2007. The transaction is expected to be legally closed on August 27, 2007.

On August 2, 2007, the Company entered into subscription agreements with six accredited investors for the issuance and sale of $2,000,000 principal amount of its secured convertible notes and warrants in a private placement. The Financing closed on August 6, 2007.

14

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

OVERVIEW

Ever-Glory and its subsidiaries (the “Company”) manufacture apparel for men, women and children for primarily middle to high-grade well-known casual wear, sportswear and outerwear brands and for a variety of companies. All of its products are exported to Japan, Europe and the United States. The Company’s customers include large retailers and well-known brands. The Company is the result of a merger of Andean Development Corporation, a corporation organized under the laws of the State of Florida (“Andean”); and Perfect Dream Limited, a corporation organized under the laws of British Virgin Islands “Perfect Dream”). Andean was formed on October 19, 1994 and engaged in the business of providing engineering and project management services and electrical and mechanical equipment for energy and private works projects. As of June 30, 2005, Andean had zero assets and liabilities of $57,000. Perfect Dream was incorporated on July 1, 2004 in the British Virgin Islands. In January of 2005, Perfect Dream acquired 100% of Goldenway Nanjing Garments Co., Ltd (“Goldenway”).

Goldenway is a limited liability company, which was incorporated in the People’s Republic of China (the “PRC”) on December 31, 1993. Until December 2004, Goldenway was a subsidiary of Jiangsu Ever-Glory International Group Corporation (“Jiangsu Ever-Glory”). After its acquisition by Perfect Dream, Goldenway changed its status to that of a wholly foreign owned enterprise and increased its registered capital from $2,512,106 to $20,000,000. The increased registered capital will be paid-in in installments within three years of the issuance of Goldenway’s updated business license. As of December 31, 2006, the Company has paid $2.63 million of its registered capital requirements. The remaining $14.86 million is due on February 1, 2008.

On December 30, 2006, the Company through its wholly owned subsidiary, Perfect Dream Ltd, a British Virgin Islands corporation, consummated the acquisition of 100% of the capital stock of Nanjing New-Tailun Garments Co, Ltd, a Chinese limited liability company (“New-Tailun”) from Ever-Glory Enterprises (HK) Ltd, a British Virgin Islands corporation (“Seller”). The purchase price consisted of a combination of 20,833,333 shares of EGLY’s common stock and $2,000,000 in cash. New Tailun is a 100% foreign-owned enterprise incorporated in People’s Republic of China and is engaged in the manufacturing and sale of garments. New-Tailun has a staff of over 800 people with the annual production capacity of about 2.5million pieces. New Tailun’s financial statements are included in the Company’s consolidated financial statements. Management believes that the acquisition of New Tailun will enables Company to facilitate its increased production, strengthen the Company’s outsourcing bases and supplement the Company’s product lines.

In the six months ended June 30, 2007, approximately 54 % of the Company’s revenues came from customers in Europe, 27 % from customers in the United States, 15 % from customers in Japan, 3 % from customers in China. In the six months ended June 30, 2006, two customers represented approximately 57 % of the Company’s sales. Management believes that the relationship with these customers is good.

The Company purchases the majority of its raw materials directly from numerous local fabric and accessories suppliers. The Company may also purchase finished goods from other contract manufacturers. One supplier represented approximately 16 % of the Company’s raw materials purchases in the six months ended June 30, 2007. The Company has not experienced difficulty in obtaining raw materials essential to its business and management believes that the relationship with its suppliers is good.

In 2006, the Company operated two factories respectively in the Nanjing Jiangning Economic and Technological Development Zone and Shangfang Town,Jiangning District in Nanjing, China.

The Company made a deposit to purchase a fifty-year land use right on 112,442 square meters of land in Nanjing Jiangning Economic and Technological Development Zone. The land contains an existing facility of 26,629 square meters, which includes manufacturing and office space. On April 7, 2006, the Company closed the transaction with the local government of Nanjing City. On June 24, 2006, the Company obtained the title to the land for the land use rights for 50 years. By the end of 2006, the Company completed the construction of the new office buildings and the new factory. The Company has been consolidating its operation into its new headquarters and manufacturing facility since January 2007. The new manufacturing facility occupies an area of 10,000 square meters and is equipped with state-of-the-art equipment. After moving into the new office buildings, the Company conducted an appraisal of the completed construction and the quality of raw materials used in construction and found that some of the construction materials and workmanship did not meet the Company’s quality requirement. After much negotiation, the Company came up with a settlement with the construction company, resulting in a reduction in the payment of construction cost of approximately $1.6 million. This amount was reflected as a reduction of our accounts payable and fixed assets in the second quarter financial statements.

Two factories employ a staff of over 1200 people with an annual production capacity of over 3million pieces. All of the Company’s work force is non-union, and the Company considers its relations with its employees to be satisfactory.

15

In 2007, all Chinese manufacturers of certain garments were subject to aggregate export quotas, or limitations, to the United States and Europe. Although certain of the Company’s apparel products fall within the categories subject to the quotas with respect to exports to the United States and Europe, the Chinese government allocated a portion of the aggregate export quota to the Company based upon the amount of product that the Company exported in the prior year. The imposition of such quotas did not have a material affect on the Company’s net sales and its net margin. See Results of Operations below. As a result of the Company’s prior export performance, it was awarded a sufficient portion of the export quotas to enable it to increase its sales to customers in Europe and the U.S. despite the reinstitution of export quotas. The Company believes that its customer mix and its ability to adjust the types of apparel it man ufactures will mitigate its exposure to such trade restrictions in the future.

Under the laws of the PRC, as a wholly foreign owned enterprise, in the fiscal year ended December 31, 2004, Goldenway was entitled to a 50% reduction in its income tax rate, from 24% to 12%. In the fiscal year ended December 31, 2005, Goldenway as a wholly foreign owned enterprise that exported over 70% of its products outside the PRC, is eligible for a 50% reduction in its tax rate from 24% to 12%. From 2006, Goldenway has an income tax rate of 12%.New-Tailun was approved as a wholly foreign-owned enterprise in 2006 and is entitled to the income tax exemptions for 2006 and 2007

The Company markets and sells its products through a combination of international distributors and direct sales to brands and retail chain stores primarily in Europe, the United States and in Japan.

Our cost of net revenues consists of the appropriate materials purchasing, receiving and inspection costs, inbound freight where applicable, garment finishing fees, direct labor, and manufacturing overhead, including the Company’s contributions to a government mandated multi-employer defined contribution plan, packing materials and others. In addition, from time to time we subcontract manufacturing, which costs are included in our cost of net revenues.

Selling expenses consist primarily of transportation and unloading charges and product inspection charges.

General and administrative expenses consist primarily of related expenses for executive, finance, accounting, facilities and human resources personnel, office expenses and professional fees.

Results of Operations

Three Months Ended June 30, 2007 Compared To Three Months Ended June 30, 2006

Revenues, Cost of Sales and Gross Margin

Revenues for the quarter ended June 30, 2007 were $ 9,577,114 an increase of 3.8 % from $ 9,226,551 for same quarter in 2006. Our increase in revenues was primarily attributable to a slight increase in sales to customers in the U.S.market as compared to 2006.

Cost of sales for the quarter ended June 30, 2007 was $8,155,119 , an increase of $ 398,887 from $ 7,756,232 for the quarter ended June 30, 2006. As a percentage of revenues, cost of sales increased to approximately 85.15 % for the three months ended June 30, 2007 from approximately 84.06 % for the quarter ended June 30, 2006. Consequently, gross margin as a percentage of revenues decreased to approximately 14.85 % for the three months ended June 30, 2007 from approximately 15.94 % for the three months ended June 30, 2006. The 1% increase in costs of sales and decrease of gross margin was mainly due to the increase for purchase price of raw materials as a result of the appreciation of exchange rate of RMB to US dollars which could not be passed totally to our customers during the quarter. . From April 1 to June, 30, the RMB to US dollar exchange rate increased from 7.74 to 7.62. an increase of 1.5%.

Operating Expenses

Selling expenses as of June 30, 2007 decreased by 27.62 % from $ 150,509 in 2006 to $ 108,936 in 2007. The decrease in selling expenses was mainly attributable to an decrease in the bidding expenses for export quotas to Europe and US markets.

General and Administrative expenses totaled $497,843 for the three months ended June 30, 2007, an increase of $210,206 or 73% from $ 287,637 for the three months ended June 30, 2006 . The great increase was mainly attributable to several factors. Firstly, the Company paid an annual tax of about $48,916 for our new land and building in which is due every May starting 2007. Secondly, the purchase expenses for the new manufacturing and office equipments increased by $40,913 as a result of furnishing our new factory and office building. Thirdly, the management salaries and life insurance expenses increased by $77,184 due to the expansion of our businesses and lastly, the Company had a foreign exchange loss of $39,700 as a result of the appreciation of RMB against the US dollar.

16

Professional fees associated with our trading activities on the OTCBB market totaled $ 139,607 for the three months ended June 30, 2007 , an decrease of $34,152 from $ 173,759 for the three months ended June 30, 2006 .

Depreciation and amortization

Depreciation and amortization expenses increased $65,383 or 802 % from $8,151 in 2006 to $73,534 in 2007. The increase was mainly due to the completion of the new land and manufacturing facilities.

Interest Expenses

Interest Expenses increased $81,406 or 169% from $48,194 in 2006 to $129,600 in 2007. The increase was mainly attributable to the increase of our borrowings from local bank as compared to 2006.

Income before income taxes expense for the three months ended June 30, 2007 was $480,017, an decrease of $327,529 or 40.56% from $807,546 for the three months ended June 30, 2006. The decrease was due largely to the big increase of our general and administrative expenses as well as the depreciation and amortization expenses as compared to the same quarter in 2006

Six Months Ended June 30, 2007 Compared To Six Months Ended June 30, 2006

Revenues, Cost of Sales and Gross Margin

Revenues for the six months ended June 30, 2007 were $21,006,831 an increase of 45.31 % from $ 14,456,071 for same period in 2006. Our increase in revenues was primarily attributable to an overall increase in sales to customers in Europe, the U.S., Japan and China. As of June 30, 2007, sales to customers in Europe increased by $3,691,144 or 48 %, sales to customers in the U.S. increased by $2,454,047 or 74%, sales to customers in Japan increased by $869,640 or 37.5%, sales to customers in China increased by $ 32,417 or 4.87% as compared to 2006.

Cost of sales for the six months ended June 30, 2007 was $17,880,051, an increase of $ 5,803,179 from $12,076,872 for the six months ended June 30, 2006. As a percentage of revenues, cost of sales increased to approximately 85.12% for the six months ended June 30, 2007 from approximately 83.54% for the six months ended June 30, 2006. Consequently, gross margin as a percentage of revenues decreased to approximately 14.88% for the six months ended June 30, 2007 from approximately 16.46% for the six months ended June 30, 2006. The decrease of gross margin was mainly attributable to the increase of purchase price of raw materials as a result of the appreciation of exchange rate of RMB to US dollars.

Operating Expenses

Selling expenses as of June 30, 2007 decreased by 2% from $269,684 in 2006 to $264,195 in 2007. The decrease in selling expenses was mainly attributable to the decrease of bidding expenses for export quotas to Europe and US markets.

General and administrative expenses totaled $934,443 for the six months ended June 30, 2007, a big increase of $ 497,973 from $ 436,470 for the six months ended June 30, 2006. The increase was mainly attributable to several factors. Firstly, the Additional payment of $48,916 for our new land and building taxes incurred in every May from 2007. Secondly, the purchase price for new manufacturing and office equipments increased $82,434. Thirdly, the management salaries and life insurance expenses increased by 297,802 due to the expansion of our business and the acquisition of New-Tailun. Lastly, the Company had a foreign exchange loss of $39,700 as a result of the appreciation of RMB against the US dollar.

Professional fees associated with our trading activities on the OTCBB market totaled $318,097 for the six months ended June 30, 2007, an decrease of $28,423 or 8.2% from $346,520 for the six months ended June 30, 2006.

Income before taxes for the six months ended June 30, 2007 was $1,140,421, an increase of $17,964 from $1,122,457 for the six months ended June 30, 2006. The slight increase was achieved as a result of the Company’s gradual digestion of the big increase of general and administrative and depreciation and amortization expenses for the six months ended June 30, 2007.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2007, the Company had cash and cash equivalents of $430,217, other current assets of $7,220,087 and current liabilities of $7,557,297. To date, the Company has financed its operations primarily from operations and cash flow from operations is expected to continue to be the Company’s primary source of funds to finance its short-term cash needs.

17

Net cash provided by operating activities as of June 30, 2007 was $4,212,592, compared with same quarter in 2006 net cash used in operating activities of $753,220. The Company’s primary source of operating cash flow was net income of $1,140,421. During this period, the Company has strengthened its effort in the collection of account receivables from its related parties. The increase in our net cash was attributable to a significant decrease in accounts receivable of $4,458,590.

Net cash used in investing activities was approximately $ 1,538,683 as of June 30, 2007, compared with $ 1,243,764 in the same quarter of 2006. The increase was primarily attributable to increase of purchase expenses for the new manufacturing and office equipments.

Net cash used in financing activities as of June 30, 2007 was $2,873,585, compared with same quarter in 2006 net cash provided by financing activities of $2,595,158. The big decrease was attributable to the payment of borrowings in the amount of $4,527,814 from the local bank during the quarter.

On August 15, 2006, Goldenway entered into credit agreements with the local bank, Nanjing City Commercial Bank, for the authorization of borrowing an aggregate principal amount of up to $6.41 million within 24 months. The loans were secured by our new facilities and were used to fund the construction costs as well as our daily operation. As of June 30, 2007, we have borrowed $1,967,265. The borrowings can be extended upon maturities on demands within the 24 months. We plan to repay the loans with the cash flows from our operation. In the event we do not have available cash flows from our operation to repay these loans, we will consolidate and refinance the loans upon maturities. There are no financial ratios or tests are included in the Company’s credit facility.

In addition, as of June 30, 2007, the Company has borrowed $4,356,755 from a related party for the main purpose of funding the increased registered capital of Goldenway. Interest paid to this related party totaled $118,269 as of June 30, 2007.

Capital Commitments

Pursuant to the Articles of Association of Goldenway, registered capital of approximately $17.5 million must be paid into Goldenway by February 1, 2008. The increased registered capital will be paid-in in installments within three years of the issuance of Goldenway’s updated business license. As of June 30, 2007, the Company has paid $2.6 million of its registered capital requirements. The remaining $14.9 million is due on February 1, 2008. The Company anticipates that cash flows from operations and borrowings from banks will be used to pay for these capital commitments.

Uses of Liquidity

The Company’s cash requirements as of June 30, 2007 are primarily to fund operations. The Company also plans to acquire additional manufacturing capacity in the future to strengthen and stabilize its manufacturing base. The Company is also looking to establish its own distribution and logistics channels in overseas markets and to launch its own brand directly to the Chinese market. In addition, the Company will need to make the required capital contributions to its subsidiary, Goldenway.

Sources of Liquidity

The Company’s primary source of liquidity for its short-term cash needs is expected to be cash flow generated from operations, and cash and cash equivalents currently on hand. The Company believes that will be able to borrow additional funds if needed.

The Company believes its cash flow from operations together with its cash and cash equivalents currently on hand will be sufficient to meet its working capital, capital expenditure and other commitments through December 2007. For its long-term cash needs, the Company is currently considering a number of different financing opportunities including debt and equity financing. Adequate funds may not be available on terms acceptable to it. If additional funds are raised through the issuance of equity securities, dilution to existing stockholders may result. If funding is insufficient at any time in the future, the Company will develop or enhance its products or services and expand its business funded by its own operation cash flows.

As of June 30, 2007, the Company had outstanding borrowings under a credit facility with a bank of approximately $1,967,265. As of June 30, 2007, the Company did not have any standby letters of credit or standby repurchase obligations.

Foreign Currency Translation Risk.

The Company’s major operations are 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 Renminbi. Sales of the Company’s products are in dollars. During 2003 and 2004 the exchange rate of RMB to the 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 dollar. In 2006, the RMB kept on appreciating to the dollar. As of June 30, 2007, the market foreign exchanges rate was increased to 7.62 RMB to one dollar. As a result, the ongoing appreciation of RMB to dollar negatively impacted our gross margins for the three and six months June 30, 2007. We are always negotiating order price adjustments with most of our customers based on the changing market foreign exchange rates, which we believe will redu ce our exposure to exchange rate fluctuations in the future and pass some increase of the cost to our customers.

18

In addition, the financial statements of Goldenway and New-Tailun (whose functional currency is the 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 expenses items are translated at the average exchange rate for the year. All exchange differences are recorded within equity. The foreign currency translation gain for the periods ended June 30, 2007 and 2006 were $362,080 and $238,307, respectively.

RISK FACTORS

Our business is subject to certain risks, and we want you to review these risks while you are evaluating our business and our historical results. Please keep in mind that any of the following risks discussed below and elsewhere in this Annual Report could materially and adversely affect us, our operating results, our financial condition and our projections and beliefs as to our future performance. As such, our results could differ materially from those projected in our forward-looking statements.

Risks Relating to the Industry in Which We Compete.

Our sales are influenced by general economic cycles. A prolonged period of depressed consumer spending would have a material adverse affect our profitability.

Apparel is a cyclical industry that is dependent upon the overall level of consumer spending. Purchase of apparel generally decline during recessionary periods when disposable income is low. Our customers anticipate and respond to adverse changes in economic conditions and uncertainty by reducing inventories and canceling orders. As a result, any substantial deterioration in general economic conditions, increases in energy costs or interest rates, acts of war, acts of nature or terrorist or political events that diminish consumer spending and confidence in any of the regions in which we compete, could reduce our sales and adversely affect our business and financial condition.

Intense competition in the worldwide apparel industry could reduce our sales and prices.

We face a variety of competitive challenges from other apparel manufacturers both in China and elsewhere. Some of these competitors have greater financial and marketing resources than we do and may be able to adapt to changes in consumer preferences or retail requirements more quickly, devote greater resources to the marketing and sale of their products or adopt more aggressive pricing policies than we can. As a result, we may not be able to compete successfully with them if we cannot continue enhancing our marketing and management strategies, quality and value or responding appropriately to consumers needs.

The success of our business depends upon our ability to offer innovative and upgraded products at attractive price points.

The worldwide apparel industry is characterized by constant product innovation due to changing consumer preferences and by the rapid replication of new products by competitors. As a result, our success depends in large part on our ability to continuously and rapidly respond to customer requirements for innovative and stylish products at a competitive pace, intensity, and price. Failure on our part to regularly and rapidly respond to customer requirements could adversely affect our ability to retain our existing customers or to acquire new customers which would limit our sales growth.

The worldwide apparel industry is subject to ongoing pricing pressure.

The apparel market is characterized by low barriers to entry for both suppliers and marketers, global sourcing through suppliers located throughout the world, trade liberalization, continuing movement of product sourcing to lower cost countries, ongoing emergence of new competitors with widely varying strategies and resources, and an increasing focus on apparel in the mass merchant channel of distribution. These factors contribute to ongoing pricing pressure throughout the supply chain. This pressure has and may continue to:

• require us to reduce wholesale prices on existing products;

• result in reduced gross margins across our product lines;

• increase pressure on us to further reduce our production costs and our operating expenses.

Any of these factors could adversely affect our business and financial condition.

19

Fluctuation in the price, availability and quality of raw materials could increase our cost of goods and decrease our profitability.

We purchase raw materials directly from local fabric and accessory suppliers. The Company may also import specialty fabrics to meet specific customer requirements. The Company also purchases finished goods from other contract manufacturers. The prices we charge for our products are dependent in part on the market price for raw materials used to produce them. The price, availability and quality of our raw materials may fluctuate substantially, depending on a variety of factors, including demand, crop yields, weather patterns, supply conditions, transportation costs, government regulation, economic climates and other unpredictable factors. Any raw material price increases could increase our cost of goods and decrease our profitability unless we are able to pass higher prices on to our customers.

One supplier represented approximately 15% of the Company’s raw materials purchases in the fiscal year ended December 31, 2006, two suppliers represented approximately 12% and 10%, respectively of the Company’s raw materials purchases in the fiscal year ended December 31, 2005, and one supplier represented approximately 17% of the Company’s raw materials purchases in the fiscal year ended December 31, 2004. We do not have long-term written agreements with any of these suppliers and do not anticipate entering into any such agreements in the near future. However, we always execute a written agreement for each order placed with our suppliers. We do not believe that loss on any of these suppliers would have a material adverse affect on our ability to obtain finished goods or raw materials essential to its business because we believe we can locate other suppliers in a timely manner.

Risks Relating to Our Business

We depend on a group of key customers for a significant portion of our sales. A significant adverse change in a customer relationship or in a customer’s performance or financial position could harm our business and financial condition.

Net sales to our two largest customers totaled approximately 57% and 52 % of total net sales for the six months ended June, 30 2007 and 2006, respectively. Our largest customer accounted for approximately 36% and 26% of net sales for the six months ended June 30, 2007 and 2006. The garment manufacturing industry has experienced substantial consolidation in recent years, which has resulted in increased customer leverage over suppliers, greater exposure for suppliers to credit risk and an increased emphasis by customers on inventory management and productivity.

A decision by a major customer, whether motivated by competitive considerations, strategic shifts, financial requirements or difficulties, economic conditions or otherwise, to decrease its purchases from us or to change its manner of doing business with us, could adversely affect our business and financial condition. In addition, while we have long-standing customer relationships, we do not have long term contracts with any of our customers. As a result, purchases generally occur on an order-by-order basis, and the relationship, as well as particular orders, can generally be terminated by either party at any time. We do not believe that there is a material risk of loss of any of these customers during the next 12 months. We also believe that the unexpected loss of these four customers could have material adverse effect on the Company’s earnings or financial condition. While we believe that we could replace these three customers within 12 months, the loss of which will not have material adverse effects on our financial condition in a long run. None of the Company or its affiliates are officers, directors or material shareholders of any of these three customers.

Our internal controls and procedures have been materially deficient, and we are in the process of correcting internal control deficiencies.

In the second quarter of 2007, resulting from comments by and discussions with the Staff of the SEC related to the Company’s Preliminary Information Statement on Form 14C, the Company and its independent registered public accounting firm recognized that our internal controls had material weaknesses. We are restating our results of operations for the year ended December 31, 2006 and our quarterly results for the quarter ended March 31, 2007 as a result of our purchase accounting for the acquisition of New-Tailun completed on December 11, 2006.

If we cannot rectify these material weaknesses through remedial measures and improvements to our systems and procedures, management may encounter difficulties in timely assessing business performance and identifying incipient strategic and oversight issues. Management is currently focused on remedying internal control deficiencies, and this focus will require management from time to time to devote its attention away from other planning, oversight and performance functions.

We cannot provide assurances as to the timing of the completion of these efforts. We cannot be certain that the measures we take will ensure that we implement and maintain adequate internal controls in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.

20

We will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act.

Failure to timely comply with the requirements of Section 404 or any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our debt securities. We are not currently an “accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. Beginning with our Annual Report for the year ending December 31, 2007, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include an internal control report with our Annual Report on Form 10-KSB. That report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Additionally, our independent registered public accounting firm will be required to issue reports on management’s assessment of our internal control over financial reporting and their evaluation of the operating effectiveness of our internal control over financial reporting. the auditor’s report is required for financial year ending December 31, 2008. Our assessment requires us to make subjective judgments and our independent registered public accounting firm may not agree with our assessment.

Achieving compliance with Section 404 within the prescribed period may require us to incur significant costs and expend significant time and management resources. If we are not able to complete the assessment under Section 404 in a timely manner, we and our independent registered public accounting firm would be unable to conclude that our internal control over financial reporting is effective as of December 31, 2007. As a result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our debt securities. In addition, our independent registered public accounting firm may not agree with our management’s assessment or conclude that our internal control over financial reporting is operating effectively. We will continue to consistently improve our internal control over the financial reporting with our best efforts and with the assistance from outside experts.

As the Company is listed on the over-the-counter bulletin board, the Company is subject to less stringent corporate governance requirements than a company listed on a national exchange. Specifically, the Company is not required to have a majority of independent directors or a separate audit committee. This provides less protection to our investors.

The Company’s board of directors currently does not have a separate audit committee or a member that qualifies as an audit committee financial expert or an independent director. The Company’s management and board of directors are considering the addition of an independent director who qualified as a financial expert but there can be no assurance the Company will be able to attract one or more qualified independent directors or that any such directors can be added to the Company’s board as it may require us to increase the number of director on the Company’s board of directors, seek the resignation of directors who are not independent, or some combination thereof. If the Company is unable to attract qualified independent directors or nominate or elect such directors, the Company’s security holders will not have the protections provided by having independent directors or audit committee members. Although we believe that all actions taken by our directors on our behalf will be in our best interests, whether or not they are deemed to be independent, we cannot assure you that this will actually be the case. If actions are taken, or expenses are incurred that are not in our best interests, it could have a material adverse effect on our business and operations and the price of our stock held by our stockholders.

We must successfully maintain and/or upgrade our information technology systems.

We rely on various information technology systems to manage our operations and we regularly evaluate these systems against our current and expected requirements. Although we have no current plans to implement modifications or upgrades to our systems, we will eventually be required to make changes to legacy systems and acquiring new systems with new functionality. We do anticipate that the aggregate cost of updating such systems will be approximately $600,000 over the next 36 months. We will also continue to self-develop and update our information systems on a timely basis to meet our business expansion needs Any information technology system disruptions, if not anticipated and appropriately mitigated, could have an adverse effect on our business and operations.

21

We may engage in future acquisitions and strategic investments that dilute the ownership percentage of our shareholders and require the use of cash, incur debt or assume contingent liabilities.

As part of our business strategy, we expect to continue to review opportunities to buy or invest in other businesses or technologies that we believe would enhance our manufacturing capabilities, or that may otherwise offer growth opportunities. If we buy or invest in other businesses in the future, we could: require the use of cash, incur debt or assume contingent liabilities.

As part of our business strategy, we expect to continue to review opportunities to buy or invest in other businesses or technologies that we believe would complement our current products, expand the breadth of our markets or enhance our technical capabilities, or that may otherwise offer growth opportunities. If we buy or invest in other businesses, products or technologies in the future, we could:

• incur significant unplanned expenses and personnel costs;

• issue stock that would dilute our current shareholders’ percentage ownership;

• use cash, which may result in a reduction of our liquidity;

• incur debt;

• assume liabilities; and

• spend resources on unconsummated transactions.

We may not realize the anticipated benefits of past or future acquisitions and strategic investments, and integration of acquisitions may disrupt our business and management.

We may in the future acquire or make strategic investments in additional companies. We may not realize the anticipated benefits of these or any other acquisitions or strategic investments, which involve numerous risks, including:

• problems integrating the purchased operations, technologies, personnel or products over geographically disparate locations;

• unanticipated costs, litigation and other contingent liabilities;

• diversion of management’s attention from our core business;

• adverse effects on existing business relationships with suppliers and customers;

• incurrence of acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

• inability to retain key customers, distributors, vendors and other business partners of the acquired business; and

• potential loss of our key employees or the key employees of an acquired organization.

22

If we are not be able to successfully integrate businesses, products, technologies or personnel that we acquire, or to realize expected benefits of our acquisitions or strategic investments, our business and financial results may be adversely affected.

International political instability and concerns about other international crises may increase our cost of doing business and disrupt our business.

International political instability may halt or hinder our ability to do business and may increase our costs. Various events, including the occurrence or threat of terrorist attacks, increased national security measures in the United States and other countries, and military action and armed conflicts, can suddenly increase international tensions. Increases in energy prices will also impact our costs and could harm our operating results. In addition, concerns about other international crises, such as the spread of severe acute respiratory syndrome (“SARS”), avian influenza, or bird flu, and West Nile viruses, may have an adverse effect on the world economy and could adversely affect our business operations or the operations of our OEM partners, contract manufacturer and suppliers. This political instability and concerns about other international crises may, for example:

• negatively affect the reliability and cost of transportation;

• negatively affect the desire and ability of our employees and customers to travel;

• adversely affect our ability to obtain adequate insurance at reasonable rates; and

• require us to take extra security precautions for our operations.

Furthermore, to the extent that air or sea transportation is delayed or disrupted, our operations may be disrupted, particularly if shipments of our products are delayed.

Business interruptions could adversely affect our business.

Our operations and the operations of our suppliers and customers are vulnerable to interruption by fire, earthquake, hurricanes, power loss, telecommunications failure and other events beyond our control. In the event of a major natural disaster, we could experience business interruptions, destruction of facilities and loss of life. In the event that a material business interruption occurs that affects us or our suppliers or customers, shipments could be delayed and our business and financial results could be harmed.

The market for the Company’s common stock is illiquid.

The Company’s common stock is traded on the Over-the-Counter Bulletin Board. It is thinly traded compared to larger more widely known companies in its industry. Thinly traded common stock can be more volatile than stock trading in an active public market. The Company cannot predict the extent to which an active public market for its common stock will develop or be sustained. The high and low bid price of Ever-Glory’s common stock during the past 52 week period is $1.87 and $0.27 respectively.

23

Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

NASD sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the NASD has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Because our assets are located overseas, stockholders may not receive distributions that they would otherwise be entitled to if we were declared bankrupt or insolvent.

Our assets are, for the most part, located in the PRC. Because the Company’s assets are located overseas, the assets of the Company may be outside of the jurisdiction of U.S. courts to administer if the Company was the subject of an insolvency or bankruptcy proceeding. As a result, if the Company was declared bankrupt or insolvent, the Company’s stockholders may not receive the distributions on liquidation that they are otherwise entitled to under U.S. bankruptcy law.

Export quotas imposed by the WTO could negatively affect our business and operations, particularly if the Chinese government changes its allocation of such quotas to the Company.

Pursuant to the World Trade Organization (WTO) Agreement, effective January 1, 2005, the United States and other WTO member countries removed quotas from WTO members. In certain instances, the elimination of quotas affords the Company greater access to foreign markets; however, as the removal of quotas resulted in an import surge from China, the U.S. took action in May 2005 and imposed safeguard quotas on seven categories of goods, including certain classes of apparel products. Exports of each specified product category will continue to be admitted into the United States in the ordinary course until the restraint level for that category is reached, after which further exports will be embargoed and will not be cleared until after January 2006. Additionally, on September 10, 2005, in response to the surge of Chinese imports into the European Union (EU), the EU Commission signed a Memorandum of Understanding (MOU) with China in which ten categories of textiles and apparel will be subject to restraints.

Although certain of the Company’s apparel products fall within the categories subject to the quotas with respect to exports to the United States and Europe, the Chinese government allocated a portion of the aggregate export quota to the Company based upon the amount of product that the Company exported in the prior year. The imposition of such quotas did not have a material affect on the Company’s net sales. See “Results of Operations” above. As a result of the Company’s prior export performance, it was awarded a sufficient portion of the export quotas to enable it to increase its sales to customers in Europe and the U.S. despite the reinstitution of export quotas. In order to increase the Company’s allocation of future export quotas, however, the Company will continue accepting orders from its customers. The Company believes that its customer mix and its ability to adjust the types of apparel it manufactures will mitigate its exposure to such trade restrictions in the future. However, there can be no assurance that additional trade restrictions will not be imposed on the exports of the Company’s products in the future. Such actions could result in increases in the cost of its products generally and may adversely affect the Company’s results of operations. The Company continues to monitor the developments described above.

24

We expect to experience volatility in our stock price, which could negatively affect shareholders’ investments.

The market price for shares of the Company’s common stock may be volatile and may fluctuate based upon a number of factors, including, without limitation, business performance, news announcements or changes in general market conditions.

Other factors, in addition to the those risks included in this section, that may have a significant impact on the market price of the Company’s common stock include, but are not limited to:

• receipt of substantial orders or order cancellations of products;

• quality deficiencies in services or products;

• international developments, such as technology mandates, political developments or changes in economic policies;

• changes in recommendations of securities analysts;

• shortfalls in the Company’s backlog, revenues or earnings in any given period relative to the levels expected by securities analysts or projected by the Company;

• government regulations, including stock option accounting and tax regulations;

• energy blackouts;

• acts of terrorism and war;

• widespread illness;

• proprietary rights or product or patent litigation;

• strategic transactions, such as acquisitions and divestitures;

• rumors or allegations regarding the Company’s financial disclosures or practices; or

• earthquakes or other natural disasters concentrated in Nanjing, China where a significant portion of the Company’s operations are based.

In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. Due to changes in the volatility of the Company’s common stock price, the Company may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources.

25

ITEM 3. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Internal Controls

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we have assessed the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Securities Exchange Act of 1934 Rule 13a-15(e) as of the end of the period covered by this report. Based on that assessment, our management has concluded that our internal control over financial reporting was not effective as of June 30, 2007 because of the material weaknesses identified and described below.

Control Activities:

The Company did not maintain effective controls to ensure the completeness, accuracy and valuation over the accounting for business combinations, including the inability to prepare financial statements and footnotes in accordance with SEC rules and regulations and with our 2006 acquisition of New-Tailun. We misapplied generally accepted accounting principles whereby we did not value the acquisitions and record the resulting purchase accounting in accordance with SFAS 141 and EITF 02-5. As a result, we were required to restate our financial results for the year ended December 31, 2006 and for the three months ended March 31, 2007. Management determined that the disclosure controls and procedures for these periods were not effective.

Remediation of Material Weaknesses in Internal Control over Financial Reporting

In light of the need for these restatements and the material weaknesses described above, management will undertake a review of our disclosure, financial information and internal controls and procedures regarding these areas for future complex financing transactions and acquisitions. This review will include efforts by our management and directors, as well as the use of additional outside resources, as follows:

• Senior accounting personnel and our chief financial officer will continue to review any future acquisition or divestiture in order to evaluate, document and approve its accounting treatment in accordance with SFAS 141 and EITF 02-5; and

• We will augment, as necessary, such procedures by obtaining concurrence with independent outside accounting experts prior to finalizing financial reporting for such transactions; and

• In conjunction with the measures outlined below, we believe these actions will strengthen our internal control over our valuation and purchase accounting of acquisitions, and this material weakness should be resolved. Management does not anticipate any extra cost from this change over the review of our valuation and purchase accounting of future acquisitions.

We believe that we will satisfactorily address the control deficiencies and material weakness relating to these matters by the end of the third quarter of 2007, although there can be no assurance that we will do so.

Given the presence of material weaknesses in our internal control over financial reporting, there is a more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Our financial reporting process includes extensive procedures we undertake in order to obtain assurance regarding the reliability of our published financial statements, notwithstanding the material weaknesses in internal control. We have expanded our review of accounting for business combinations to help compensate for our material weaknesses in order to provide assurance that the financial statements are free of material inaccuracies or omissions of material fact. As a result, management, to the best of its knowledge, believes that (i) the report does not contain any untrue statements of a material fact or omits any material fact and (ii) the consolidated financial statements and other financial information included in this report for the quarter ended June 30, 2007 has been prepared in conformity with GAAP and fairly present in all material aspects our financial condition, results of operations and cash flows.

Management, including our chief executive officer and our chief financial officer, does not expect that our disclosure controls and internal controls will prevent all error or all fraud, even as the same are improved to address any deficiencies and/or weaknesses. A 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. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. 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. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

26

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fiscal quarter ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a named defendant in an action pending in the U.S. District Court for the Northern District of Ohio. The action was filed on February 22, 2006 by Plaintiff Douglas G. Furth. The other principal parties are named defendants John Zanic, Wilson-Davis & Co., and Godwin, Pappas, Longley & Ronquillo, LLP. The action alleges that Company breached an agreement with the plaintiff under which it had promised to provide plaintiff 1,000,000 shares of its common stock in exchange for certain assistance in marketing and financial public relations services. The action seeks an award of damages in excess of $75,000. The Company denies that it was a party to such an agreement, that it breached the agreement or that it is otherwise liable. The Company intends to vigorously defend its legal position. After vigorously defending itself, the Company was voluntarily dismissed by the Plaintiff without prejudice from an action pending in the U.S. District Court for the Northern District of Ohio. No payment was made to plaintiff and no settlement agreement was entered into between the Company and plaintiff.

The Company is also a named defendant in a civil action pending in the U.S. court of common pleas of Allegheny County, Pennsylvania. The civil action was filed on April 17, 2006 by Plaintiff Mark B. Aronson. The action alleges that the Company violated the Pennsylvania Unsolicited Telecommunication Advertisement Act by issuing ‘spam’ emails soliciting purchasers for its common stock. The action seeks an award of damages in excess of $12,100. The Company denies that it was a party to the alleged conduct. The Company intends to vigorously defend its legal position, with the case now in the initial phase of discovery.

On January 4, 2007, the case was dismissed without prejudice by the Plaintiff. To date, no settlement agreement has been discussed between the Company and the Plaintiff

The Company is aware that ‘spam’ emails soliciting purchasers for its common stock had originated from unknown sources; the company had never participated nor would it ever participate or authorize in the distribution of ‘spam’ email to solicit purchasers for its common stock.

The Company has solemnly declared an anti-spamming policy on its website.

In May, 2007, Plaintiff Douglas G. Furth has filed a Second Amended Complaint in the Litigation asserting claims against EGLY and other principal parties. The Company denied all the claims and has filed the responses and objections to Plaintiff’s First Request and asked for the dismissal with prejudice by the plaintiff. No payment was made to plaintiff and no settlement has been discussed between the Company and the Plaintiff.

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
None.
ITEM 5.	OTHER INFORMATION
None.
ITEM 6.	EXHIBITS

27

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.

28

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this Report on Form 10-QSB to be signed on its behalf by the undersigned, thereunto duly authorized.

		EVER-GLORY INTERNATIONAL GROUP, INC.
Date: August 14, 2007	By:	/s/ Guo Yan
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

29

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Kang Yihua, certify that:

1.          I have reviewed this quarterly report on Form 10-QSB 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 small business issuer as of, and for, the periods presented in this report;

4.          The small business issuer’s other certifying officers 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 small business issuer 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 small business issuer, 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 small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

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

a) all significant deficiencies in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer’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 small business issuer’s internal control over financial reporting.

Date:	August 14, 2007
By:	/s/ Kang Yihua
	Kang Yihua
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Guo Yan, certify that:

1.          I have reviewed this quarterly report on Form 10-QSB 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 small business issuer as of, and for, the periods presented in this report;

4.          The small business issuer’s other certifying officers 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 small business issuer 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 small business issuer, 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 small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

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

a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’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 small business issuer’s internal control over financial reporting.

Date:	August 14, 2007
By:	/s/ Guo Yan
	Guo Yan
	Chief Financial Officer

EX-32.1

 EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ever-Glory International Group, Inc. (the “Company”) on Form 10-QSB for the period ending June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kang Yihua, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

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

By:	/s/ Kang Yihua
		Kang Yihua
		Chief Executive Officer
August 14, 2007

EX-32.2

 EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ever-Glory International Group, Inc. (the “Company”) on Form 10-QSB for the period ending June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Guo Yan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(3) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

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

By:	/s/ Guo Yan
		Guo Yan
		Chief Financial Officer
August 14, 2007