Ever-Glory International Group, Inc. - FORM 10-Q/A

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EX-32.1 - Ever-Glory International Group, Inc.	v172297_ex32-1.htm
EX-32.2 - Ever-Glory International Group, Inc.	v172297_ex32-2.htm
EX-31.1 - Ever-Glory International Group, Inc.	v172297_ex31-1.htm
EX-31.2 - Ever-Glory International Group, Inc.	v172297_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No.1)

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

For the quarterly period ended September 30, 2009

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

For the transition period from ____________ to ____________

Commission file number: 0-28806

Ever-Glory International Group Inc.

(Exact name of registrant as specified in its charter)

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

100 N. Barranca Ave. #810

West Covina, California 91791

(Address of principal executive offices)

(626) 859-6638

(Registrant’s telephone number, including area code)

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

Yes x No o

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of November 8, 2009, 13,560,240 shares of the Company’s common stock, $0.001 par value, were issued and outstanding.

EVER-GLORY INTERNATIONAL GROUP, INC.

FORM 10-Q/A

EXPLANATORY NOTE

Ever-Glory International Group, Inc. (the "Company") is filing this Amendment No. 1 (this "Amendment No. 1") to its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 (the "Original Report "), which was originally filed on November 9, 2009, to address comments from the staff of the Securities and Exchange Commission (the “Staff”) in connection with the Staff's regular periodic review of the Company's filings. As a result of comments received from the Staff, the Company re-evaluated its calculation of the derivative effect of certain warrants and determined to restate its consolidated financial statements for the fiscal period ended September 30, 2009 included in the Original Report and to make the following changes:

Restate the Financial Statements;

Revise the Recent Accounting Pronouncements and Results of Operations sections in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations.

Revise Note 1, Note 2 and Note 5 to the unaudited interim condensed consolidated Financial Statements; and

Amend the disclosure contained under Item 4 - Controls and Procedures;

Re-execute the certificates required by Section 302 of the Sarbanes-Oxley Act of 2002.

Except as discussed above, the Company has not modified or updated disclosures presented in the Original Report. Accordingly, this Amendment No. 1 does not reflect events occurring after the filing of the Original Report, nor does it modify or update those disclosures affected by subsequent events or discoveries. It also does not affect information contained in the Original Report which was not impacted by these restatements. Events occurring after the filing of the Original Report or other disclosures necessary to reflect subsequent events have been or will be addressed in the Company's reports filed subsequent to the Original Report.

This Amendment No. 1 should be read in conjunction with the Company's filings made with the Securities and Exchange Commission subsequent to the filing of the Original Report, including any amendments to those filings.

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008


ASSETS
	September 30,		December 31,
	2009		2008
	(unaudited)
	(as restated, Note 1)

CURRENT ASSETS
Cash and cash equivalents	$	3,561,116	$	1,445,363
Accounts receivable		14,590,133		9,485,338
Inventories		7,232,455		3,735,227
Value added tax receivable		802,120		-
Other receivables and prepaid expenses		480,667		945,191
Advances on inventory purchases		381,850		288,256
Amounts due from related party		10,475,672		11,565,574
Total Current Assets		37,524,013		27,464,949

LAND USE RIGHT, NET		2,805,175		2,854,508
PROPERTY AND EQUIPMENT, NET		12,574,798		12,494,452
INVESTMENT AT COST		1,467,000		1,467,000
TOTAL ASSETS	$	54,370,986	$	44,280,909

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Bank loans	$	5,398,560	$	6,542,820
Loan from related party -short term		500,000
Accounts payable		9,682,539		3,620,543
Accounts payable and other payables- related parties		739,437		754,589
Other payables and accrued liabilities		1,943,983		1,683,977
Value added and other taxes payable		371,655		368,807
Income tax payable		118,921		257,946
Deferred tax liabilities		304,670		80,009
Total Current Liabilities		19,059,765		13,308,691


LONG-TERM LIABILITIES
Loan from related party		2,247,879		2,660,085
Derivative liability		1,207,000
Total Long-term Liabilities		3,454,879		2,660,085
TOTAL LIABILITIES		22,514,644		15,968,776

COMMITMENTS AND CONTINGENCIES

EQUITY
Stockholders' equity of the Company
Preferred stock ($.001 par value, authorized 5,000,000 shares,
no shares issued and outstanding)		-		-
Common stock ($.001 par value, authorized 50,000,000 shares,
13,560,240 and 12,373,567 shares issued and outstanding
as of September 30,2009 and December 31, 2008, respectively)		13,560		12,374
Additional paid-in capital		3,616,971		4,549,004
Retained earnings		20,310,793		15,807,539
Statutory reserve		3,437,379		3,437,379
Accumulated other comprehensive income		3,919,913		3,956,860
Total Stockholders' Equity of the Company		31,298,616		27,763,156
Noncontrolling interest		557,726		548,977
Total Equity		31,856,342		28,312,133
TOTAL LIABILITIES AND EQUITY	$	54,370,986	$	44,280,909

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)


	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
	(as restated, Note 1)						(as restated, Note 1)

NET SALES
Related parties	$	66,221		$	17,582		$	75,572		$	510,145
Third parties		24,870,500			31,867,994			66,494,465			75,191,036
Total net sales		24,936,721			31,885,576			66,570,037			75,701,181

COST OF SALES
Related parties		38,281			10,989			47,294			472,373
Third parties		20,264,735			27,284,216			52,667,322			62,563,564
Total cost of sales		20,303,016			27,295,205			52,714,616			63,035,937

GROSS PROFIT		4,633,705			4,590,371			13,855,421			12,665,244

OPERATING EXPENSES
Selling expenses		1,097,840			563,971			2,903,655			1,210,063
General and administrative expenses		1,562,382			1,683,713			5,707,786			4,918,696
Total Operating Expenses		2,660,222			2,247,684			8,611,441			6,128,759

INCOME FROM OPERATIONS		1,973,483			2,342,687			5,243,980			6,536,485

OTHER INCOME (EXPENSES)
Interest income		180,089			41,052			445,117			121,616
Interest expense		(94,016	)		(1,468,592	)		(332,900	)		(2,677,546	)
Change of fair value of derivitive liability		(143,000	)					(725,000	)
Other income		269			571			45,252			53,656
Total Other Income (Expenses)		(56,658	)		(1,426,969	)		(567,531	)		(2,502,274	)

INCOME BEFORE INCOME TAX EXPENSE		1,916,825			915,718			4,676,449			4,034,211

INCOME TAX EXPENSE		(130,479	)		(273,203	)		(692,206	)		(841,850	)

NET INCOME		1,786,346			642,515			3,984,243			3,192,361

ADD: NET LOSS ATTRIBUTABLE TO THE NONCONTROLING INTEREST		7,552			4,666			25,011			1,417

NET INCOME ATTRIBUTABLE TO THE COMPANY	$	1,793,898		$	647,181		$	4,009,254		$	3,193,778

NET INCOME	$	1,786,346		$	642,515		$	3,984,243		$	3,192,361

Foreign currency translation gain (loss)		46,364			107,468			(36,947	)		1,818,706

COMPREHENSIVE INCOME		1,832,710			749,983			3,947,296			5,011,067

COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO
THE NONCONTROLING INTEREST		(6,752	)		34,441			8,749			11,419

COMPREHENSIVE INCOME ATTRIBUTABLE TO
THE COMPANY	$	1,825,958		$	784,424		$	3,956,045		$	5,022,486

NET INCOME PER SHARE
Attributable to the Company's common stockholders
Basic	$	0.13		$	0.05		$	0.30		$	0.27
Diluted	$	0.13		$	0.05		$	0.30		$	0.27
Weighted average number of shares outstanding
Basic		13,558,326			11,914,825			13,546,116			11,692,604
Diluted		13,558,326			12,002,908			13,546,116			11,715,332

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)


	2009			2008
	(as restated, Note 1)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,984,243		$	3,192,361
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization		1,512,089			714,446
Change in fair value of derivative liability		725,000
Deferred income tax		224,493
Amortization of discount on convertible notes					1,934,026
Amortization of deferred financing costs					318,196
Stock issued for interest					2,155
Stock-based compensation		22,181			12,855
Changes in operating assets and liabilities
Accounts receivable		(5,100,967	)		(3,306,125	)
Accounts receivable - related parties					153,420
Inventories		(3,494,605	)		(597,330	)
Value added tax receivable		(801,519	)
Other receivables and prepaid expenses		(123,094	)		(631,466	)
Other receivable - related parties					(37,823	)
Advances on inventory purchases		(93,524	)		(332,988	)
Amounts due from related party		1,088,634			(4,059,141	)
Accounts payable		6,057,452			4,325,070
Accounts payable and other payables - related parties		72,399			149,688
Other payables and accrued liabilities		259,657			435,963
Value added and other taxes payable		2,845			181,056
Income tax payable		(138,920	)		268,334
Net cash provided by operating activities		4,196,364			2,722,697

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in La Chapelle					(1,397,700	)
Purchase of property and equipment		(984,346	)		(800,669	)
Proceeds from sale of equipment		28,537			37,019
Net cash used in investing activities		(955,809	)		(2,161,350	)

CASH FLOWS FROM FINANCING ACTIVITIES
Contribution from minority shareholders					553,040
Proceeds from bank loans		11,991,062			11,354,904
Repayment of bank loans		(13,134,464	)		(10,695,402	)
Repayment of long term loan					(1,844,164	)
Exercise of warrants					219,635
Net cash used in financing activities		(1,143,402	)		(411,987	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		18,600			91,449

NET INCREASE IN CASH AND CASH EQUIVALENTS		2,115,753			240,809

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,445,363			641,739

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,561,116		$	882,548

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest expense	$	245,105		$	295,562
Income taxes	$	606,622		$	573,557

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009 (UNAUDITED)

NOTE 1 BASIS OF PRESENTATION

Ever-Glory International Group, Inc. (the “Company”), together with its subsidiaries, is an apparel manufacturer, supplier and retailer in China, with wholesale and retail segments. The Company’s wholesale business consists of recognized brands for department and specialty stores located in Europe, Japan and the United States. The Company’s newly established retail business consists of 154 flagship stores and store-in-stores for the Company’s own-brand products located in 23 province in China. The Company’s wholesale operations are provided primarily through the Company’s wholly-owned subsidiaries, Goldenway Nanjing Garments Co. Ltd. (“Goldenway”), Nanjing Catch-Luck Garments Co. Ltd. (“Catch-Luck”), Nanjing New-Tailun Garments Co. Ltd (“New-Tailun”) and Perfect Dream Limited (“Perfect-Dream”). The Company’s retail operations are provided through its 60%-owned subsidiary, Shanghai LA GO GO Fashion Company Limited (“LA GO GO”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Ever-Glory International Group, Inc. and its subsidiaries (the “Company”) contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheets as of September 30, 2009 and December 31, 2008, the condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2009 and 2008, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2009 and 2008. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three and nine months ended September 30, 2009 are not necessarily indicative of the results of operations to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The Company has made certain reclassifications to the prior year’s condensed consolidated financial statements to conform to classifications in the current year. These reclassifications had no impact on previously reported results of operations.

Ever-Glory International Group Apparel Inc.(“Ever-Glory Apparel”), a wholly owned subsidiary of Goldenway, was incorporated in the PRC on January 6, 2009. Goldenway invested approximately $735,000 (RMB 5.0 million) in cash. As of September 30, 2009, Goldenway has increased its investment to approximately $6,595,000 (RMB45.0 million). Ever-Glory Apparel is principally engaged in the import and export of apparel, fabric and accessories.

On March 23, 2009, Goldenway transfered all of its ownership interest in LA GO GO to Ever-Glory Apparel.

Ever-Glory International Group (HK) Ltd. (“Ever-Glory HK”), a wholly-owned subsidiary of Perfect-Dream, was incorporated in Samoa on September 15, 2009. Ever-Glory HK is principally engaged in the import and export of apparel, fabric and accessories.

Subsequent to the issuance of the Company’s September 30, 2009 consolidated interim financial statements, the Company determined that it had incorrectly reported derivative warrant liabilities with an estimated fair value of $725,000 at September 30, 2009, related to the Company’s January 1, 2009 change in accounting principle as a result of the adoption of ASC 815 (previously EITF No. 07-5) (see Note 5). Accordingly the Company’s September 30, 2009 interim financial statements have been restated resulting in a decrease in net income of $143,000, and a decrease in basic and diluted net income per share of $0.01 for the three months ended September 30, 2009. Net income and basic and diluted net income per share for the nine months ended September 30, 2009 decreased by $725,000 and $0.05, respectively.

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

Financial Instruments

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

Fair Value Accounting

Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures”, previously FAS No.157, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2

Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

At September 30, 2009, the Company’s financial assets consist of cash placed with financial institutions management considers to be of a high quality, which management considers to be a Level 1 measurement..

Effective January 1, 2008, the Company also adopted ASC 825-10 “Financial Instruments”, previously SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115”, which allows an entity to choose to measure certain financial instruments and liabilities at fair value on a contract-by-contract basis. Subsequent fair value measurement for the financial instruments and liabilities an entity chooses to measure will be recognized in earnings. As of September 30, 2009, the Company did not elect such option for its financial instruments and liabilities.

Foreign Currency Translation and Other Comprehensive Income

The reporting currency of the Company is the U.S. dollar. The functional currency of Ever-Glory, Perfect Dream and Ever-Glory HK is the U.S. dollar. The functional currency of Goldenway, New Tailun, Catch-luck, LA GO GO and Ever-Glory Apparel is the Chinese RMB.

For the subsidiaries whose functional currencies are the RMB, all assets and liabilities are translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at the historical rates and items in the statement of operations are translated at the average rate for the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of stockholders’ equity. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred and amounted to $3,062, $1,561, $72,094 and $289,539 for the three and nine month periods ended September 30, 2009 and 2008 , respectively. Items in the cash flow statements are translated at the average exchange rate for the periods.

Recent Accounting Pronouncements

Embedded Derivatives

(Included in ASC 815 “Derivatives and Hedging”, previously SFAS 133)

In June 2008, the FASB issued Emerging Issues Task Force Issue 07-5 “Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF No. 07-5”). This Issue is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early application is not permitted. Paragraph 11(a) of Statement of Financial Accounting Standard No 133 “Accounting for Derivatives and Hedging Activities” (“SFAS 133”) specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF No.07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. Upon adoption of EITF No. 07-5, the Company reclassified certain warrants that were previously classified as equity to liability (Note 5).

Business Combinations

(Included in ASC 805 “Business Combinations”, previously SFAS No. 141(R))

This ASC guidance revised SFAS No. 141, “Business Combinations” and addresses the accounting and disclosure for identifiable assets acquired, liabilities assumed, and noncontrolling interests in a business combination. Adoption of this standard on January 1, 2009 did not have a material impact on the Company’s condensed consolidated financial statements, as the Company did not enter into a business combination during the nine months ended September 30, 2009.

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51)

SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The Company adopted SFAS 160 on January 1, 2009. As a result, the Company has reclassified financial statement line items within the Company’s Condensed Consolidated Balance Sheets and Statements of Income and Comprehensive Income for the prior period to conform to this standard.

Interim Disclosures about Fair Value of Financial Instruments

(Included in ASC 825 “Financial Instruments”, previously FSP SFAS No. 107-1)

This guidance requires that the fair value disclosures required for all financial instruments within the scope of SFAS 107, “Disclosures about Fair Value of Financial Instruments”, be included in interim financial statements. This guidance also requires entities to disclose the method and significant assumptions used to estimate the fair value of financial instruments on an interim and annual basis and to highlight any changes from prior periods. FSP 107-1 was effective for interim periods ending after September 15, 2009. The adoption of FSP 107-1 did not have a material impact on the Company’s Consolidated Financial Statements.

Subsequent Events

(Included in ASC 855 “Subsequent Events”, previously SFAS No. 165)

SFAS No.165, “Subsequent Events” establishes accounting and disclosure requirements for subsequent events. SFAS 165 details the period after the balance sheet date during which the Company should evaluate events or transactions that occur for potential recognition or disclosure in the financial statements, the circumstances under which the Company should recognize events or transactions occurring after the balance sheet date in its financial statements and the required disclosures for such events. The Company adopted this statement and has evaluated all subsequent events through November 9, 2009.

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-1)

In June 2009, the FASB approved its Accounting Standards Codification (“Codification”) as the single source of authoritative United States accounting and reporting standards applicable for all non-governmental entities, with the exception of the SEC and its staff. The Codification is effective for interim or annual financial periods ending after September 15, 2009 and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the quarter ended September 30, 2009.

As a result of the Company’s implementation of the Codification during the quarter ended September 30, 2009, previous references to new accounting standards and literature are no longer applicable. In the current quarter financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impact of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

NOTE 3 INVENTORIES

Inventories at September 30, 2009 and December 31, 2008 consisted of the following:

	2009		2008
Raw materials	$	874,029	$	328,607
Work-in-progress		3,090,625		342,303
Finished goods		3,267,801		3,064,317
Total inventories	$	7,232,455	$	3,735,227

NOTE 4 BANK LOANS

Bank loans represent amounts due to various banks and are due on demand or normally within one year. These loans generally can be renewed with the banks. As of September 30, 2009 and December 31, 2008, short-term bank loans consisted of the following:

	2009		2008
Bank loan, interest rate at 0.4455% per month,
due December 31,2009	$	2,640,600
Bank loan, interest rate at 0.4455% per month,
due January 14, 2010		1,467,000
Bank loan, interest rate at 0.4455% per month,
due March 11, 2010		1,026,900
Bank loan, interest rate at 0.4050% per month, due November 24,2009		264,060
Bank loan, interest rate at 0.60225% per month,
paid in full, February 2009			$	5,809,320
Bank loan, interest rate at 0.48825% per month,
paid in full, April 2009				733,500
Total bank loans	$	5,398,560	$	6,542,820

On July 31, 2008, Goldenway entered into a two-year revolving line of credit agreement with a PRC Bank, which allows the Company to borrow up to approximately $7.3 million (RMB50million). These borrowings are guaranteed by Jiangsu Ever-Glory, an entity controlled by Mr. Kang, the Company’s Chief Executive Officer. These borrowings are also collateralized by the Company’s property and plant. In the third quarter of 2009 the company repaid $3.2 million and borrowed $5.1 million under this agreement. As of September 30, 2009, $5.1 million of bank loans are under this agreement and approximately $2.2 million was unused and available.

The bank loan for $264,060 due in November 2009 which was borrowed in the third quarter of 2009, is specifically for the development of LA GO GO.

On June 30, 2009, HSBC bank approved a revolving credit facility of $2.5 million to Perfect-Dream. To date nothing has been drawn down on this line of credit.

On July 3, 2009, Ever-Glory Apparel entered into one-year line of credit agreement for approximately $5.9 million (RMB40 million) with Nanjing Bank. In the third quarter of 2009 the Company borrowed $2.2 million and repaid $2.2 million under this agreement.

Total interest expense on bank loans amounted to $64,750, $245,105, $76,481 and $220,827 for the three and nine months ended September 30,2009 and 2008, respectively.

Note 5 DERIVATIVE WARRANT LIABILITY

(Included in ASC 815 “Derivatives and Hedging”, previously SFAS 133)

In June 2008, the FASB ratified EITF No. 07-5, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock. Paragraph 11(a) of SFAS No. 133 specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope exception. The Company’s adoption of EITF 07-5 effective January 1, 2009, resulted in the identification of certain warrants that were determined to require liability classification because of certain provisions that may result in an adjustment to their exercise price. Accordingly, these warrants were retroactively reclassified as liabilities upon the effective date of EITF No. 07-5 as required by the EITF. The resulting cumulative effect of the change in the accounting principle was a decrease in paid in capital of $976,000, an increase in retained earnings of $494,000, and the recognition of a liability of $482,000 as of January 1, 2009. The liability was then adjusted to fair value as of September 30, 2009, resulting in an increase in the liability and a decrease in other income of $143,000 and $725,000 for the three and nine months ended September 30, 2009, respectively

The Company uses the Black-Scholes pricing model to calculate fair value of its warrant liabilities. Key assumptions used to apply these models are as follows:

	September 30, 2009			January 1, 2009
Expected term	3.68 years			4.43 years
Volatility		111.24	%		100.20	%
Risk-free interest rate		2.4	%		1.5	%
Dividend yield		0	%		0	%

NOTE 6 INCOME TAX

Pre-tax income (loss) for the three and nine months ended September 30 2009 and 2008 was taxable in the following jurisdictions.

	Three months ended					Nine months ended
	September 30,					September 30,
	2009		2008			2009		2008
PRC	$	880,545	$	2,312,172		$	4,271,595	$	6,695,424
Others		1,179,280		(1,396,454	)		1,129,854		(2,661,213	)
	$	2,059,825	$	915,718		$	5,401,449	$	4,034,211

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

Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”) law replaced the old laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”).

The key changes are:

The new standard EIT rate of 25% replaces the 33% rate applicable to both DES and FIEs, except for High-Tech companies that pay a reduced rate of 15%;

Companies established before March 16, 2007 continue to enjoy tax holiday treatment approved by local governments for a grace period of either the next 5 years, or until the tax holiday term is completed, whichever is sooner.

Below is a summary of the income tax rate for each of our PRC subsidiaries in 2008 and 2009.

	Goldenway			New- Tailun			Catch- Luck			LA GO GO			Ever-Glory Apparel
2008		25.0	%		12.5	%		12.5	%		25.0	%		*
2009		25.0	%		12.5	%		12.5	%		25.0	%		25.0	%

*Ever-Glory Apparel was established on January 6, 2009.

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

Ever-Glory HK was incorporated in Samoa on September 15, 2009, and has no liabilities to income tax.

Ever-Glory International Group Inc. was incorporated in the United States and has incurred net operating losses for income tax purposes through September 30, 2009. The net operating loss carry forwards for United States income taxes may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through 2029. Management believes that the realization of the benefits from these losses appears uncertain due to our limited operating history and continuing losses for United States income tax purposes. Accordingly, we have provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero.

Income tax expense was $130,479, $692,206, $273,203, and $841,850 for the three and nine months ended September 30,2009 and 2008 respectively.

The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three and nine months ended September 30, 2009 and 2008:

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
PRC Statutory Rate		25.0			25.0			25.0			25.0
Income tax exemption		(9.1	)		(13.0	)		(11.0	)		(12.0	)
Other		(1.1	)					2.2
Effective income tax rate		14.8	%		12.0	%		16.2	%		13.0	%

Income tax expense for the three and nine months ended September 30, 2009 and 2008 is as follows:

	For the three months ended September 30				For the nine months ended September 30
	2009		2008		2009		2008
Current	$	58,504	$	273,203	$	467,713	$	841,850
Deferred		71,975		-		224,493		-
Income tax expense	$	130,479	$	273,203	$	692,206	$	841,850

NOTE 7 EARNINGS PER SHARE

Earnings per share is calculated as follows:

	For the three months ended September 30					For the nine months ended September 30
	2009		2008			2009		2008
Net income attributable to the Company	$	1,793,898	$	647,181		$	4,009,254	$	3,193,778
Add: interest expense related to convertible notes				756					2,252
Subtract: Unamortized issuance costs and discount on convertible notes				(44,350	)				(44,350	)
Adjusted net income for calculating EPS-diluted	$	1,793,898	$	603,587		$	4,009,254	$	3,151,680

Weighted average number of common stock – Basic		13,558,326		11,914,825			13,546,116		11,692,604
Effect of dilutive securities:
Convertible notes				88,083					22,728
Weighted average number of common stock – Diluted		13,558,326		12,002,908			13,546,116		11,715,332

Earnings per share - basic	$	0.13	$	0.05		$	0.30	$	0.27
Earnings per share -diluted	$	0.13	$	0.05		$	0.30	$	0.27

At September 30, 2009, the Company had 913,182 warrants outstanding. For the three and nine months ended September 30, 2009, these outstanding warrants were excluded from the diluted earnings per share calculation as they are anti-dilutive as the average stock price was less than the exercise price of the warrants. As of September 30, 2008, the Company included all shares issuable upon conversion of the convertible notes and warrants in diluted earnings per share.

NOTE 8 STOCKHOLDERS’ EQUITY

On March 13, 2009 and March 25, 2009, the Company issued 21,085 shares of common stock to the Company’s three independent directors as compensation for their services in the third and fourth quarters of 2008. The shares were valued at $1.05 per share, being the average market price of the common stock for the five trading days before the grant date.

On April 28, 2009, the Company issued 1,153,846 shares of restricted common stock to a related party as part of the consideration for the acquisition of Catch-Luck.

On July 16, 2009, the Company issued 11,742 shares of common stock to the Company’s three independent directors as compensation for their services in the first and second quarters of 2009. The shares were valued at $1.86 per share, being the average market price of the common stock for the five trading days before the grant date.

NOTE 9 RELATED PARTY TRANSACTIONS

Mr. Kang is the Company’s Chairman and Chief Executive Officer. Ever-Glory Hong Kong is the Company’s major shareholder. Shanghai La Chapell is the shareholder of the Company’s subsidiary LA GO GO. All transactions associated with the following companies controlled by Mr. Kang, Ever-Glory Hong Kong and Shanghai La Chapell are considered to be related party transactions. All related party outstanding balances are short-tem in nature and are expected to be settled in cash.

Sales and Cost of Sales to Related Parties

Sales and cost of sales for the three and nine months ended September 30, 2009 were from transactions with Nanjing Knitting, Jiangsu Ever-Glory and Shanghai La Chapell.

Purchases of raw materials and sub contractor agreements with Related Parties

For the three and nine months ended September 30, 2009 and 2008, the Company purchased raw materials of $462,065, $818,214, $1,212,491, and $1,903,440, respectively, from Nanjing Knitting.

In addition, for the wholesale business the Company sub-contracted certain manufacturing work to related companies totaling $270,172, $1,173,830, $471,795 and $862,443 for the three and nine months ended September 30, 2009 and 2008, respectively. The Company provided raw materials to the sub-contractors and was charged a fixed fee for labor provided by the sub-contractors.

Sub-contracts with related parties included in cost of sales for the three and nine months ended September 30, 2009 and 2008 are as follows:

	Three Months Ended September 30				Nine Months Ended September 30
	2009		2008		2009		2008
Nanjing High-Tech Knitting & Weaving Technology Development Co., Ltd	$	111,654	$	222,203	$	520,598	$	291,122
Nanjing Ever-Kyowa Garment Washing Co., Ltd.,		158,518		249,592		653,232		571,321
	$	270,172	$	471,795	$	1,173,830	$	862,443

For its retail business the Company purchased finished goods from a related party, Jiangsu Ever-Glory, totaling $554 and $19,695 for the three and nine months ended September 30, 2009.

Amounts Due From Related Party

Jiangsu Ever-Glory International Group Corp., (“Jiangsu Ever-Glory”) is an entity engaged in importing/exporting, apparel-manufacture, real-estate development, car sales and other activities. Jiangsu Ever-Glory is controlled by the Company’s Chief Executive Officer. Because of restrictions on the Company’s ability to directly import and export products, the Company utilizes Jiangsu Ever-Glory as its agent, to assist the Company with its import and export transactions and its international transportation projects. Import transactions primarily consist of purchases of raw materials and accessories designated by the Company’s customers for use in garment manufacture. Export transactions consist of the Company’s sales to foreign markets such as Japan, Europe and the United States. As the Company’s agent, Jiangsu Ever-Glory’s responsibilities include managing customs, inspection, transportation, insurance and collections on behalf of the Company. Jiangsu Ever-Glory also manages transactions denominated in currencies other than the Chinese RMB at rates of exchange agreed between the Company and Jiangsu Ever-Glory and based upon rates of exchange quoted by the People’s Bank of China. In return for these services, Jiangsu Ever-Glory charges the Company a fee of approximately 3% of export sales. For import transactions, the Company may make advance payments, through Jiangsu Ever-Glory, for the raw material purchases, or Jiangsu Ever-Glory may make advance payments on the Company’s behalf. For export transactions, accounts receivable for export sales are remitted by the Company’s customers through Jiangsu Ever-Glory, who forwards the payments to the Company. The Company and Jiangsu Ever-Glory have agreed that balances from import and export transactions may be offset. Amounts due to (from) Jiangsu Ever-Glory are typically settled within 60-90 days. Interest of 0.5% is charged on net amounts due at each month end. Interest income for the three and nine months ended September 30, 2009 and 2008 was $179,560, $443,051, $37,752 and $113,216, respectively. Following is a summary of import and export transactions for the nine months ended September 30, 2009:

	Accounts Receivable		Accounts Payable		Net
As of January 1,2009	$	17,938,281	$	6,372,707	$	11,565,574
Sales/Purchases	$	52,789,443	$	30,469,297
Payments Received/Made	$	53,315,655	$	29,905,606
As of September 30,2009	$	17,412,069	$	6,936,397	$	10,475,672

Approximately 53.8% of the receivable balance at September 30, 2009 was settled by October 31, 2009.

Accounts Payable and Other Payables – Related Parties

As of September 30, 2009 and December 31, 2008, accounts payable and other payables due to related parties were as follows:.

	2009		2008
Nanjing High-Tech Knitting & Weaving Technology Development Co., Ltd	$	30,714
Ever-Glory Enterprise HK Limited		415,323	$	754,589
Shanghai La Chapelle Garment and Accessories Company Limited		293,400
Total	$	739,437	$	754,589

The Company purchases raw materials from and subcontracts some of its production to related parties. Accounts payable to Nanjing Knitting was $30,714 at September 30, 2009.

As of September 30, 2009, $415,323 was due for legal and professional fees paid by Ever-Glory Enterprise HK Limited on behalf of the Company.

As of December 31, 2008, $200,000 was due for the purchase of Catch-Luck and $554,589 was due for legal and professional fees paid by Ever-Glory Enterprise HK Limited on behalf of the Company.

In February, July and August 2009, LA GO GO borrowed $293,400 (RMB 2 million) from Shanghai La Chapelle for operations. This loan is interest free and due on demand. Management expects to repay this loan in cash from operations within the next twelve months.

Long-Term Liability – Related Party

As of September 30, 2009 and December 31, 2008 the Company owed $2,747,879 ($500,000 is due within one year) and $2,660,085, respectively to Blue Power Holdings Limited, a company controlled by the Company’s Chief Executive Officer, Mr. Kang. Interest is charged at 6% per annum on the amounts due. The loans are due between September 2010 and December 2010. For the three and nine months ended September 30, 2009 and 2008, the Company incurred interest expense of $29,265, $87,794, $29,265, and $145,836, respectively. The accrued interest is included in the carrying amount of the loan in the accompanying balance sheets.

NOTE 10 CONCENTRATIONS AND RISKS

The Company extends unsecured credit to its customers in the normal course of business and generally does not require collateral. As a result, management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. Based on management’s assessment of the amount of probable credit losses, if any, in existing accounts receivable, management has concluded that no allowance for doubtful accounts is necessary at September 30, 2009 and December 31, 2008 . Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of accounts receivable. In the analysis, management primarily considers the age of the customer’s receivable and also considers the credit worthiness of the customer, the economic conditions of the customer’s industry, and general economic conditions and trends, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collect ability of accounts receivable were incorrect, adjustments to the allowance may be required, which would reduce profitability.

For the nine-month period ended September 30, 2009, the Company had two wholesale customers that represented approximately 29.0% and 12.8% of the Company’s revenues. For the three-month period ended September 30, 2009, the Company had two wholesale customers that represented approximately 20.9% and 23.6% of the Company’s revenues. At September 30, 2009, approximately 4.9% and 30.7% of accounts receivable were due from these two customers. For the nine-month period ended September 30, 2008, the Company had one customer that represented approximately 29.4% of the Company’s revenues. For the three-month period ended September 30, 2008, the Company had one customer that represented approximately 25.7% of the Company’s revenues. At September 30, 2008, approximately 2.5% of accounts receivable were due from this customer.

During the three and nine months ended September 30, 2009 and 2008, no vendor supplied more than 10% of total raw materials purchases.

For the wholesale business, during the nine months ended September 30, 2009, the Company relied on two different manufacturers for 17.9% and 11.4% of purchased finished goods. During the nine months ended September 30, 2008, the Company relied on one manufacturer for 17.0% of purchased finished goods. During the three months ended September 30, 2009, the Company relied on two manufacturers for 15.1% and 17.7% of purchased finished goods. During the three months ended September 30, 2008, the Company relied on one manufacturer for 19.0% of purchased finished goods. No other manufacturers represented more than 10% of purchased finished goods.

For the retail business, during the three months ended September 30, 2009, the Company did not rely on any manufacturer for purchased finished goods. During the nine months ended September 30, 2009, the Company relied on one manufacturer for 10.0% of purchased finished goods.

The Company’s revenue for the three and nine months ended September 30, 2009 and 2008 were earned in the following geographic areas:

	Three months ended September 30				Nine months ended September 30
	2009		2008		2009		2008
The People’s republic of China	$	3,874,933	$	3,978,707	$	10,002,626	$	8,049,002
Europe		11,973,636		14,924,436		35,450,762		42,178,290
Japan		3,106,221		6,925,551		10,347,924		12,739,050
United States		5,981,931		6,056,882		10,768,725		12,734,839
Total	$	24,936,721	$	31,885,576	$	66,570,037	$	75,701,181

NOTE 11 SEGMENTS

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

(a) Wholesale segment

(b) Retail segment

The Company also provides general corporate services to its segments and these costs are reported as "corporate and others."

	Wholesale segment		Retail segment		Corporate and others		Total
Nine months ended September 30,2009
Segment profit or loss:
Net revenue from external customers	$	59,369,406	$	7,188,520	$	-	$	66,557,926
Net revenue from related parties	$	12,111					$	12,111
Income from operations	$	5,311,244	$	-67,264	$	-	$	5,243,980
Interest income	$	445,117	$	-	$	-	$	445,117
Interest expense	$	245,105			$	87,795	$	332,900
Depreciation and amortization	$	753,866	$	758,223			$	1,512,089
Income tax expense	$	692,206	$	-			$	692,206
Segment assets:
Additions to property, plant and equipment	$	76,469	$	907,877			$	984,346
Total assets	$	58,779,581	$	5,529,624	$	47,504,883	$	111,814,088

Nine months ended September 30,2008
Segment profit or loss:
Net revenue from external customers	$	73,779,891	$	1,411,145	$	-	$	75,191,036
Net revenue from related parties	$	510,145					$	510,145
Income from operations	$	6,748,702	$	-7,612	$	-204,605	$	6,536,485
Interest income	$	117,431	$	4,072	$	113	$	121,616
Interest expense	$	220,827			$	2,456,719	$	2,677,546
Depreciation and amortization	$	712,737	$	1,709			$	714,446
Income tax expense	$	841,850	$	-			$	841,850
Segment assets:
Additions to property, plant and equipment	$	406,280	$	394,389			$	800,669
Total assets	$	44,383,899	$	3,086,252	$	40,286,454	$	87,756,605

The reconciliations of segment information to the Company’s consolidated totals were as follows:

	September 30,2009			September 30,2008
Revenues:
Total reportable segments	$	66,570,037		$	75,701,181
Elimination of intersegment revenues		-
Total consolidated	$	66,570,037		$	75,701,181
Income (loss) from operations:
Total segments	$	5,243,980		$	6,536,485
Elimination of intersegment profits		-			-
Total consolidated	$	5,243,980		$	6,536,485
Total assets:
Total segments	$	111,814,088		$	87,756,605
Elimination of intersegment receivables		(57,443,102	)		(43,475,696	)
Total consolidated	$	54,370,986		$	44,280,909

	Wholesale segment		Retail segment		Corporate and others		Total
Three months ended September 30,2009
Segment profit or loss:
Net revenue from external customers	$	22,311,223	$	2,622,738	$	-	$	24,933,961
Net revenue from related parties	$	2,760	$	-	$	-	$	2,760
Income from operations	$	1,992,626	$	-19,143	$	-	$	1,973,483
Interest income	$	180,088	$	-	$	1	$	180,089
Interest expense	$	64,750	$	-	$	29,266	$	94,016
Depreciation and amortization	$	250,528	$	274,420	$	-	$	524,948
Income tax expense	$	130,479	$	-	$	-	$	130,479
Segment assets:
Additions to property, plant and equipment	$	13,526	$	847,941	$	-	$	861,467
Total assets	$	58,779,581	$	5,529,624	$	47,504,883	$	111,814,088

Three months ended September 30,2008
Segment profit or loss:
Net revenue from external customers	$	30,829,847	$	1,038,147	$	-	$	31,867,994
Net revenue from related parties	$	17,582	$	-	$	-	$	17,582
Income from operations	$	2,363,116	$	-16,070	$	-4,359	$	2,342,687
Interest income	$	39,336	$	1,698	$	18	$	41,052
Interest expense	$	76,481	$	-	$	1,392,111	$	1,468,592
Depreciation and amortization	$	331,498	$	1,268	$	-	$	332,766
Income tax expense	$	275,911	$	-2,708	$	-	$	273,203
Segment assets:
Additions to property, plant and equipment	$	73,332	$	369,642	$	-	$	442,974
Total assets	$	44,383,899	$	3,086,252	$	40,286,454	$	87,756,605

The reconciliations of segment information to the Company’s consolidated totals were as follows:

	September 30,2009			September 30,2008
Revenues:
Total reportable segments	$	24,936,721		$	31,885,576
Elimination of intersegment revenues		-			-
Total consolidated	$	24,936,721		$	31,885,576
Income (loss) from operations:
Total segments	$	1,973,483		$	2,342,687
Elimination of intersegment profits		-			-
Total consolidated	$	1,973,483		$	2,342,687
Total assets:
Total segments	$	111,814,088		$	87,756,605
Elimination of intersegment receivables		(57,443,102	)		(43,475,696	)
Total consolidated	$	54,370,986		$	44,280,909

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Summary of Critical Accounting Policies

New accounting policy

On January 1, 2009, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) 07-05, Determining whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock, which provides guidance on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in paragraph 11(a) of SFAS 133. Upon the adoption of EITF 07-05, the Company reclassified certain warrants that were previously classified equity to a derivative liability. On January 1, 2009, we adopted the following additional critical accounting policy as a result of a newly-adopted accounting standard:

Derivative warrant liability

SFAS 133, as amended, requires all derivatives to be recorded on the balance sheet at fair value. As a result, beginning January 1, 2009, certain derivative warrant liabilities are now separately valued and accounted for on our balance sheet, with any changes in fair value recorded in earnings.

We utilize the Black-Scholes option-pricing model to estimate fair value. Key assumptions of the Black-Scholes option-pricing model include the market price of the Company’s stock, applicable volatility rates, risk-free interest rates and the instrument’s remaining term. These assumptions require significant management judgment. In addition, changes in any of these variables during a period can result in material changes in the fair value (and resultant gains or losses) of this derivative instrument.

Results of Operations

Results of Operations for the three months ended September 30, 2009 as compared with the three months ended September 30, 2008.

The following table summarizes our results of operations for the three months ended September 30, 2009 and 2008. The table and the discussion below should be read in conjunction with the condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.

	Three months ended September 30
	2009				2008
	(in U.S. Dollars, except for percentages)
Sales	$	24,936,721	100.0	%	$	31,885,576		100.0	%
Gross Profit		4,633,705	18.6			4,590,371		14.4
Operating Expenses		2,660,222	10.7			2,247,684		7.0
Income From Operations		1,973,483	7.9			2,342,687		7.3
Other Income (Expenses)	（56,658）		(0.2	)		(1,426,969	)	(4.5	)
Income Tax Expense		130,479	0.5			273,203		0.9
Net Income	$	1,786,346	7.2	%	$	642,515		2.0	%

Change of fair value of derivative liability

Change of fair value of derivative liability was $0.14 million for the three months ended September 30, 2009 which reflects a reduction in the market value of certain outstanding warrants. See “Derivative Warrant Liability” in Note 5 to the Condensed Consolidated Financial Statements in this report.

Net Income

Net income was $1.8 million for the three months ended September 30, 2009 an increase of 178.0% compared to the three months ended September 30, 2008. Our diluted earnings per share were $0.13 and $0.05 for the three months ended September 30, 2009 and 2008, respectively.

Results of Operations for the nine months ended September 30, 2009 as compared with the nine months ended September 30, 2008.

The following table summarizes our results of operations for the nine months ended September 30, 2009 and 2008. The table and the discussion below should be read in conjunction with the condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.

	Nine months ended September 30
	2009					2008
	(in U.S. Dollars, except for percentages)
Sales	$	66,570,037		100.0	%	$	75,701,181		100.0	%
Gross Profit		13,855,421		20.8			12,665,244		16.7
Operating Expenses		8,611,441		12.9			6,128,759		8.1
Income From Operations		5,243,980		7.9			6,536,485		8.6
Other Income(Expenses)		(567,531	)	(0.9	)		(2,502,274	)	(3.3	)
Income Tax Expense		692,206		1.0			841,850		1.1
Net Income	$	3,984,243		6.0	%	$	3,192,361		4.2	%

Change of fair value of derivative liability

Change of fair value of derivative liability was $0.73 million for the nine months ended September 30, 2009 which reflects a reduction in the market value of certain outstanding warrants. See “Derivative Warrant Liability” in Note 5 to the Condensed Consolidated Financial Statements in this report.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2009, the end of the fiscal quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Because of the restatement of our September 30,2009 financial statements, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not operating effectively as of September 30,2009. The Company intends to engage outside experts to provide counsel and guidance in areas where it cannot economically maintain the required expertise internally (e.g., with the appropriate classifications and treatments of complex and non-routine transactions).

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 Securities Exchange Act of 1934) during the quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 6. EXHIBITS

The following exhibits are filed herewith:

Exhibit No.		Description

31.1		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

	EVER-GLORY INTERNATIONAL GROUP, INC.

January 28, 2010	By:	/s/ Edward Yihua Kang
		Edward Yihua Kang
		Chief Executive Officer
		(Principal Executive Officer)

By:	/s/ Yan Guo
	Yan Guo
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

Attached files

Ever-Glory International Group, Inc. Reports

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