UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2020~~March 31, 2021

☐ 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: ~~001-34124~~0-28806

Ever-Glory International Group Inc.

(Exact name of registrant as specified in its charter)

Florida

65-0420146

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Ever-Glory Commercial Center,

509 Chengxin Road, Jiangning Development Zone,

Nanjing, Jiangsu Province,

People’s Republic of China

(Address of principal executive offices)

86-25-5209-6831

~~(Registrant’s~~ (Registrant’s telephone number, including area code)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, 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). Yes ☒ No ☐

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

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

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

Securities registered under Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001		EVK		NASDAQ Global Market

Securities registered under Section 12(g) of the Act: None.

As of ~~October 13, 2020, 14,809,160~~May 8, 2021, 14,810,660 shares of the Company’s common stock, $0.001 par value, were issued and outstanding.

��

EVER-GLORY INTERNATIONAL GROUP, INC.

FORM 10-Q

INDEX

		Page Number

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		ii

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (unaudited)	1

	Condensed Consolidated Statements of Income (loss) and Comprehensive Income (loss) for the Three Months Ended March 31, 2021 and 2020 (unaudited)	2

	Condensed Consolidated Statements of Equity for The Three Months Ended March 31, 2021 and 2020 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)	4

	Notes to the Condensed Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3227

Item 4.	Controls and Procedures	3227

PART II. OTHER INFORMATION		28

Item 1.	Legal Proceedings	3328

Item 1A.	Risk Factors	3328

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3328

Item 3.	Defaults Upon Senior Securities	3328

Item 4.	Mine Safety Disclosure	34 28

Item 5.	Other Information	3428

Item 6.	Exhibits	3429

SIGNATURES		3530

Cautionary Note Regarding Forward-Looking Statements

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

	●	Competition within our industry;

	●	Seasonality of our sales;

	●	Success of our investments in new product development

	●	Our plans and ability to open new retail stores;

	●	Success of our acquired businesses;

	●	Our relationships with our major customers;

	●	The popularity of our products;

	●	Relationships with suppliers and cost of supplies;

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

	●	Anticipated effective tax rates in future years;

	●	Regulatory requirements affecting our business;

	●	Currency exchange rate fluctuations;

	●	Our future financing needs; and

	●	Our ability to obtain future financing on acceptable terms.

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

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

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands of U.S. Dollars, except share and per share data or otherwise stated)

~~AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019 (UNAUDITED)~~

	2020			2019			March 31, 2021			December 31, 2020
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	69,950		$	48,551		$	78,056		$	81,865
Restricted cash		20,552			2,204			45,660			39,858
Trading securities		817			-			3,036			1,792
Accounts receivable, net		62,866			78,053			46,719			53,285
Inventories		46,443			67,355			43,342			53,893
Advances on inventory purchases		7,393			9,681			7,802			10,261
Value added tax receivable		2,106			2,495			1,183			1,244
Other receivables and prepaid expenses		5,229			5,293			5,956			5,479
Amounts due from related parties		1,086			123			674			567
Total Current Assets		216,442			213,755			232,428			248,244

NONCURRENT ASSETS
NON-CURRENT ASSETS
Equity security investment		2,936			-			3,877			3,932
Intangible assets, net		4,628			4,729			4,712			4,794
Property and equipment, net		28,203			28,812			31,881			32,164
Operating lease right-of-use assets		37,705			53,379			55,839			41,690
Deferred tax assets		1,099			996			879			902
Total Non-Current Assets		74,571			87,916			97,188			83,482
TOTAL ASSETS	$	291,013		$	301,671		$	329,616		$	331,726

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Bank loans	$	48,444		$	29,931		$	71,534		$	65,919
Accounts payable		65,155			72,418			52,083			67,762
Accounts payable and other payables – related parties		3,878			4,811			2,829			3,764
Other payables and accrued liabilities		14,159			19,137			13,522			16,073
Value added and other taxes payable		1,134			1,657			684			909
Income tax payable		1,104			1,142			704			1,062
Current operating lease liabilities		29,296			44,888			47,327			33,481
Total Current Liabilities		163,170			173,984			188,683			188,970

NONCURRENT LIABILITIES
NON-CURRENT LIABILITIES
Non-current operating lease liabilities		8,491			8,537			8,622			8,307
TOTAL LIABILITIES		171,661			182,521			197,305			197,277

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS’ EQUITY
Stockholders’ equity:
Preferred stock ($0.001 par value, authorized 5,000,000 shares, no shares issued and outstanding)		-			-
Common stock ($0.001 par value, authorized 50,000,000 shares, 14,809,160 and 14,801,770 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively)		15			15
Common stock ($0.001 par value, authorized 50,000,000 shares, 14,810,660 and 14,809,160 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively)								15			15
Additional paid-in capital		3,650			3,640			3,655			3,650
Retained earnings		102,049			106,328			108,001			109,171
Statutory reserve		19,939			19,939			20,376			20,376
Accumulated other comprehensive (loss)		(1,308	)		(4,330	)
Accumulated other comprehensive income								3,238			4,590
Amounts due from related party		(3,430	)		(4,932	)		(2,974	)		(3,353	)
Total equity attributable to stockholders of the Company		120,915			120,660
Noncontrolling interest		(1,563	)		(1,510	)
Total Equity		119,352			119,150
Total equity								132,311			134,449
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	291,013		$	301,671		$	329,616		$	331,726

See the accompanying notes to the condensed consolidated financial statements.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)~~

Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
NET SALES $ 79,908 $ 113,326 $ 188,350 $ 278,598
COST OF SALES 56,235 88,967 134,193 195,895

GROSS PROFIT 23,673 24,359 54,157 82,703

OPERATING EXPENSES
Selling expenses 12,996 17,944 39,101 58,651
General and administrative expenses 7,818 7,584 19,574 22,450
Total Operating Expenses 20,814 25,528 58,675 81,101

INCOME (LOSS) FROM OPERATIONS 2,859 (1,169 ) (4,518 ) 1,602

OTHER INCOME (EXPENSES)
Interest income 313 215 930 699
Interest expense (700 ) (265 ) (1,607 ) (1,036 )
Other income, net 574 502 2,236 1,616
Total Other Income, Net 187 452 1,559 1,279

INCOME (LOSS) BEFORE INCOME TAX EXPENSE 3,046 (717 ) (2,959 ) 2,881
Income tax expense (822 ) (387 ) (1,315 ) (2,667 )

NET INCOME (LOSS) 2,224 (1,104 ) (4,274 ) 214

Net loss (income) attributable to the non-controlling interest (8 ) 28 (4 ) 46
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY 2,216 (1,076 ) (4,278 ) 260

NET INCOME (LOSS) $ 2,224 $ (1,104 ) $ (4,274 ) $ 214

Foreign currency translation gain (loss) 4,664 (3,729 ) 2,964 (2,244 )
COMPREHENSIVE INCOME (LOSS) 6,888 (4,833 ) (1,310 ) (2,030 )

Comprehensive loss (income) attributable to the non-controlling interest 51 15 53 67
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY $ 6,939 $ (4,818 ) $ (1,257 ) $ (1,963 )

EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY’S STOCKHOLDERS
Basic and diluted $ 0.15 $ (0.07 ) $ (0.29 ) $ 0.02
Weighted average number of shares outstanding Basic and diluted 14,808,737 14,801,770 14,805,987 14,801,770

	Three Months Ended
	March 31, 2021			March 31, 2020

SALES	$	70,814		$	58,355

COST OF SALES		48,379			42,317

GROSS PROFIT		22,435			16,038

OPERATING EXPENSES
Selling expenses		15,548			13,478
General and administrative expenses		7,851			5,785
Total operating expenses		23,399			19,263

LOSS FROM OPERATIONS		(964	)		(3,225	)

OTHER INCOME (EXPENSE)
Interest income		224			277
Interest expense		(492	)		(341	)
Government subsidy		259			460
Other income (expense), net		532			358
Total other income (expense), net		523			754

LOSS BEFORE INCOME TAX		(441	)		(2,471	)

INCOME TAX EXPENSE		(729	)		(227	)

NET LOSS		(1,170	)		(2,698	)
Net income attributable to the non-controlling interest		-			(3	)
NET LOSS ATTRIBUTABLE TO THE COMPANY	$	(1,170	)	$	(2,701	)

NET LOSS	$	(1,170	)	$	(2,698	)
Foreign currency translation loss		(1,352	)		(1,437	)
COMPREHENSIVE LOSS	$	(2,522	)	$	(4,135	)

Comprehensive loss attributable to the non-controlling interest		-			6

COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY	$	(2,522	)	$	(4,129	)
LOSS PER SHARE:
Basic and diluted	$	(0.08	)	$	(0.18	)
Weighted average number of shares outstanding Basic and diluted		14,810,001			14,804,832

See the accompanying notes to the condensed consolidated financial statements.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED March 31, 2021 AND 2020 (Unaudited)

(In thousands of U.S. Dollars, except share and per share data or otherwise stated)

					Additional		Retained Earnings					Accumulated other			Amounts due from			Total equity attributable to stockholders			Non-
	Common Stock				paid-in					Statutory		Comprehensive			related			of the			controlling		Total
	Shares		Amount		capital		Unrestricted			reserve		Income (loss)			party			Company			Interest		equity
Balance at January 1, 2021		14,809,160	$	15	$	3,650	$	109,171		$	20,376	$	4,590		$	(3,353	)	$	134,449		$	-	$	134,449

Stock-based compensation		1,500		-		5		-			-		-			-			5			-		5
Net loss		-		-		-		(1,170	)		-		-			-			(1,170	)		-		(1,170	)
Net cash received from related party under counter guarantee agreement		-		-		-		-			-		-			379			379			-		379
Foreign currency translation loss		-		-		-		-			-		(1,352	)		-			(1,352	)		-		(1,352	)
Balance at March 31, 2021		14,810,660	$	15	$	3,655	$	108,001		$	20,376	$	3,238		$	(2,974	)	$	132,311			-	$	132,311

					Additional		Retained Earnings					Accumulated other			Amounts due from			Total equity attributable to stockholders			Non-
	Common Stock				paid-in					Statutory		Comprehensive			related			of the			controlling			Total
	Shares		Amount		capital		Unrestricted			reserve		Income (loss)			party			Company			Interest			equity
Balance at January 1, 2020		14,801,770	$	15	$	3,640	$	106,328		$	19,939	$	(4,330	)	$	(4,932	)	$	120,660			(1,510	)	$	119,150

Stock-based compensation		3,062		-		5		-			-		-			-			5			-			5
Net income (loss)		-		-		-		(2,701	)		-		-			-			(2,701	)		3			(2,698	)
Net cash received from related party under counter guarantee agreement		-		-		-		-			-		-			785			785			-			785
Foreign currency translation income (loss)		-		-		-		-			-		(1,440	)		-			(1,440	)		3			(1,437	)
Balance at March 31, 2020		14,804,832	$	15	$	3,645	$	103,627		$	19,939	$	(5,770	)	$	(4,147	)	$	117,309			(1,504	)	$	115,805

See the accompanying notes to the condensed consolidated financial statements.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)~~

Additional Retained Earnings Accumulated
other Amounts
due from Total
equity
attributable
to stockholders Non-
Common Stock paid-in Statutory Comprehensive related of the controlling Total
Shares Amount capital Unrestricted reserve loss party Company Interest equity
Balance at January 1, 2020 14,801,770 $ 15 $ 3,640 $ 106,328 $ 19,939 $ (4,330 ) $ (4,932 ) $ 120,660 (1,510 ) $ 119,150
Stock issued for compensation 3,062 - 5 - - - - 5 5
Net loss - - - (2,701 ) - - - (2,701 ) 3 (2,698 )
Net cash received from related party under counter guarantee agreement - - - - - - 785 785 - 785
Foreign currency translation gain (loss) (1,440 ) - (1,440 ) 3 (1,437 )
Balance at March 31, 2020 14,804,832 15 3,645 103,627 19,939 (5,770 ) (4,147 ) 117,309 (1,504 ) 115,805
Net loss (3,794 ) (3,794 ) (6 ) (3,800 )
Net cash received from related party under counter guarantee agreement 151 151 151
Foreign currency translation loss (261 ) (261 ) (2 ) (263 )
Balance at June 30, 2020 14,804,832 $ 15 $ 3,645 $ 99,833 $ 19,939 $ (6,031 ) $ (3,996 ) $ 113,405 (1,512 ) $ 111,893
Stock issued for compensation 4,328 - 5 - - - - 5 5
Net income 2,216 2,216 8 2,224
Net cash received from related party under counter guarantee agreement 566 566 - 566
Foreign currency translation gain 4,723 4,723 (59 ) 4,664
Balance at September 30, 2020 14,809,160 $ 15 $ 3,650 $ 102,049 $ 19,939 $ (1,308 ) $ (3,430 ) $ 120,915 (1,563 ) $ 119,352

Additional Retained Earnings Accumulated
other Amounts
due from Total
equity
attributable
to stockholders Non-
Common Stock paid-in Statutory Comprehensive related of the controlling Total
Shares Amount capital Unrestricted reserve income party Company Interest equity
Balance at January 1, 2019 14,798,198 $ 15 $ 3,627 $ 105,914 $ 19,083 $ (3,578 ) $ (10,354 ) $ 114,707 (1,551 ) $ 113,156
Stock issued for compensation 1,942 0.004 8 - - - - 8 8
Net income (loss) - - - (521 ) - - - (521 ) 66 (455 )
Net cash received from related party under counter guarantee agreement - - - - - - 1,101 1,101 - 1,101
Foreign currency translation gain 3,972 - 3,972 34 4,006
Balance at March 31, 2019 14,800,140 15 3,635 105,393 19,083 394 (9,253 ) 119,267 (1,451 ) 117,816
Net income (loss) 1,856 1,856 (83 ) 1,773
Net cash received from related party under counter guarantee agreement 1,390 1,390 1,390
Foreign currency translation loss (2,487 ) (2,487 ) 34 (2,453 )
Balance at June 30, 2019 14,800,140 $ 15 $ 3,635 $ 107,249 $ 19,083 $ (2,093 ) $ (7,863 ) $ 120,026 (1,500 ) $ 118,526
Stock issued for compensation 1,630 0.002 5 5 5

Net income (loss) (1,076 ) (1,076 ) (28 ) (1,104 )
Net cash advanced to related party under counter guarantee agreement 1,215 1,215 1,215
Foreign currency translation loss (3,729 ) (3,729 ) 43 (3,686 )
Balance at September 30, 2019 14,801,770 $ 15 $ 3,640 $ 106,173 $ 19,083 $ (5,822 ) $ (6,648 ) $ 116,441 (1,485 ) $ 114,956

	Three Months Ended
	March 31, 2021			March 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,170	)	$	(2,698	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		1,377			1,587
Gain on disposal of intangible assets		-			(268	)
Loss from sale of property and equipment		102			102
(Recovering from) Provision of bad debt allowance		(196	)		278
Provision for obsolete inventories		3,583			4,204
Changes in fair value of trading securities		(262	)		-
Changes in fair value of investment		28			-
Deferred income tax		17			104
Stock-based compensation		5			5
Changes in operating assets and liabilities
Accounts receivable		6,509			34,906
Inventories		6,805			10,303
Value added tax receivable		52			210
Other receivables and prepaid expenses		(367	)		364
Advances on inventory purchases		2,544			2,855
Amounts due from related parties		(71	)		142
Accounts payable		(14,690	)		(19,864	)
Accounts payable and other payables- related parties		(769	)		(1,038	)
Other payables and accrued liabilities		(3,221	)		(5,587	)
Value added and other taxes payable		(220	)		(31	)
Income tax payable		(358	)		(1,019	)
Net cash (used in) provided by operating activities		(302	)		24,555

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(1,378	)		(78	)
Disposal of intangible assets		-			353
Purchases of trading securities		(1,238	)		-
Proceeds from trading securities		255			-
Net cash (used in) provided by investing activities		(2,361	)		275

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		12,336			11,464
Repayment of bank loans		(6,168	)		(14,884	)
Net collection (advance) of amounts due from related party (equity)		148			748
Net cash provided by (used in) financing activities		6,316			(2,672	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(1,659	)		1,497

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		1,993			23,655

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		121,723			48,551

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	123,716		$	72,206

Reconciliation of cash, cash equivalents and restricted cash reported within their consolidated balance sheets:

Cash and Cash Equivalents		78,056			70,036
Restricted cash		45,660			2,170
	$	123,716		$	72,206

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	492		$	341
Income taxes	$	729		$	1,218

See the accompanying notes to the condensed consolidated financial statements.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~(In thousands of U.S. Dollars, except share and per share data or otherwise stated)~~

~~FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)~~

2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (4,274 ) $ 214
Adjustments to reconcile net (loss) income to cash provided by operating activities: 　　
Depreciation and amortization 4,114 6,824
Loss from sale of property and equipment 283 16
Provision of bad debt allowance 683 820
Provision for obsolete inventories 5,786 3,846
Investment loss from the trading securities 13 -
Deferred income tax (165 ) (2,388 )
Stock-based compensation 10 12
Changes in operating assets and liabilities
Accounts receivable 15,571 312
Inventories 16,135 (4,979 )
Value added tax receivable (577 ) (281 )
Other receivables and prepaid expenses 50 3,738
Advances on inventory purchases 2,461 (3,214 )
Amounts due from related parties (848 ) 16
Accounts payable (7,842 ) 6,253
Accounts payable and other payables- related parties (1,112 ) (692 )
Other payables and accrued liabilities (6,093 ) (10,594 )
Value added and other taxes payable 467 (4,120 )
Income tax payable (64 ) 746
Net cash provided by (used in) operating activities 24,598 (3,471 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,769 ) (6,555 )
Purchases of trading securities (825 ) -
Investment in a partnership (2,936 ) -
Net cash used in investing activities (6,530 ) (6,555 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans 66,599 42,570
Repayment of bank loans (49,278 ) (35,620 )
Net collection (advance) of amounts due from related party (equity) 1,618 3,937
Net cash provided by financing activities 18,939 10,887

EFFECT OF EXCHANGE RATE CHANGES ON CASH 2,740 (650 )
　　
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 39,747 211
　　
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 50,755 47,012
　　
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 90,502 $ 47,223

Reconciliation of cash, cash equivalents and restricted cash reported within their consolidated balance sheets:

Cash and Cash Equivalents 69,950 45,837
Restricted cash 20,552 1,386
$ 90,502 $ 47,223

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest $ 1,607 $ 1,036
Income taxes $ 1,455 $ 4,196
~~See the accompanying notes to the condensed consolidated financial statements.~~

~~EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES~~
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~
(UNAUDITED)

NOTE 1 ~~Nature of Operations and Basis of Presentation~~BASIS OF PRESENTATION

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

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

~~In March 2020, the Company incorporated Nanjing Rui Lian Technology~~Shanghai Yiduo Fashion Company Limited, ~~(“Nanjing Rui Lian”)~~the only then subsidiary with non-controlling interests, was deconsolidated from the financial statements as of December 31, 2020 as a result of bankruptcy liquidation.
He Meida was closed in April 2021, which is not a strategic shift and ~~it is~~does not have major effect on the Company’s ~~wholly-owned PRC subsidiaries. Nanjing Rui Lian is engaged in the business of garments trading.~~operations or financial results.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheet as of ~~September 30, 2020~~March 31, 2021 the condensed consolidated statements of income (loss) and comprehensive income (loss), condensed consolidated statements of equity, and condensed consolidated statements of cash flows for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. 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 8-03 of Regulation S-X of the Securities and ~~the SEC.~~Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements.

Wholesale revenues are generally higher in the third and fourth fiscal quarters, while retail revenues are generally higher in the first and fourth fiscal quarters. The results of operations for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 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, ~~2019.~~2020.


5

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC (“~~2019~~2020 Form 10-K.”)
~~Equity security investment~~
The Company accounts for equity security investments through which management exercises significant influence but does not have control over the investee under the equity method. Under the equity method, the investment is initially recorded at cost and adjusted for the Company’s share of undistributed earnings or losses of the investee every year.
The Company utilizes the measurement alternative for equity security investments that do not have readily determinable fair values and measures these investments at cost less impairment plus or minus observable price changes in orderly transactions for an identical or similar investment of the same issuer.
~~The Company classifies its equity security investment without readily determinable fair value as non-current assets on the consolidated balance sheets.~~

Use of Estimates

In preparing our condensed consolidated financial statements, we use estimates and assumptions that affect the reported amounts and disclosures. Our estimates are often based on complex judgments, probabilities and assumptions that we believe to be reasonable, but that are inherently uncertain and unpredictable. We are also subject to other risks and uncertainties that may cause actual results to differ from estimated amounts. Significant estimates include the assumptions used to value tax liabilities, derivative financial instruments, ~~equity security investments,~~ the estimates of the allowance for deferred tax assets, and the accounts receivable allowance, and impairment of long-lived assets and inventory write off.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”; In November 2019, the FASB issued ASU No. 2019-10 “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”; In March 2020, the FASB issued ASU No. 2020-03 “Codification Improvements to Financial Instruments”; which modifies the measurement of expected credit losses of certain financial instruments. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2022. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements.

NOTE 3 INVESTMENTS

Trading securities

Investments in equity securities of certain US public companies are accounted for as trading securities and measured subsequently at fair value in the ~~condensed~~ consolidated balance sheets. Net gains and losses recognized during the three months periods are summarized as follows (In thousands of U.S. Dollars).

Net gains and (losses) recognized during the period on equity securities $ (14 )
Less: Net gains and (losses) recognized during the period on equity securities sold during the period (1 )
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date $ (13 )
March 31,
2021 March 31,
2020
(In thousands of
U.S. Dollars)
Net gains recognized during the period on equity securities $ 262 $    -
Less: Net gains recognized during the period on equity securities sold during the period 54 -
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date $ 208 $ -

6

Equity security investment ~~without readily determinable fair value~~

In August 2020, Ever-Glory Apparel invested ~~$3.0~~$2.9 million (RMB 20.0 million) for 2.38% ownership in a partnership (“Partnership”)~~, which is planning to invest~~. In December 2020, the Partnership invested in a ~~Chinese~~ public ~~listed company.~~company in China. As a limited partner, the Company does not have ability to exercise significant influence due to lack of kick-out rights through voting interests. In the meantime, the Company entered an agreement with the general partner of the Partnership (GP) and an individual that the Company has the privilege to sell the ownership interests in the Partnership to GP or the individual for the consideration of the average net asset value ten trading days prior to the closing date, if the Company is not able to withdraw any part of the original investment from the Partnership in the twelve months period beginning the third year of the initial investment (“optional withdrawal period”). If the Company opts to withdraw entire investment during the optional withdrawal period, the GP will compensate up to 8% of annual return on investment. If the return on investment is in excess of 8% for any portion of the investment withdrawn during the optional withdrawal period, then 20% of the return in excess of 8% will be shared with the individual. The Company may also continue to invest in the Partnership beyond the optional withdrawal period, but none of above agreement with the GP and the individual is in place.

~~The Company reported this investment at cost since~~In December 2020, the Partnership invested in a public company in China. Since there is no readily determinable fair value of the equity investment, the Company started to measure its equity investment at ~~September 30,~~fair value using the public company’s stock price and the Company’s shares since December 31, 2020. At each reporting period, the Company ~~made~~makes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. There is no significant adverse change in the regulatory, economic, or technological environment of the investee. So the investment was not impaired at ~~September 30, 2020.~~March 31, 2021.

NOTE 4 INVENTORIES

Inventories at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consisted of the following:

September 30,
2020 December 31,
2019 March 31,
2021 December 31,
2020
(In thousands of
U.S. Dollars) (In thousands of
U.S. Dollars)
Raw materials $ 1,051 $ 1,468 $ 1,029 $ 1,297
Work-in-progress 7,349 8,025 11,211 8,130
Finished goods 38,043 57,862 31,102 44,466
Total inventories $ 46,443 $ 67,355 $ 43,342 $ 53,893

NOTE 5 BANK LOANS

Bank loans represent amounts due to various banks and are generally due on demand or within one year. These loans can be renewed with the banks. Short term bank loans consisted of the following as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

September 30,
2020 December 31,
2019 March 31,
2021 December 31,
2020
Bank (In thousands of
U.S. Dollars) (In thousands of
U.S. Dollars)
Shanghai Pudong Development Bank $ 47,943 $ 42,157
Industrial and Commercial Bank of China $ 20,552 $ 18,629 21,308 21,462
Shanghai Pudong Development Bank 22,754 -
China Minsheng Bank 2,936 2,866
Nanjing Bank 2,202 6,449 2,283 2,300
Bank of Communications - 1,426
HSBC - 561
$ 48,444 $ 29,931 $ 71,534 $ 65,919

In August ~~2018, Goldenway~~2020, Ever-Glory Apparel entered into a line of credit agreement for approximately $3.0 million (RMB20.0 million) with ~~Nanjing~~the Shanghai Pudong Development Bank ~~which allows the Company to borrow up to approximately $7.3 million (RMB50.0 million). These loans are~~and guaranteed by Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), an entity controlled by Mr. Kang, the Company’s Chairman and Chief Executive Officer. These loans are also collateralized by the Company’s property and equipment.Goldenway. As of March 31, 2021, Ever-Glory Apparel had borrowed $2.3 million (RMB 15.0 million) under this line of credit with annual interest 3.01% and due on September ~~30, 2020,~~2021. As of March 31, 2021, approximately ~~$7.3~~$0.7 million was unused and available under this line of credit.

7
From March 2020 to July 2020, Ever-Glory Apparel entered into a certificate of three-year time deposit of $29.0 million (RMB190.0 million) with the Shanghai Pudong Development Bank with annual interest rates ranging from 3.75% to 3.99%. From July to November 2020, Ever-Glory Apparel pledged the certificate of three-year time deposit to the Shanghai Pudong Development Bank and Ever-Glory Apparel had borrowed $29.0 million (RMB 190.0 million) under this line of certificate with an annual interest rate from 2.50% to 3.10% and due on between May 2021 and October 2021.

In December 2020, Goldenway entered into a certificate of three-year time deposit of $16.7 million (RMB110.0 million) with the Shanghai Pudong Development Bank with an annual interest rate of 3.85%. From November ~~2018,~~2020 to February 2021, Goldenway pledged the certificate of three-year time deposit to the Shanghai Pudong Development Bank and Goldenway had borrowed $16.7 million (RMB 110.0 million) under this line of certificate with annual interest rate of 2.90% and 3.4%, due between May 2021 and February 2022.
In April 2020, Goldenway entered into a line of credit agreement with Industrial and Commercial Bank of China, which allows the Company to borrow up to approximately $6.1 million (RMB40.0 million). These loans are collateralized by the Company’s property and equipment. As of March 31, 2021, Goldenway had borrowed $6.1 million (RMB40.0 million) from Industrial and Commercial Bank of China with an annual interest rate 4.57% and due in August 2021.
In July 2019, Ever-Glory Apparel entered into a line of credit agreement for approximately ~~$14.7~~$15.2 million (RMB100.0 million) with Industrial and Commercial Bank of China, which is collateralized by assets of Nanjing Knitting, an equity investee of Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), under a collateral agreement executed among Ever-Glory Apparel, Nanjing Knitting and the bank. As of ~~September 30, 2020,~~March 31, 2021, Ever-Glory Apparel had borrowed ~~$14.7~~$15.2 million (RMB 100.0 million) under this line of credit with annual interest rates ranging from ~~3.92%~~3.95% to 4.35% and due ~~on from October~~between May 2021 to March 2022.
In April 2020, Goldenway entered into a line of credit agreement with Nanjing Bank, which allows the Company to ~~May 2021.~~borrow up to approximately $6.9 million (RMB45.0 million). These loans are guaranteed by Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), an entity controlled by Mr. Kang, the Company’s Chairman and Chief Executive Officer. These loans are also collateralized by the Company’s property and equipment. As of March 31, 2021, approximately $6.9 million was unused and available under this line of credit.

In June ~~2019,~~2020, LA GO GO entered into a revolving line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately ~~$2.9~~$3.0 million (RMB20.0 million). The line of credit is guaranteed by Mr. Kang and Goldenway. As of ~~September 30, 2020,~~March 31, 2021, LA GO GO had borrowed ~~$2.2~~$2.3 million (RMB 15.0 million) under this line of credit with annual interest 4.55% and due onin September 2021. As of ~~September 30, 2020,~~March 31, 2021, approximately $0.7 ~~million was unused and available under this line of credit.~~
In August 2019, Ever-Glory Apparel and Goldenway collectively entered into a secured banking facility agreement for a combined revolving import facility, letter of credit, invoice financing facilities and a credit line for treasury products of up to $2.5 million with the Nanjing Branch of HSBC (China) Company Limited (“HSBC”). This agreement is guaranteed by the Company and Mr. Kang. As of September 30, 2020, approximately $2.5 million was unused and available under this line of credit.

In September 2019, Ever-Glory Apparel entered into a line of credit agreement for approximately ~~$8.8~~$9.1 million (RMB60.0 million) with Nanjing Bank and guaranteed by Jiangsu Ever-Glory, Mr. Kang and Goldenway. As of ~~September 30, 2020,~~March 31, 2021, approximately ~~$8.8~~$9.1 million was unused and available under this line of credit.

In September 2019, LA GO GO entered into a line of credit agreement for approximately $2.9 million (RMB20.0 million) with the Bank of Communications and guaranteed by Jiangsu Ever-Glory, Ever-Glory Apparel and Jiangsu LAGOGO. As of September 30, 2020, approximately $2.9 million was unused and available under this line of credit.
~~In September 2019,~~March 2021, Ever-Glory Apparel entered into a line of credit agreement for approximately $5.9 million (RMB40.0 million) with the Shanghai Pudong Development Bank and guaranteed by Goldenway. As of September 30, 2020, Ever-Glory Apparel had borrowed $2.2 million (RMB 15.0 million) under this line of credit with annual interest 3.01% and due on September 2021. As of September 30, 2020, approximately $3.7 million was unused and available under this line of credit. In March 2020, Ever-Glory Apparel entered into a certificate of three-year time deposit of $20.6 million (RMB140.0 million) with the Shanghai Pudong Development Bank with annual interest rates ranging from 3.85% to 3.99%. From July to September 2020, Ever-Glory Apparel pledged the certificate of three-year time deposit to the Shanghai Pudong Development Bank and Ever-Glory Apparel had borrowed $20.6 million (RMB 140.0 million) under this line of certificate with an annual interest rate of 2.62% and due on from July to September 2021.
In October 2019, LA GO GO entered into a line of credit agreement for approximately $2.9 million (RMB20.0 million) with China Minsheng Bank and guaranteed by Ever-Glory Apparel and Mr. Kang. As of September 30, 2020, LA GO GO had borrowed $2.9 million (RMB20.0 million) from China Minsheng Bank with an annual interest rate of 5.0% and due in November 2020.
In December 2019, Goldenway entered into a line of credit agreement with Industrial and Commercial Bank of China, which allows the Company to borrow up to approximately $5.9 million (RMB40.0 million). These loans are collateralized by the Company’s property and equipment. As of September 30, 2020, Goldenway had borrowed $5.9 million (RMB40.0 million) from Industrial and Commercial Bank of China with an annual interest rate 4.57% and due on August 2021.
~~In April 2020, Ever-Glory Apparel entered into a line of credit agreement for approximately $4.4~~$4.6 million (RMB30.0 million) with Bank of China and guaranteed by Jiangsu Ever-Glory. These loans are also collateralized by assets of Jiangsu Ever-Glory’s equity investee, Chuzhou Huarui, under a collateral agreement executed by Ever-Glory Apparel, Chuzhou Huarui and Bank of China. As of ~~September 30, 2020,~~March 31, 2021, approximately ~~$4.4~~$4.6 million was unused and available under this line of credit.

All bank loans are used to fund our daily operations. All loans have been repaid before or at maturity date.

Total interest expense on bank loans amounted to ~~$1.6~~$0.5 million and ~~$1.0 million for the nine months ended September 30, 2020 and 2019, respectively, and $0.7 million and $0.2~~$0.3 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

NOTE 6 INCOME TAX

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

All PRC subsidiaries, except for He Meida, are subject to income tax at the 25% statutory rate.

8
He Meida incorporated in Xizang (Tibet) Autonomous Region is subject to income tax at 15% statutory rate. The local government has implemented an income tax reduction from 15% to 9% valid through December 31, 2020. He Meida was closed in April 2021.

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

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

Ever-Glory Supply Chain Service Co., Limited was incorporated in Hongkong, and under the current laws of Hongkong, its income tax rate is 8.25% when its profit is under HKD 2.0 million and its income tax rate is 16.5% when its profit is over HKD 2.0 million.

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

After the tax liability adjustment resulted from the reevaluation of the Company’s tax position (resulting in the company allocating substantially all of the earnings of the Samoan subsidiary to the PRC and reporting such earnings as taxable in the PRC), pre-tax ~~income (loss)~~loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was taxable in the following jurisdictions:

Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019 2021 2020
(In thousands of U.S. Dollars) (In thousands of
U.S. Dollars)
PRC $ 3,057 $ (714 ) $ (2,943 ) $ 2,891 $ (438 ) $ (1,748 )
BVI - (720 )
Others (11 ) (3 ) (16 ) (10 ) (3 ) (3 )
$ 3,046 $ (717 ) $ (2,959 ) $ 2,881 $ (441 ) $ (2,471 )

The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Three months ended Nine months ended
June 30, September 30,
2020 2019 2020 2019
PRC statutory rate 25.0 % 25.0 % 25.0 % 25.0 %
Temporary difference between US GAAP and PRC tax accounting 2.0 (78.9 ) (69.5 ) 67.5
Effective income tax rate 27.0 % (53.9 )% (44.5 )% 92.5 %

2021 2020
PRC statutory rate 25.0 % 25.0 %
Temporary difference between US GAAP and PRC tax accounting (190.7 ) (34.2 )
Effective income tax rate (165.7 )% (9.2 )%

Income tax expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ is as follows:

Three months ended Nine months ended
September 30, September 30, 2021 2020
2020 2019 2020 2019 (In thousands of
U.S. Dollars)
Current $ 1,115 $ 387 $ 1,418 $ 2,377 $ 706 $ 345
Deferred (293 ) - (103 ) 290 23 (118 )
Income tax expense $ 822 $ 387 $ 1,315 $ 2,667 $ 729 $ 227

The Company’s deferred tax liabilities arise from differences between US GAAP and PRC tax accounting for certain revenue and expense items, including timing of deduction of losses from allowances.

9
The Company has not recorded U.S. deferred income taxes on approximately ~~$102.0~~$110.2 million of its non-U.S. subsidiaries’ undistributed earnings because such amounts are intended to be reinvested outside the United States indefinitely. OnThe U.S. Tax Reform signed into law on December 22, 2017 significantly modified the U.S. ~~enacted~~Internal Revenue Code by, among other things, reducing the ~~“Tax Cuts and Jobs Act” (“~~statutory U.S. ~~Tax Reform”) which made significant changes to corporate income tax law. One significant change was to decrease the general~~federal corporate income tax rate from ~~34%~~35% to 21%. This reduction had no effect on the Company’s income tax expense as the reduction in deferred tax assets was offset by an equivalent reduction in the valuation allowance. Another significant change resulting from U.S. Tax Reform is that any future remittances to the parent company from for taxable years beginning after December 31, 2017; limiting and/or eliminating many business ~~income earned by its subsidiaries outside of~~deductions; migrating the U.S. ~~will no longer~~ to ~~taxable to the Company under U.S.~~a territorial tax ~~law. The Company would be liable for payment~~system with a one-time transition tax on a mandatory deemed repatriation of ~~income tax, or reduction of the net operating loss carryover, at a reduced rate for any accumulated~~previously deferred foreign earnings and profits of its non-U.S. subsidiaries at December 31, 2017. U.S. Tax Reform includes provisions for Global Intangible Low-Taxed Income (“GILTI”) under which taxes on foreign income are imposed on the excess of a deemed return on tangible assets of certain foreign ~~subsidiaries~~subsidiaries; subject to certain limitations, generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries; and providing for ~~Base Erosion and Anti-Abuse Tax (“BEAT”) under which~~new taxes ~~are imposed~~ on certain ~~base eroding payments to affiliated~~ foreign companies. Consistent with accounting guidance, we treat BEAT as a period tax charge in the period the tax is incurred and have made an accounting policy election to treat GILTI taxes in a similar manner.earnings. The Company measured the current and deferred taxes based on the provisions of the Tax legislation. After the Company’s measurement, there is no deferred tax expense (income) relating to the Tax Act ~~changed~~changes for the ~~three and nine months~~year ended ~~September 30, 2020.~~ March 31, 2021.

NOTE 7 STOCKHOLDERS’ EQUITY
On January 31, 2019, the Company issued 1,942 shares of the Company’s common stock to two of the Company’s independent directors as compensation for their services rendered during the third and fourth quarter of 2018. The shares issued in 2019 were valued at $3.80 per share, which was the average market price of the common stock for the five days before the grant date.

On January 15, 2020, the Company issued 3,062 shares of Company’s common stock to two of the Company’s independent directors as compensation for their services rendered during the third and fourth quarter of 2019. The shares issued in 2020 were valued at ~~$1.65~~$1.41 per share, which was the average market price of the common stock for the five days before the grant date.

On ~~July 10, 2020,~~February 9, 2021, the Company issued ~~4,328~~1,500 shares of the Company’s common stock to two of the Company’s independent directors as compensation for their services rendered during the ~~first~~third and ~~second~~fourth quarter of 2020. The shares issued in ~~2020~~2021 were valued at ~~$1.15~~$3.34 per share, which was the average market price of the common stock for the five days before the grant date.

NOTE 8 RELATED PARTY TRANSACTIONS

Mr. Kang is the Company’s Chairman and Chief Executive Officer. Ever-Glory Enterprises (HK) Ltd. (Ever-Glory Enterprises) is the Company’s major shareholder. Mr. Xiaodong Yan was Ever-Glory Enterprises’ sole shareholder and sole director. Mr. Huake Kang, Mr. Kang’s son, acquired 83% interest of Ever-Glory Enterprises and became its sole director in 2014. All transactions associated with the following companies controlled by Mr. Kang or his son are considered to be related party transactions, and it is possible that the terms of these transactions may not be the same as those that would result from transactions between unrelated parties. All related party outstanding balances are short-term in nature and are expected to be settled in cash.


Other income from Related Parties

Jiangsu Wubijia Trading Company Limited (“Wubijia”) is an entity engaged in high-grade home goods sales and is controlled by Mr. Kang. Wubijia has sold their home goods on consignment in ~~certain~~some Company’s retail stores since the third quarter of 2014.

Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019 2021 2020
(In thousands of U.S. Dollars) (In thousands of
U.S. Dollars)
The Company received from the customers 3 11 12 57 $ 3 3
The Company paid to Wubijia (3 ) (11 ) (12 ) (50 ) (3 ) (3 )
The net income recorded as other income $     - $ - $ - $ 7 $ - $ -
Included in other income for the years ended March 31, 2021 and 2020 is rental income from EsC’Lav, the entity controlled by Mr. Kang under operating lease agreement with term through 2021. The rental income is $6,366 and $5,916 for the three months ended March 31, 2021 and 2020, respectively.
10

Other expenses due to Related Parties

Included in other expenses for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ are rent ~~costs~~ due to entities controlled by Mr. Kang under operating lease agreements as follows:

Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019 2021 2020
(In thousands of U.S. Dollars) (In thousands of
U.S. Dollars)
Chuzhou Huarui 51 52 153 140 55 50
Kunshan Enjin 22 22 65 66 23 22
Total $ 73 $ 74 $ 218 $ 206 $ 78 $ 72

The Company leases Chuzhou Huarui and Kunshan Enjin’s warehouse spaces because the locations are convenient for transportation and distribution.

Purchases from and Sub-contracts with Related Parties

The Company purchased raw materials from Nanjing Knitting totaled $0.2 million and $0.1 million during the three months ended March 31, 2021 and 2020, respectively.
In addition, ~~sub-contracts~~the Company sub-contracted certain manufacturing work to related companies totaled $4.7 million and $3.1 million for the three months ended March 31, 2021 and 2020, respectively. The Company provided raw materials to the sub-contractors and 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,~~March 31, 2021 and 2020 ~~and 2019~~ are as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
(In thousands of U.S. Dollars)
Chuzhou Huarui $ 421 $ 1,197 $ 1,411 $ 4,664
Fengyang Huarui 625 1,071 1,025 1,619
Nanjing Ever-Kyowa 166 342 608 1,097
Ever-Glory Vietnam 4,019 4,689 9,498 9,737
Nanjing Knitting 504 339 991 939
EsCeLav 9 28 33 129
Jiangsu Ever-Glory 144 345 771 815
$ 5,888 $ 8,011 $ 14,337 $ 19,000

2021 2020
(In thousands of
U.S. Dollars)
Ever-Glory Vietnam $ 3,083 $ 1,884
Chuzhou Huarui 491 513
Fengyang Huarui 319 158
Nanjing Ever-Kyowa 391 254
EsC’eLav 6 10
Jiangsu Ever-Glory 457 246
Total $ 4,747 $ 3,065

Accounts Payable – Related Parties

The accounts payable to related parties at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are as follows:

2020 2019 2021 2020
(In thousands of
U.S. Dollars) (In thousands of
U.S. Dollars)
Ever-Glory Vietnam $ 1,566 2,260 $ 2,211 1,727
Fengyang Huarui 336 414 2 150
Nanjing Ever-Kyowa 336 386 - 384
Chuzhou Huarui 1,134 1,064 215 1,234
Nanjing Knitting 398 186 228 257
Jiangsu Ever-Glory 109 501 173 12
Total $ 3,878 $ 4,811 $ 2,829 $ 3,764
11

Amounts Due From Related Parties-current assets

The amounts due from related parties at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are as follows:

2020 2019 2021 2020
(In thousands of
U.S. Dollars) (In thousands of
U.S. Dollars)
Jiangsu Ever-Glory 1,086 123 $ 660 $ 567
Esc’elav 14 -
Total $ 1,086 $ 123 $ 674 $ 567

Jiangsu Ever-Glory is an entity engaged in importing/exporting, apparel-manufacture, real-estate development, car sales and other activities. Jiangsu Ever-Glory is controlled by Mr. Kang. During three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company and Jiangsu Ever-Glory purchased raw materials on behalf of each other in order to obtain cheaper purchase prices. The Company purchased raw materials on Jiangsu Ever-Glory’s behalf and sold to Jiangsu Ever-Glory at a cost ~~of $0.7 million, $1.3 million, $0.8~~for $1.8 million and ~~$0.8~~$0.2 million during the three ~~and nine months~~month period ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Jiangsu Ever-Glory purchased raw materials on the Company’s behalf and sold to the Company at a cost ~~of $0 million, $0.8 million, $0~~for $0.5 million and ~~$0.1~~$0.7 million during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

Amounts Due From Related Party under Counter Guarantee Agreement

In March 2012, in consideration of the guarantees and collateral provided by Jiangsu Ever-Glory and Nanjing Knitting, the Company agreed to provide Jiangsu Ever-Glory a counter guarantee in the form of cash of not less than 70% of the maximum aggregate lines of credit obtained by the Company. Jiangsu Ever-Glory is obligated to return the full amount of the counter-guarantee funds provided upon expiration or termination of the underlying lines of credit and is to pay annual interest at the rate of 6.0% of amounts provided. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Jiangsu Ever-Glory has provided guarantees for approximately ~~$38.2~~$35.8 million (RMB ~~260~~235 million) and ~~$33.0~~$36 million (RMB ~~230~~235.0 million) of lines of credit obtained by the Company, respectively. Jiangsu Ever-Glory and Nanjing Knitting have also provided their assets as collateral for certain of these lines of credit. The value of the collateral, as per appraisals obtained by the banks in connection with these lines of credit is approximately ~~$29.4~~$31.3 million (RMB 205.5 million) and ~~$29.4~~$31.5 million (RMB 205.5 million) as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020 respectively. Mr. Kang has also provided a personal guarantee for ~~$17.2~~$12.2 million (RMB ~~120.3~~80.0 million) and ~~$14.5~~$14.8 million (RMB ~~100.0~~96.3 million) as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

At December 31, ~~2019, $4.7~~2020, $3.1 million (RMB ~~32.8~~20.0 million) was outstanding due from Jiangsu Ever-Glory under the counter guarantee agreement. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, an additional ~~$4.0~~$0.2 million (RMB ~~28.0~~1.2 million) was provided to and ~~$5.6~~repayment of $0.3 million (RMB ~~39.3~~2.2 million) was received from Jiangsu Ever-Glory under the counter-guarantee. As of ~~September 30, 2020,~~March 31, 2021, the amount of the counter-guarantee was ~~$3.2~~$2.9 million (RMB ~~21.4~~19.1 million) (the difference represents currency exchange adjustment of ~~$0.1~~$0.02 million), which was ~~8.3%~~8.11% of the aggregate amount of lines of credit. ~~Obtaining bank loan requires a higher guarantee deposit in this quarter.~~ This amount plus accrued interest of ~~$0.3~~$0.07 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G. At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the amount classified as a reduction of equity was ~~$3.4~~$3.0 million and ~~$5.0~~$3.4 million, respectively. Interest of 0.5% iswas charged on net amounts due from Jiangsu Ever-Glory at each month end. Since January 1, 2019, interest rate has changed to 0.3625% charged at each month end as the bank benchmark interest rate decreased. Interest income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was approximately ~~$0.03 million, $0.04 million, $0.05 million~~$0.3 thousands and ~~$0.2~~$0.02 million, respectively.

NOTE 9 COMMITMENTS AND CONTINGENCIES

Operating Lease Commitment

The Company recognized operating lease liabilities and operating lease right-of-use (ROU) assets on its balance sheets. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company has leases with fixed payments for land-use-rights, warehouses and logistics centers, flagship stores, and leases with variable payments for stores within shopping malls (“shopping mall stores”) in the PRC, which are classified as operating leases. Options to extend or renew are recognized as part of the lease liabilities and recognized as right of use assets. There are no residual value guarantees and no restrictions or covenants imposed by the leases.

12
The weighted average remaining lease term excluding stores in the shopping malls is 3130 years and the weighted average discount rate is 4.35%. The lease term for shopping mall stores is commonly one year with options to extend or renew, and the rent is predetermined with a percentage of sales. The Company estimates the next 12 months rent for the shopping mall stores by annualizing current period rent calculated with the percentage of sales. Thus, the ROU assets and lease liabilities may vary significantly at different period ends. For stores closed before the lease end, we would incur insignificant amounts in net of loss on impairment of ROU assets and gain on extinguishment of lease liabilities, which are recorded in the current period statement of income (loss) and comprehensive income (loss).

In the ~~nine~~three months ended ~~September 30,~~March 31, 2021, the costs of the leases recognized in cost of revenues and general administrative expenses are $9.9 million and $0.1 million, respectively. Cash paid for the operating leases including in the operating cash flows was $10.0 million. In the three months ended March 31, 2020, the costs of the leases recognized in cost of revenues and general administrative expenses are ~~$18.9~~$6.0 million and ~~$0.6~~$0.2 million, respectively. Cash paid for the operating leases including in the operating cash flows was ~~$19.5~~$6.2 million.

~~Future minimum~~The following table summarizes the maturity of operating lease ~~payments for leases with initial or remaining noncancelable lease terms in excess of one year are as follows:~~liabilities:

Year ending December 31, (In thousands of U.S. Dollars)
2020 387
2021 387 $ 563
2022 387 751
2023 401 766
2024 401 432
2025 432
Thereafter 12,374 12,883
$ 14,337
Total lease payment 15,827
Less: Interest 7,092
Total $ 8,735

Legal Proceedings

~~In March 2019, Shanghai La Go Go Fashion Company Limited (“LA GO GO”) filed~~We are not aware of any pending legal proceedings to which we are a ~~complaint against Shanghai Chijing Investment Management Co., Ltd. (“Shanghai Chijing”) for unpaid rent of RMB0.27 million ($0.04 million) per month~~party which is material or potentially material, either individually or in the ~~Shanghai People’s Court for Jiading District (the “District Court”). The rent arrears began accumulating~~aggregate. We are from ~~April 2018~~time to time, during the actual payment date. In July 2019, Shanghai Chijing filed counterclaims against LA GO GO to claim RMB10.19 million ($1.45 million) in damages, alleging that LA GO GO had not fulfilled its corresponding obligations as a landlord. As a result, the District Court froze the bank accountsnormal course of both Shanghai Chijing and LA GO GO. As of December 31, 2019, a total balance of RMB15.38 million ($2.2 million) was frozen in the bank accounts of LA GO GO. As of December 31, 2019, the Company had booked this restricted cash in other receivables. On March 10, 2020, the District Court entered a judgment in favor of LA GO GO and dismissed most of Shanghai Chijing’s counterclaims. The District Court ordered Shanghai Chijing to pay to LA GO GO an aggregate sum of RMB4.77 million ($0.68 million), which is the accumulated unpaid rent from April 2018 to January 2020. The District Court also ordered LA GO GO to pay Shanghai Chijing RMB1.49 ($0.21 million) for the expenses incurred from remodeling. Both parties were required to pay the monetary damages within ten days after the District Court’s decision. LA GO GO appealed to the Shanghai Second Appellate Court (the “Appellate Court”) to claim more damages, while Shanghai Chijing appealed to reverse the judgment. LA GO GO later requested to withdraw its appeal, which was granted by the Appellate Court. In June 2020, the Appellate Court entered a final decision to dismiss the appeal of Shanghai Chijing and sustained the District Court’s judgment. LA GO GO has not received RMB4.77 million ($0.68 million) in monetary damages from Shanghai Chijing as of September 30, 2020, and has applied for compulsory enforcement with the District Court. The total balance of RMB15.38 million ($2.2 million) in LA GO GO’s bank accounts were unfrozen after the final decision in July 2020.

~~In addition to the foregoing, the Company may become~~our business operations, subject to ~~other~~various litigation claims and legal ~~proceedings~~disputes. We do not believe that ~~arise in~~ the ~~ordinary course~~ultimate disposition of ~~business and have not been finally adjudicated. Adverse decisions in~~ any of ~~the foregoing may~~these matters will have a material adverse effect on our financial position, results of operations ~~cash flows~~ or ~~our financial condition.~~liquidity.
Lawsuits against Client A
In November 2020, the Company’s two subsidiaries, Ever-Glory International Group Apparel Inc. and Goldenway Nanjing Garments Company Limited filed a complaint against Client A (“Client A”) for unpaid goods worth RMB 70.15 million ($10.75 million) in the Tianjin No.1 Intermediate People’s Court based on processing contracts between the parties. The Company has applied for interim measures with the court and has frozen bank accounts of Client A for a total amount of RMB 68.12 million ($10.44 million). The Company has delivered goods worth RMB 62.06 million ($9.51 million) to Client A pursuant to the processing contracts. The Company also seeks Client A for the payment of the loss incurred from the cost of raw materials paid to suppliers in the amount of RMB 8.09 million ($1.24 million) in reliance on the processing contracts. The Company received RMB 71.4 million ($10.9 million) from Client A in April 2021 which settled the complaint amount.
13

NOTE 10 RISKS AND UNCERTAINTIES

Economic and Political Risks

The Company’s results of operations could be adversely affected by general conditions in the global economy, including conditions that are outside of its control, such as the impact of health and safety concerns from the outbreak of COVID-19. The outbreak in China has resulted in the reduction of customer traffic and temporary closures of shopping malls as mandated by the provincial governments in various provinces of China from late January to March, which has adversely affected the company isin the retail business with a decline in sales since February 2020. The Company’s wholesale business is also significantly affected as the Company is facing a sharp decline in its order quantities. Some of the Company’s wholesale clients have also cancelled or postponed existing orders. Due to the Chinese factories’ shutdowns and traffic restrictions during the outbreak in China and potential shutdowns and traffic restrictions in the countries where the Company’s suppliers are located, The Company’s supply chain and business operations of its suppliers may be affected. Disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of the Company’s or its suppliers’ or customers’ products, could have adverse ripple effects on the Company’s manufacturing output and delivery schedule. The Company could also face difficulties in collecting its accounts receivables due to the effects of COVID-19 on its customers and risk gaining a large amount of bad debt. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which the Company, its suppliers and customers operate.

Although China has already begun to recover from the outbreak of COVID-19, the epidemic continues to spread on a global scale and there is the risk of the epidemic returning to China in the future, thereby causing further business interruption. While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its common stock. If the Company’s future sales continue to decline significantly, it may risk facing financial difficulties due to its recurring fixed expenses. The extent to which COVID-19 impacts the Company’s operating is uncertain and cannot be predicted at this time, and it will depend on many factors and future developments, including new information about COVID-19 and any new government regulations which may emerge to contain the virus, among others.

The majority of the Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

Credit risk

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. 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 collectability of accounts receivables are incorrect, adjustments to the allowance may be required, which would reduce profitability.

Concentration risk

For the ~~nine months~~three-month period ended ~~September 30, 2020,~~March 31, 2021, the Company had ~~two~~only one wholesale ~~customers~~customer that represented approximately ~~12.2% and 10.3% of the Company’s wholesale revenues. For the three months ended September 30, 2020, the Company had two wholesale customers that represented approximately 18.0% and 11.5%~~12.6% of the Company’s revenues. For the ~~nine months~~three-month period ended ~~September 30, 2019,~~March 31, 2020, the Company had ~~one~~four wholesale ~~customer~~customers that represented approximately ~~17% of the Company’s revenues. For the three months ended September 30, 2019, the Company had one wholesale customer that represented approximately~~20%, 10%, 10% and 10% of the Company’s revenues.

For the wholesale business, the Company did not rely on any raw material supplier that represented more than 10% of the total raw material purchases during the three ~~and nine~~ months ended ~~September 30, 2020 and 2019.~~
For the Company’s retail business, the Company had four suppliers that represented approximately 37%, 21%, 17% and 14% of raw materials purchases during the nine months ended September 30, 2020. For the retail business, theMarch 31, 2021. The Company relied on ~~four~~one raw material ~~suppliers~~supplier that represented ~~approximately 28%, 27%, 18% and 15%~~11% of the total raw material purchases during the ~~nine~~three months ended ~~September 30, 2019.~~
~~For the wholesale business, the Company had two suppliers that represented approximately 11% and 10% of finished goods purchases during the nine months ended September 30,~~March 31, 2020. For the wholesale business, the Company did not rely on any finished goods supplier that represented more than 10% of the total finished goods purchases during the three and nine months ended September 30, 2019.

For the retail business, the Company ~~did not rely~~relied on ~~any supplier~~two raw material suppliers that represented ~~more than 10%~~approximately 46% and 38% of ~~the total finished goods~~raw material purchases during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021. The Company relied on two raw material suppliers that represented approximately 60% and 34% of raw material purchases during the three months ended March 31, 2020.
For the wholesale business, during the three months ended March 31, 2021, the Company relied on one manufacturer that represented 14.4% of finished goods purchases and during the three months ended March 31, 2020, ~~and 2019.~~ the Company relied on one manufacturer that represented 11% of finished goods purchases.
14

The Company’s revenues for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were earned in the following geographic areas:

Three months ended
September 30, Nine months ended
September 30,
2020 2019 2020 2019
(In thousands of U.S. Dollars)
The People’s Republic of China $ 7,171 $ 23,241 $ 14,935 $ 40,486
Hong Kong China 12,019 14,574 17,063 22,291
Germany 48 981 291 2,708
United Kingdom 7,116 10,555 8,425 13,393
Europe-Other 8,642 12,523 16,152 21,977
Japan 3,124 10,056 9,714 16,304
United States 6,945 9,807 22,823 29,931
Total wholesale business 45,065 81,737 89,403 147,090
Retail business 34,843 31,589 98,947 131,508
Total $ 79,908 $ 113,326 $ 188,350 $ 278,598

2021 2020
(In thousands of
U.S. Dollars)
Mainland China $ 7,490 $ 4,653
Hong Kong China 4,056 2,992
United Kingdom 1,053 837
Europe-Other 4,146 4,093
Japan 3,405 4,385
United States 3,069 5,328
Total wholesale business 23,219 22,288
Retail business 47,595 36,067
Total $ 70,814 $ 58,355

NOTE 11 SEGMENTS

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

Wholesale
segment Retail
segment Total
(In thousands of U.S. Dollars)
Nine months ended September 30, 2020
Segment profit or loss:
Net revenue from external customers $ 89,403 98,947 188,350
Income (loss) from operations $ 3,467 (7,985 ) (4,518 )
Interest income $ 865 65 930
Interest expense $ 1,382 225 1,607
Depreciation and amortization $ 841 3,273 4,114
Income tax expense $ 965 350 1,315
Segment assets:
Additions to property, plant and equipment 2,494 275 2,769
Total assets 126,755 164,258 291,013

Nine months ended September 30, 2019
Segment profit or loss:
Net revenue from external customers $ 147,090 131,508 278,598
Income from operations $ 6,925 (5,323 ) 1,602
Interest income $ 673 26 699
Interest expense $ 775 261 1,036
Depreciation and amortization $ 1,179 5,645 6,824
Income tax expense $ 1,617 1,050 2,667
Segment assets:
Additions to property, plant and equipment 1,069 5,486 6,555
Total assets 114,789 170,456 285,245
(a)  Wholesale segment

Wholesale
segment Retail
segment Total
(In thousands of U.S. Dollars)
Three months ended September 30, 2020
Segment profit or loss:
Net revenue from external customers $ 45,065 34,843 79,908
Income from operations $ 2,466 393 2,859
Interest income $ 289 24 313
Interest expense $ 662 38 700
Depreciation and amortization $ 257 261 518
Income tax expense $ 497 325 822

Three months ended September 30, 2019
Segment profit or loss:
Net revenue from external customers $ 81,737 31,589 113,326
Income from operations $ 4,551 (5,720 ) (1,169 )
Interest income $ 206 9 215
Interest expense $ 203 62 265
Depreciation and amortization $ 706 1,628 2,334
Income tax expense $ 143 244 388

(b)  Retail segment

Wholesale
segment Retail
segment Total
(In thousands of U.S. Dollars)
As of and for the period ended March 31, 2021
Segment profit or loss:
Net revenue from external customers $ 23,219 47,595 70,814
Loss from operations $ (705 ) (259 ) (964 )
Interest income $ 196 28 224
Interest expense $ 466 26 492
Depreciation and amortization $ 261 1,116 1,377
Loss before income tax expense (387 ) (54 ) (441 )
Income tax expense $ 325 404 729
Segment assets:
Additions to property, plant and equipment 734 644 1,378
Inventory 13,913 29,429 43,342
Total assets 181,535 148,081 329,616
Wholesale
segment Retail
segment Total
(In thousands of U.S. Dollars)
As of and for the period ended March 31, 2020
Segment profit or loss:
Net revenue from external customers $ 22,288 36,067 58,355
Loss from operations $ (674 ) (2,551 ) (3,225 )
Interest income $ 262 15 277
Interest expense $ 218 123 341
Depreciation and amortization $ 254 1,333 1,587
Loss before income tax expense 64 (2,535 ) (2,471 )
Income tax expense $ 186 41 227
Segment assets:
Additions to property, plant and equipment 419 (341 ) 78
Inventory 13,607 38,545 52,152
Total assets 82,846 171,517 254,363
NOTE 12 SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date which the consolidated financial statements were available to be issued. All subsequent events requiring recognition as of March 31, 2021 have been incorporated into these consolidated financial statements and there are no significant subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

The following discussion and analysis of our financial condition and results of operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 should be read in conjunction with the Financial Statements and corresponding notes included in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Special Note Regarding Forward-Looking Statements in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “target”, “forecast” and similar expressions to identify forward-looking statements.

Overview

Our Business

We are a retailer of branded fashion apparel and leading global apparel supply chain solution provider based in China. We are listed on the NASDAQ Global Market under the symbol of “EVK”.

We classify our businesses into two segments: Wholesale and Retail. Our wholesale business consists of wholesale-channel sales made principally to domestically and international recognized brands, and department stores located throughout Europe, the U.S., Japan and the People’s Republic of China (“PRC”). We focus on well-known, middle-to-high end casual wear, sportswear, and outerwear brands. Our retail business consists of retail-channel sales directly to consumers through retail stores located throughout the PRC as well as sales via online stores at Tmall, Dangdang mall, JD.com, VIP.com and etc.

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

Wholesale Business

We conduct our original design manufacturing (“ODM”) operations through seven wholly owned subsidiaries which are located in the Nanjing Jiangning Economic and Technological Development Zone and Shang Fang Town in the Jiangning District in Nanjing, Jiangsu province, China, Chuzhou, Anhui province, China and Samoa: Ever-Glory International Group Apparel Inc. (“Ever-Glory Apparel”), Goldenway Nanjing Garments Company Limited (“Goldenway”), Nanjing New-Tailun Garments Company Limited (“New Tailun”), Nanjing Catch-Luck Garments Co., Ltd. (“Catch-Luck”), Chuzhou Huirui Garments Co., Ltd. (“Huirui), ~~Nanjing Tai Xin Garments Trading Company Limited (“Tai Xin”),~~ Haian Tai Xin Garments Trading Company Limited (“Haian Tai Xin”), Nanjing Rui Lian Technology Company Limited (“Nanjing Rui Lian”), Ever-Glory Supply Chain Service Co., Limited (“Ever-Glory Supply Chain”) and Ever-Glory International Group (HK) Ltd. (“Ever-Glory HK”).

Retail Business

We conduct our retail operations through Shanghai LA GO GO Fashion Company Limited (“LA GO GO”), Jiangsu LA GO GO Fashion Company Limited (“Jiangsu LA GO GO”), Tianjin LA GO GO Fashion Company Limited (“Tianjin LA GO GO”), Shanghai Ya Lan Fashion Company Limited (“Ya Lan”), ~~Shanghai Yiduo Fashion~~Nanjing Tai Xin Garments Trading Company Limited (“~~Shanghai Yiduo”~~Tai Xin”), and Xizang He Meida Trading Company Limited (“He Meida”). He Media was closed in April 2021.
Shanghai Yiduo Fashion Company Limited, the only then subsidiary with non-controlling interests, was deconsolidated from the financial statements as of December 31, 2020 as a result of bankruptcy liquidation.

16

Business Objectives

Wholesale Business

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

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

● Expanding our global sourcing network;

● ~~Expanding our~~Exploring the overseas low-cost manufacturing ~~base (outside of mainland China);~~base;

● Focusing on high value-added products and continuing our strategy to produce mid-to-high end apparel;

● Continuing to emphasize product design and technology utilization;

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

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

Retail Business

The business objectives for our retail segment are to establish leading brands of women’s apparel and to build a nationwide retail network in China. As of ~~September 30, 2020,~~March 31, 2021, we had ~~923~~921 stores (including store-in-stores), which includes 5911 stores that were opened and ~~237~~26 stores that were closed ~~during nine months ended September 30, 2020.~~in the first quarter of 2021. We expect to ~~open~~increase an additional 2050 to ~~50 stores and close 20 to 30~~100 stores in ~~2020.~~2021.

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

● Building our retail brand to be recognized as a major player in the mid-to-high end women’s apparel market in China;

● Expanding our retail network throughout China;

● Improving our retail stores’ efficiency and increasing same-store sales;

● Continuing to launch retail flagship stores in Tier-1 cities and increasing our penetration and coverage in Tier-2 and Tier-3 cities; and

● ~~Becoming~~Taking advantage of our position as a multi-brand operator.
17

Partnership Investment

The Company had idle cash and cash equivalent in operation. In order to realize the capital preservation and appreciation, Ever-Glory Apparel invested in a Partnership in August 2020. As a limited partner of the Partnership, Ever-Glory Apparel does not have the right to kick-out and appointment of general manager. Therefore, Ever-Glory does not have ability to exercise significant influence. In the meantime, the Company entered an agreement with the GP and an individual that the Company has the privilege to sell the ownership interests in the Partnership to GP or the individual for the consideration of the average net asset value ten days prior to the closing date, if the Company is not able to withdraw any part of the original investment from the Partnership during the optional withdrawal period. If the Company opts to withdraw entire investment during the optional withdrawal period, the GP will compensate up to 8% of annual return on investment. If the return on investment is in excess of 8% for any portion of the investment withdrawn during the optional withdrawal period, then 20% of the return in excess of 8% will be shared with the individual. The Company may also continue to invest in the Partnership beyond the optional withdrawal period, but none of above agreement with the GP and the individual is in place. In December 2020, the Partnership invested in a public company in China.
Seasonality of Business

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

Collection Policy

Wholesale business

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

Retail business

For store-in-store shops, we generally receive payments from the stores between 60 to 90 days following the date of the register receipt. For our own flagship stores, we receive payments on the same day of the register receipt. For sales from e-commerce platforms such as Tmall, Dangdang mall, JD.com, VIP.com and etc., we generally receive payments between 5 to 15 days following the date of the register receipt.

Global Economic Uncertainty

Our business is dependent on consumer demand for our products. We believe that the significant uncertainty in the global economy and the slowdown of economies in the United States and Europe have increased our clients’ sensitivity to the cost of our products. We have experienced continued pricing pressure. If the global economic environment continues to be weak, these worsening economic conditions could have a negative impact on our sales growth and operating margins in our wholesale segment in ~~2020.~~2020 and 2021.

In addition, economic conditions in the United States and other foreign markets in which we operate could substantially affect our sales profitability, cash position and collection of accounts receivable. Global credit and capital markets have experienced unprecedented volatility and disruption. Business credit and liquidity have tightened in much of the world. Some of our suppliers and customers may face credit issues and could experience cash flow problems and other financial hardships. These factors currently have not had an impact on the timeliness of receivable collections from our customers. We cannot predict at this time how this situation will develop and whether accounts receivable may need to be allowed for or written off in the coming quarters.
18

Our results of operations could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the impact of health and safety concerns from the outbreak of COVID-19. The outbreak in China resulted in the reduction of customer traffic and temporary closures of shopping malls as mandated by the provincial governments in various provinces of China from late January to March, which had adversely affected our retail business with a decline in sales since February 2020. Our wholesale business was also significantly affected as we were facing a sharp decline in our order quantities. Some of our wholesale clients had also cancelled or postponed existing orders. Due to the Chinese factories’ shutdowns and traffic restrictions during the outbreak in China and potential shutdowns and traffic restrictions in the countries where our suppliers are located, our supply chain and business operations of our suppliers may be affected. Disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, could have adverse ripple effects on our manufacturing output and delivery schedule. We also face difficulties in collecting our accounts receivables due to the effects of COVID-19 on our customers and risk gaining a large amount of bad debt. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate.

Although China has already begun to recover from the outbreak of COVID-19, the epidemic continues to spread on a global scale and there is the risk of the epidemic returning to China in the future, thereby causing further business interruption. While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. If our future sales continue to decline significantly, we may risk facing bankruptcy due to our recurring fixed expenses. The extent to which COVID-19 impacts our results will depend on many factors and future developments, including new information about COVID-19 and any new government regulations which may emerge to contain the virus, among others.

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

Summary of Critical Accounting Policies

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

The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the SEC on March 30, 2021 (“2020 ~~(“2019~~ Form 10-K.”)

~~Fair Value Accounting~~
~~Accounting Standards Codification (“ASC”) 820 “~~~~Fair Value Measurements~~Estimates and ~~Disclosures~~”, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
~~Level 1~~ ~~Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;~~
~~Level 2~~ ~~Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;~~
~~Level 3~~ ~~Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).~~
The fair value of forward exchange contracts is based on broker quotes, if available. If broker quotes are not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the reporting date for the residual maturity of the contract using a risk-free interest rate based on government bonds.
As of September 30, 2020, and 2019, the Company’s financial assets (all Level 1) consist of cash placed with financial institutions and trading securities that management considers to be of a high quality.
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.
~~The Company has adopted ASC 825-10 “~~~~Financial Instruments~~”, 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.

~~Use of Estimates~~Assumptions

In preparing our condensed consolidated financial statements, we use estimates and assumptions that affect the reported amounts and disclosures. Our estimates are often based on complex judgments, probabilities and assumptions that we believe to be reasonable, but that are inherently uncertain and unpredictable. We are also subject to other risks and uncertainties that may cause actual results to differ from estimated amounts. Significant estimates in 2021 and 2020 include the assumptions used to value tax liabilities, ~~derivative financial instruments,~~ the estimates of the allowance for deferred tax assets, and the accounts receivable allowance, and impairment of long-lived assets and inventory ~~write off.~~write-offs.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13 “”Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”; In November 2019, the FASB issued ASU No. 2019-10 “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”; In March 2020, the FASB issued ASU No. 2020-03 “Codification Improvements to Financial Instruments”; which modifies the measurement of expected credit losses of certain financial instruments. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2022. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

19
The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements.
Results of Operations ~~for the three months ended September 30, 2020 and 2019~~

The following table summarizes our results of operations for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. The table and the discussion below should be read in conjunction with ~~our~~the condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.

Three Months Ended September 30,
2020 2019
(In thousands of U.S. dollars, except for percentages)
Sales $ 79,908 100.0 % $ 113,326 100.0 %
Gross Profit $ 23,673 29.6 % $ 24,359 21.5 %
Operating Expense $ 20,814 26.0 % $ 25,528 22.5 %
Income (Loss) From Operations $ 2,859 3.6 % $ (1,169 ) (1.0 )%
Other Income $ 187 0.2 % $ 452 0.4 %
Income tax expense $ 822 1.0 % $ 387 0.3 %
Net Income (Loss) $ 2,224 2.8 % $ (1,104 ) (1.0 )%
Three Months Ended March 31,
2021 2020
(In thousands of U.S. dollars, except for percentages)
Sales $ 70,814 100.0 % $ 58,355 100.0 %
Gross Profit 22,435 31.7 16,038 27.5
Operating Expenses 23,399 33.0 19,263 33.0
Loss Income From Operations (964 ) (1.4 ) (3,225 ) (5.5 )
Other Income, net 523 0.7 754 1.3
Income Tax Expense 729 1.0 227 0.4
Net Loss $ (1,170 ) (1.7 )% $ (2,698 ) (4.6 )%

Revenue

The following table sets forth a breakdown of our total sales, by region, for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

2020 % of
total sales 2019 % of
total sales
Growth (Decrease)
in 2020 compared
with 2019

Wholesale business (In thousands of U.S. dollars) (In thousands of U.S. dollars)
Mainland China $ 7,171 9.0 % $ 23,241 20.4 % (69.1 )%
Hong Kong China 12,019 15.0 14,574 12.8 (17.5 )
Germany 48 0.1 981 0.9 (95.1 )
United Kingdom 7,116 8.9 10,555 9.3 (32.6 )
Europe-Other 8,642 10.8 12,523 11.1 (31.0 )
Japan 3,124 3.9 10,056 8.9 (68.9 )
United States 6,945 8.7 9,807 8.7 (29.2 )
Total Wholesale business 45,065 56.4 81,737 72.1 (44.9 )
Retail business 34,843 43.6 31,589 27.9 10.3
Total sales $ 79,908 100.0 % $ 113,326 100.0 % (29.5 )%

2021 2020 Growth
(decrease)
Wholesale business (In thousands of U.S. dollars) % of total sales (In thousands of U.S. dollars) % of total sales in 2021
compared
with 2020
Mainland China $ 7,490 10.6 % $ 4,653 8.0 % 61.0 %
Hong Kong 4,056 5.7 2,992 5.1 35.6
United Kingdom 1,053 1.5 837 1.4 25.8
Europe-Other 4,146 5.9 4.093 7.1 1.3
Japan 3,405 4.8 4,385 7.5 (22.3 )
United States 3,069 4.3 5,328 9.1 (42.4 )
Total Wholesale business 23,219 32.8 22,288 38.2 4.2
Retail business 47,595 67.2 36,067 61.8 32.0
Total sales $ 70,814 100.0 % $ 58,355 100.0 % 21.4 %

~~Sales~~Total sales for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$79.9~~$70.8 million, ~~a 29.5% decrease compared with~~an increase of 21.4% from the three months ended ~~September 30, 2019.~~March 31, 2020. This ~~decrease~~increase was primarily attributable to a ~~44.9% decrease in sales~~4.2% increase in our wholesale business ~~partially offset by an 10.3%~~and a 32.0% increase in our retail business.
20

Sales generated from our wholesale business contributed ~~56.4%~~32.8% or ~~$45.1~~$23.2 million of our total sales for the three months ended ~~September 30, 2020, a 44.9% decrease~~March 31, 2021, an increase of 4.2% compared ~~with 72.1% or $81.7~~to $22.3 million in the three months ended ~~September 30, 2019.~~March 31, 2020. This ~~decrease~~increase was primarily attributable to ~~a decrease in~~increased sales in Mainland China, Hong Kong, ~~Germany, Europe-Other,~~the United Kingdom, and other European markets partially offset for decreased sales in Japan and the United ~~States and United Kingdom.~~States.

Sales generated from our retail business contributed ~~43.6%~~67.2% or ~~$34.8~~$47.6 million of our total sales for the three months ended ~~September 30, 2020,~~March 31, 2021, an ~~10.3%~~ increase of 32.0% compared ~~with 27.9%~~to 61.8% or ~~$31.6~~$36.1 million in the three months ended ~~September 30, 2019.~~March 31, 2020. This increase was primarily due to anthe increase in same-store sales.
Total retail store square footage and sales per square foot for the ~~e-commercesales.~~three months ended March 31, 2021 and 2020 are as follows:
2021 2020
Total store square footage 1,001,864 1,088,007
Number of stores 921 1,038
Average store size, square feet 1,088 1,048
Total store sales (in thousands of U.S. dollars) $ 47,595 $ 36,067
Sales per square foot $ 48 $ 33
Same-store sales and newly opened store sales for the three months ended March 31, 2021 and 2020 are as follows:
2021 2020
(In thousands of U.S. dollars)
Sales from stores opened for a full year $ 35,885 $ 24,813
Sales from newly opened store sales $ 3,933 $ 3,900
Sales from e-commerce platform $ 3,440 $ 4,217
Other* $ 4,337 $ 3,137
Total $ 47,595 $ 36,067
* Primarily sales from stores that were closed in the current reporting period.
We remodeled or relocated 54 stores in year 2020, and 2 stores during the three months ended March 31, 2021. We plan to relocate or remodel 50-100 stores in 2021. Remodels and relocations typically drive incremental same-store sales growth. A relocation typically results in an improved, more visible and accessible location, and usually includes increased square footage. We believe we will continue to have opportunities for additional remodels and relocations beyond 2021.  Same-store sales are calculated based upon stores that were open at least 12 full fiscal months in each reporting period and remain open at the end of each reporting period.

Costs and Expenses

Cost of Sales and Gross Margin

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

21
The following table sets forth the components of our cost of sales and gross profit both in amounts and as a percentage of total sales for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~  2020.

Growth
(Decrease) in
2020
Three months ended September 30, Compared
2020 2019 with 2019
(In thousands of U.S. dollars, except for percentages)
Net Sales for Wholesale Sales $ 45,065 100.0 % $ 81,737 100.0 % (44.9 )%
Raw Materials 20,435 45.3 39,488 48.3 (48.3 )
Labor 366 0.8 635 0.8 (42.3 )
Outsourced Production Costs 14,915 33.1 31,176 38.1 (52.2 )
Other and Overhead 157 0.3 181 0.2 (13.4 )
Total Cost of Sales for Wholesale 35,873 79.6 71,480 87.4 (49.8 )
Gross Profit for Wholesale 9,192 20.4 10,257 12.6 (10.4 )
Net Sales for Retail 34,843 100.0 31,589 100.0 10.3
Production Costs 13,212 37.9 12,765 40.4 3.5
Rent 7,150 20.5 4,722 14.9 51.4
Total Cost of Sales for Retail 20,362 58.4 17,487 55.3 16.4
Gross Profit for Retail 14,481 41.6 14,102 44.7 2.7
Total Cost of Sales 56,235 70.4 88,967 78.5 (36.8 )
Gross Profit $ 23,673 29.6 % $ 24,359 21.5 % (2.8 )%

Three Months Ended March 31, Growth
(Decrease)
in 2021
2021 2020 compared
(In thousands of U.S. dollars, except for percentages) with 2020
Wholesale Sales $ 23,219 100.0 % $ 22,288 100.0 % 4.2 %
Raw Materials 10,385 44.7 10,090 45.3 2.9
Labor 333 1.4 245 1.1 36.0
Outsourced Production Costs 7,833 33.7 8,370 37.6 (6.4 )
Other and Overhead 105 0.5 86 0.4 21.8
Total Cost of Sales for Wholesale 18,656 80.4 18,791 84.3 (0.7 )
Gross Profit for Wholesale 4,562 19.6 3,497 15.7 30.5

Net Sales for Retail 47,595 100.0 36,067 100.0 32.0
Production Costs 19,764 41.5 15,847 43.9 24.7
Rent 9,959 20.9 7,679 21.3 29.7
Total Cost of Sales for Retail 29,723 62.4 23,526 65.2 26.3
Gross Profit for Retail 17,873 37.6 12,541 34.8 42.5

Total Cost of Sales 48,379 68.3 42,317 72.5 14.3
Gross Profit $ 22,435 31.7 % $ 16,038 27.5 % 39.9 %

Raw material costs for our wholesale business were ~~45.3%~~44.7% of our total wholesale business sales in the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of 2.9% compared ~~with 48.3%~~to 45.3% in the three months ended ~~September 30, 2019.~~March 31, 2020.  The ~~decrease~~cost percentage to total sale increase was mainly due to ~~lower~~the higher raw ~~materials purchase~~material prices.

Labor costs for our wholesale business were ~~0.8%~~1.4% of our total wholesale business sales in the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of 36.0% compared ~~with 0.8%~~to 1.1% in the three months ended ~~September 30, 2019.~~March 31, 2020. The marginal increase was mainly due to the increased labor fee.

Outsourced production costs for our wholesale business ~~for~~decreased by 6.4% to $7.8 million in the three months ended ~~September 30,~~March 31, 2020 ~~decreased 52.2% to $14.9~~from $8.4 million ~~from $31.2 million for~~in the three months ended ~~September 30, 2019. Outsourced~~March 31, 2020. As a percentage of total wholesale sales, outsourced production costs ~~accounted for 33.1%~~were 33.7% of our total wholesale ~~business~~ sales in the three months ended ~~September 30, 2020,~~March 31, 20210, a ~~5.0%~~ decrease of 6.4% from the three months ended ~~September 30, 2019.~~March 31, 2020. This decrease ~~in percentage~~ was primarily attributable to increased outsourced orders to our related entities in Vietnam, which have lower labor costs compared to orders outsourced to Chinese factories.

Overhead and other expenses for our wholesale business accounted for ~~0.3%~~0.5% and 0.4% of our total wholesale business sales for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~compared with 0.2% of total~~respectively.
Gross profit for our wholesale business ~~sales~~ for the three months ended ~~September 30, 2019.~~
~~Wholesale business gross profit~~March 31, 2021 was $4.6 million, an increase of 30.5% compared to the three months ended March 31, 2020. Gross margin was 19.6% for the three months ended ~~September 30, 2020 was $9.2 million~~March 31, 2021, an increase of 30.5% compared ~~with $10.3 million~~to 15.7% for the three months ended ~~September 30, 2019. Gross profit accounted for 20.4% of our total wholesale sales for the three months ended September 30, 2020, compared with 12.6% for the three months ended September 30, 2019.~~March 31, 2020. The increase in gross margin was mainly due to ~~a decrease in raw material~~the decreased outsourced production costs.

Production costs for our retail business were ~~$13.2 million for the three months ended September 30, 2020 compared with $12.8~~$19.8 million during the three months ended ~~September 30, 2019. Retail~~March 31, 2021 compared to $15.8 million during the three months ended March 31, 2020. As a percentage of retail sales, retail production costs accounted for ~~37.9%~~41.5% of our total retail sales in the three months ended ~~September 30, 2020,~~March 31, 2021, compared ~~with 40.4% for~~to 43.9% of total retail sales in the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease in percentage was due to ~~decrease in overall purchase costs.~~ lower discounts on our products ended March 31, 2021 compared with the same period of the prior year.

Rent costs for our retail business ~~for the three months ended September 30, 2020~~ were ~~$7.2 million compared with $4.7~~$10.0 million for the three months ended ~~September 30, 2019. Rent~~March 31, 2021 compared to $7.7 million for the three months ended March 31, 2020. As a percentage of retail sales, rent costs ~~for our retail business~~ accounted for ~~20.5%~~20.9% of our total retail sales for the three months ended ~~September 30, 2020,~~March 31, 2021, compared ~~with 14.9%~~to 21.3% of total retail sales for the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~increase~~decrease in percentage was primarily attributable to ~~the increased of sales.~~lower rent at certain locations.

Gross profit in our retail business for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$14.5~~$17.9 million and gross margin was ~~41.6%~~37.6%. Gross profit in our retail business for the three months ended ~~September 30, 2019~~March 31, 2020 was ~~$14.1~~$12.5 million and gross margin was ~~44.7%~~34.8%. The increase in gross margin was attributable to decreased rent costs and production costs.
22

Total cost of sales for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$56.2~~$48.4 million, ~~a 36.8% decrease from $89.0~~compared to $42.3 million for the three months ended ~~September 30, 2019. Total~~March 31, 2020, an increase of 14.3%. As a percentage of total sales, cost of sales ~~as a percentage~~decreased to 68.3% of total sales for the three months ended ~~September 30, 2020 was 70.4%,~~March 31, 2021, compared ~~with 78.5%~~to 72.5% of total sales for the three months ended ~~September 30, 2019. Gross~~March 31, 2020. Consequently, gross margin increased to 31.7% for the three months ended ~~September 30, 2020 was 29.6% compared with 21.5%~~March 31, 2021 from 27.5% for the three months ended ~~September 30, 2019.~~  March 31, 2020.

Selling, General and Administrative Expenses

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

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

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

Three Months Ended September 30, Increase (Decrease) in 2020 Compared
2020 2019 to 2019
(In thousands of U.S. dollars, except for percentages)
Gross Profit $ 23,673 29.6 % $ 24,359 21.5 % (2.8 )%
Operating Expenses: 　　　
Selling Expenses 12,996 16.3 17,944 15.8 (27.6 )
General and Administrative Expenses 7,818 9.8 7,584 6.7 3.1
Total 20,814 26.0 25,528 22.5 (18.5 )
Income (Loss) from Operations $ 2,859 3.6 % $ (1,169 ) (1.0 )% 344.5 %
Three Months Ended March 31,
2021 2020
(In thousands of U.S. dollars, except for percentages) Increase
Gross Profit $ 22,435 31.7 % $ 16,038 27.5 % 39.9 %
Operating Expenses 　　　
Selling Expenses 15,548 22.0 13,478 23.1 15.4
General and Administrative Expenses 7,851 11.1 5,785 9.9 35.7
Total Operating Expenses 23,399 33.0 19,263 33.0 21.5
Loss from Operations $ (964 ) (1.4 )% $ (3,225 ) (5.5 )% 70.1 %

Selling expenses ~~for the three months ended September 30, 2020 decreased 27.6%~~increased 15.4% to ~~$13.0 million from $17.9~~$15.5 million for the three months ended ~~September 30, 2019.~~March 31, 2021 from $13.5 million for the three months ended March 31, 2020. The ~~decrease~~increase was attributable to the ~~travelling expenses.~~ increased sales.

General and administrative expenses ~~for the three months ended September 30, 2020~~ increased ~~3.1%~~35.7% to ~~$7.8 million from $7.6~~$7.9 million for the three months ended ~~September 30, 2019. The increase was attributable to the foreign currency transaction gain.~~
~~Income (Loss)~~March 31, 2020 from ~~Operations~~
~~Income (loss) from operations for the three months ended September 30, 2020 increased 344.5% to $2.8 million from ($1.2)~~$5.8 million for the three months ended ~~September 30, 2019. Income~~March 31, 2020. As a percentage of total sales, general and administrative expenses increased to 11.1% of total sales for the three months ended March 31, 2021, compared to 9.9% of total sales for the three months ended March 31, 2020. The increase was mainly attributable to the decreased business trip and the exemption of social benefits by the PRC government in 2020.
Loss from Operations
Loss from operations was $1.0 million for the three months ended March 31, 2021, compared to $3.2 million for the three months ended March 31, 2020. As a percentage of sales, loss from operations accounted for ~~3.6% and (1.0%)~~1.4% of our total sales ~~during~~for the three months ended ~~September 30,~~March 31, 2021, an increase of 70.1% compared to 5.5% for the three months ended March 31, 2020 ~~and 2019.~~as a result of increased gross profit.

Interest Expense

Interest expense was $0.5 million for the three months ended ~~September 30, 2020 was $0.7 million,~~March 31, 2021, an ~~164.2%~~ increase of 44.3% compared ~~with~~to the same period in ~~2019.~~2020. The increase was due to the increased bank loans.
23

Income Tax Expenses

Income tax expense was ~~$0.8~~$0.7 million and ~~$0.4~~$0.2 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

~~Net~~The Company’s operating subsidiaries are governed by the Income ~~(Loss)~~Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (“the Income Tax Laws”).
All PRC subsidiaries, except for He Meida, are subject to income tax at the 25% statutory rate.
He Meida incorporated in Xizang (Tibet) Autonomous Region is subject to income tax at 15% statutory rate. The local government has implemented an income tax reduction from 15% to 9% valid through December 31, 2020. He Meida was closed in April 2021.
Perfect Dream was incorporated in the British Virgin Islands (BVI), and under the current laws of the BVI dividends and capital gains arising from the Company’s investments in the BVI are not subject to income taxes.
Ever-Glory HK was incorporated in Samoa, and under the current laws of Samoa has no liabilities for income taxes.
Ever-Glory Supply Chain Service Co., Limited was incorporated in Hongkong, and under the current laws of Hongkong, its income tax rate is 8.25% when its profit is under HKD 2.0 million and its income tax rate is 16.5% when its profit is over HKD 2.0 million.
The PRC’s Enterprise Income Tax Law imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise in PRC to its immediate holding company outside China; such distributions were exempted under the previous income tax law and regulations. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company. The foreign invested enterprise became subject to the withholding tax starting from January 1, 2008. Given that the undistributed profits of the Company’s subsidiaries in China are intended to be retained in China for business development and expansion purposes, no withholding tax accrual has been made.

Net ~~income (loss)~~Loss
Net loss for the three months ended ~~September 30,~~March 31, 2021 and 2020 was ~~$2.2~~$1.2 million ~~a 301.4% increase compared with the same period in 2019.~~and $2.7 million, respectively. Our basic and diluted ~~earnings (loss)~~loss per share were ~~$0.15~~$0.08 and ~~($0.07)~~$0.18 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively.~~
~~Results of Operations for the nine months ended September 30, 2020 and 2019~~
The following table summarizes our results of operations for the nine months ended September 30, 2020 and 2019. The table and the discussion below should be read in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this report.
Nine Months Ended September 30,
2020 2019
(In thousands of U.S. Dollars, except for percentages)
Sales $ 188,350 100.0 % $ 278,598 100.0 %
Gross Profit 54,157 28.8 82,703 29.7
Operating Expense 58,675 31.2 81,101 29.1
(Loss) Income From Operations (4,518 ) (2.4 ) 1,602 0.6
Other Income 1,559 0.8 1,279 0.5
Income tax expense 1,315 0.7 2,667 1.0
Net (Loss) Income $ (4,274) (2.3 )% $ 214 0.1 %

~~Revenue~~
~~The following table sets forth a breakdown of our total sales, by region, for the nine months ended September 30, 2020 and 2019.~~
2020 % of total sales 2019 % of total sales
Growth (Decrease)
in 2019 compared
with 2018

Wholesale business (In thousands of U.S. dollars) (In thousands of U.S. dollars)
Mainland China $ 14,935 7.9 % $ 40,487 14.5 % (63.1 )%
Hong Kong China 17,063 9.1 22,291 8.0 (23.5 )
Germany 291 0.2 2,708 1.0 (89.3 )
United Kingdom 8,425 4.5 13,393 4.8 (37.1 )
Europe-Other 16,152 8.6 21,977 7.9 (26.5 )
Japan 9,714 5.2 16,304 5.9 (40.4 )
United States 22,823 12.1 29,930 10.7 (23.7 )
Total Wholesale business 89,403 47.5 147,090 52.8 (39.2 )
Retail business 98,947 52.5 131,508 47.2 (24.8 )
Total sales $ 188,350 100.0 % $ 278,598 100.0 % (32.4 )%
Sales for the nine months ended September 30, 2020 were $188.4 million, a decrease of 32.4% from the nine months ended September 30, 2019. This decrease was primarily attributable to a 39.2% decrease in sales in our wholesale business and a 24.8% decrease in our retail business.
Sales generated from our wholesale business contributed 47.5% or $89.4 million of our total sales for the nine months ended September 30, 2020, a decrease of 39.2% compared with 52.8% or $147.1 million in the nine months ended September 30, 2019. This decrease was primarily attributable to decreased sales in Hong Kong China, Germany, Europe-Other, Mainland China, United Kingdom, Japan and the United States.
Sales generated from our retail business contributed 52.5% or $98.9 million of our total sales for the nine months ended September 30, 2020, a decrease of 24.8% compared with 47.2% or $131.5 million in the nine months ended September 30, 2019. This decrease was primarily due to a decrease in same store sales.
~~Total retail store square footage and sales per square foot for the nine months ended September 30, 2020 and 2019 are as follows:~~
2020 2019
Total store square footage 983,291 1,219,459
Number of stores 923 1,157
Average store size, square feet 1,065 1,054
Total store sales (in thousands of U.S. dollars) $ 98,947 $ 131,508
Sales per square foot $ 101 $ 108

~~Same store sales and newly opened store sales for the nine months ended September 30, 2020 and 2019 are as follows:~~
2020 2019
(In thousands of U.S. dollars)
Sales from stores opened for a full year $ 77,727 $ 111,739
Sales from newly opened store sales $ 6,060 $ 6,027
Sales from e-commerce platform $ 10,355 $ 9,000
Other* $ 4,805 $ 4,742
Total $ 98,947 $ 131,508
* ~~Primarily sales from stores that were closed in the current reporting period.~~
We remodeled or relocated 117 stores in 2019, and 38 stores during the nine months ended September 30, 2020. We plan to relocate or remodel approximately 50 stores in 2020. Remodels and relocations typically drive incremental same-store sales growth. A relocation typically results in an improved, more visible and accessible location, and usually includes increased square footage. We believe we will continue to have opportunities for additional remodels and relocations beyond 2020.  Same-store sales are calculated based upon stores that were open at least 12 full fiscal months in each reporting period and remain open at the end of each reporting period.
~~Costs and Expenses~~
~~Cost of Sales and Gross Margin~~
Cost of goods sold includes the direct raw material cost, direct labor cost, and manufacturing overhead including depreciation of production equipment and rent, consistent with the revenue earned. Cost of goods sold excludes warehousing costs, which historically have not been significant.
~~The following table sets forth the components of our cost of sales and gross profit both in amounts and as a percentage of total sales for the nine months ended September 30, 2020 and 2019.~~
Growth
(Decrease) in
2020
Nine months ended September 30, Compared
2020 2019 with 2019
(In thousands of U.S. dollars, except for percentages)
Net Sales for Wholesale Sales $ 89,403 100.0 % $ 147,090 100.0 % (39.2 )%
Raw Materials 39,139 43.8 67,172 45.7 (41.7 )
Labor 910 1.0 1,340 0.9 (32.1 )
Outsourced Production Costs 31,909 35.7 55,455 37.7 (42.5 )
Other and Overhead 395 0.4 295 0.2 33.9
Total Cost of Sales for Wholesale 72,353 80.9 124,262 84.5 (41.8 )
Gross Profit for Wholesale 17,050 19.1 22,828 15.5 (25.3 )
Net Sales for Retail 98,947 100.0 131,508 100.0 (24.8 )
Production Costs 42,923 43.4 47,051 35.8 (8.8 )
Rent 18,917 19.1 24,582 18.7 (23.0 )
Total Cost of Sales for Retail 61,840 62.5 71,633 54.5 (13.7 )
Gross Profit for Retail 37,107 37.5 59,875 45.5 (38.0 )
Total Cost of Sales 134,193 71.2 195,895 70.3 (31.5 )
Gross Profit $ 54,157 28.8 % $ 82,703 29.7 % (34.5 )%

Raw material costs for our wholesale business were 43.8% of our total wholesale business sales in the nine months ended September 30, 2020, compared with 45.7% in the nine months ended September 30, 2019. The decrease was mainly due to lower raw materials purchase prices.
Labor costs for our wholesale business were 1.0% of our total wholesale business sales in the nine months ended September 30, 2020, compared with 0.9% in the nine months ended September 30, 2019. The marginal increase was mainly due to lower number of outsourced orders in 2020.
Outsourced manufacturing costs for our wholesale business were 35.7% of our total wholesale sales in the nine months ended September 30, 2020, compared with 37.7% in the nine months ended September 30, 2019. This decrease in percentage was primarily attributable to lower outsourced labor.
~~Overhead and other expenses for our wholesale business accounted for 0.4% and 0.2% of our total wholesale sales for the nine months ended September 30, 2020 and 2019, respectively.~~
Gross profit for our wholesale business for the nine months ended September 30, 2020 was $17.1 million, a 25.3% decrease compared with the nine months ended September 30, 2019. As a percentage of total wholesale business sales, gross profit was 19.1% of our total wholesale business sales for the nine months ended September 30, 2020, compared with 15.5% for the nine months ended September 30, 2019. The decrease in gross profits was mainly due to lower revenues.
Production costs for our retail business for the nine months ended September 30, 2020 were $42.9 million compared with $47.1 million for the nine months ended September 30, 2019. As a percentage of our total retail sales, production costs were 43.4% of our total retail sales for the nine months ended September 30, 2020, compared with 35.8% for the nine months ended September 30, 2019. The increase in percentage was due to higher discounts on our past season products in the nine months ended September 30, 2020 compared with the same period of the prior year in percentage of sales.
Rent costs for our retail business for the nine months ended September 30, 2020 were $18.9 million compared with $24.6 million for the nine months ended September 30, 2019. As a percentage of total retail sales, rent costs were 19.1% of our total retail sales for the nine months ended September 30, 2020 compared with 18.7% for the nine months ended September 30, 2019. The decrease was primarily attributable to lower rent at certain locations.
Gross profit for our retail business for the nine months ended September 30, 2020 was $37.1 million compared with $59.9 million for the nine months ended September 30, 2019. Gross margin for our retail business for the nine months ended September 30, 2020 was 37.5% compared with 45.5% for the nine months ended September 30, 2019.
Total cost of sales for the nine months ended September 30, 2020 was $134.2 million, a 31.5% decrease compared with the nine months ended September 30, 2019. As a percentage of total sales, total costs were 71.2% of total sales for the nine months ended September 30, 2020, compared with 70.3% for the nine months ended September 30, 2019. Total gross margin for the nine months ended September 30, 2020 was 28.8% compared with 29.7% for the nine months ended September 30, 2019.
~~Selling, General and Administrative Expenses~~
Our selling expenses consist primarily of local transportation, unloading charges, product inspection charges, salaries for retail staff and decoration and marketing expenses associated with our retail business.
Our general and administrative expenses include administrative salaries, office expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that are not directly attributable to our revenues.

Costs of our distribution network that are excluded from cost of sales consist of local transportation and unloading charges, and product inspection charges. Accordingly, our gross profit amounts may not be comparable to those of other companies who include these amounts in costs of sales.
Nine months ended September 30, Increase (Decrease) in 2020 Compared
2020 2019 to 2019
(In thousands of U.S. dollars, except for percentages)
Gross Profit $ 54,157 28.8 % $ 82,703 29.7 % (34.5 )%
Operating Expenses: 　　　
Selling Expenses 39,101 20.8 58,651 21.1 (33.3 )
General and Administrative Expenses 19,574 10.4 22,450 8.1 (12.8 )
Total 58,675 31.2 81,101 29.2 (27.7 )
(Loss) Income from Operations $ (4,518 ) (2.4 )% $ 1,602 0.5 % (382.0 )%
Selling expenses for the nine months ended September 30, 2020 were $39.1 million, a 33.3% decrease compared with the nine months ended September 30, 2019. The decrease was attributable to lower retail sales.
General and administrative expenses for the nine months ended September 30, 2020 were $19.6 million a 12.8% decrease compared with the nine months ended September 30, 2019. As a percentage of total sales, general and administrative expenses accounted for 10.4% of total sales for the nine months ended September 30, 2020, compared with 8.1% of total sales for the nine months ended September 30, 2019. The amount decrease was mainly attributable to the decline in number of stores.
~~(Loss) Income from Operations~~
(Loss) Income from operations for the nine months ended September 30, 2020 was ($4.5) million, a 382.0% decrease from $1.6 million for the nine months ended September 30, 2019. This decrease was due to decreased gross profit.
~~Interest Expense~~
~~Interest expense was $1.6 million and $1.0 million for the nine months ended September 30, 2020 and 2019, respectively. The increase was due to the increased bank loans.~~
~~Income Tax Expense~~
~~Income tax expense for the nine months ended September 30, 2020 was $1.3 million, a 50.7% decrease compared to the same period of 2019. The decrease was primarily due to less taxable income.~~
~~Net (Loss) Income~~
Net (loss) income was ($4.3) million and $0.2 million during the nine months ended September 30, 2020 and 2019. Basic and diluted earnings per share were ($0.29) and $0.02 for the nine months ended September 30, 2020 and 2019, respectively.

Summary of Cash Flows

Summary cash flows information for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ is as follows:

2020 2019
(In thousands of U.S. dollars)
Net cash provided by (used in) operating activities $ 24,598 $ (3,471 )
Net cash used in investing activities $ (6,530 ) $ (6,555 )
Net cash provided by financing activities $ 18,939 $ 10,887
2021 2020
(In thousands of U.S. dollars)
Net cash (used in) provided by operating activities $ (302 ) $ 24,555
Net cash (used in) provided by investing activities $ (2,361 ) $ 275
Net cash provided by (used in) financing activities $ 6,316 $ (2,672 )

Net cash (used in) provided by operating activities was ($0.3) million and $24.6 million for the three months ended March 31, 2021 and 2020, respectively. This decrease was mainly due to decreased accounts payable and other payables.
Net cash (used in) provided by investing activities was ($2.4) million and $0.3 million for the three months ended March 31, 2021 and 2020. This change was mainly due to that we purchased property and equipment in the three months ended March 31, 2021 more than the same period of 2020. In addition, we purchased more trading securities.
24

Net cash provided by ~~operating~~(used in) financing activities ~~was $24.6~~were $6.3 million and ($2.7) million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~compared with net cash used in $3.5 million during~~respectively. During the ~~nine~~three months ended ~~September 30, 2019. The increase was primarily due to decrease in inventories.~~
Net cash used in investing activities was $6.5 million for the nine months ended September 30, 2020, compared with $6.6 million during the nine months ended September 30, 2019. This decrease was mainly due to the decreased in purchase of property and equipment and remodeling expenditure in 2020.
Net cash provided by financing activities was $18.9 million for the nine months ended September 30, 2020 compared with $10.9 million net cash provided by financing activities during the nine months ended September 30, 2019. During the nine months ended September 30, 2020,March 31, 2021, we ~~repaid $49.3 million of~~received new bank loans of $12.3 million and ~~received~~repaid the bank ~~loan proceeds~~loans of ~~$66.6~~$6.2 million. ~~Also, under the counter-guarantee agreement, we received $5.6 million from and paid $4.0 million to the related party during the nine months ended September 30, 2020.~~

Liquidity and Capital Resources

As of ~~September 30, 2020,~~March 31, 2021, we had cash and cash equivalents ~~of $70.0~~$78.0 million, ~~other~~ current assets ~~of $146.6~~other than cash $154.4 million and current liabilities ~~of $163.2~~$188.7 million. We presently finance our operations primarily from cash flows from operations and borrowings from banks, and we anticipate that these will continue to be our primary source of funds to finance our short-term cash needs.

Bank Loans

In August ~~2018,~~2020, Ever-Glory Apparel entered into a line of credit agreement for approximately $3.0 million (RMB20.0 million) with the Shanghai Pudong Development Bank and guaranteed by Goldenway. As of March 31, 2021, Ever-Glory Apparel had borrowed $2.3 million (RMB 15.0 million) under this line of credit with annual interest 3.01% and due on September 2021. As of March 31, 2021, approximately $0.7 million was unused and available under this line of credit.
From March 2020 to July 2020, Ever-Glory Apparel entered into a certificate of three-year time deposit of $29.0 million (RMB190.0 million) with the Shanghai Pudong Development Bank with annual interest rates ranging from 3.75% to 3.99%. From July to November 2020, Ever-Glory Apparel pledged the certificate of three-year time deposit to the Shanghai Pudong Development Bank and Ever-Glory Apparel had borrowed $29.0 million (RMB 190.0 million) under this line of certificate with an annual interest rate from 2.50% to 3.10% and due on between May 2021 and October 2021.
In December 2020, Goldenway entered into a certificate of three-year time deposit of $16.7 million (RMB110.0 million) with the Shanghai Pudong Development Bank with an annual interest rate of 3.85%. From November 2020 to February 2021, Goldenway pledged the certificate of three-year time deposit to the Shanghai Pudong Development Bank and Goldenway had borrowed $16.7 million (RMB 110.0 million) under this line of certificate with annual interest rates of 2.90% and 3.4%, due between May 2021 and February 2022.
In April 2020, Goldenway entered into a line of credit agreement with Industrial and Commercial Bank of China, which allows the Company to borrow up to approximately $6.1 million (RMB40.0 million). These loans are collateralized by the Company’s property and equipment. As of March 31, 2021, Goldenway had borrowed $6.1 million (RMB40.0 million) from Industrial and Commercial Bank of China with an annual interest rate 4.57% and due in August 2021.
In July 2019, Ever-Glory Apparel entered into a line of credit agreement for approximately $15.2 million (RMB100.0 million) with Industrial and Commercial Bank of China, which is collateralized by assets of Nanjing Knitting, an equity investee of Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), under a collateral agreement executed among Ever-Glory Apparel, Nanjing Knitting and the bank. As of March 31, 2021, Ever-Glory Apparel had borrowed $15.2 million (RMB 100.0 million) under this line of credit with annual interest rates ranging from 3.95% to 4.35% and due between May 2021 to March 2022.
In April 2020, Goldenway entered into a line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately ~~$7.3~~$6.9 million ~~(RMB50.0~~(RMB45.0 million). These loans are guaranteed by Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), an entity controlled by Mr. Kang, the Company’s Chairman and Chief Executive Officer. These loans are also collateralized by the Company’s property and equipment. As of ~~September 30, 2020,~~March 31, 2021, approximately ~~$7.3~~$6.9 million was unused and available under this line of credit.

In November 2018, Ever-Glory Apparel entered into a line of credit agreement for approximately $14.7 million (RMB100.0 million) with Industrial and Commercial Bank of China and collateralized by assets of Jiangsu Ever-Glory’s equity investee, Nanjing Knitting, under a collateral agreement executed among Ever-Glory Apparel, Nanjing Knitting and the bank. As of September 30,June 2020, ~~Ever-Glory Apparel had borrowed $14.7 million (RMB 100.0 million) under this line of credit with annual interest rates ranging from 3.92% to 4.35% and due on from October 2020 to May 2021.~~

~~In June 2019,~~ LA GO GO entered into a revolving line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately ~~$2.9~~$3.0 million (RMB20.0 million). The line of credit is guaranteed by Mr. Kang and Goldenway. As of ~~September 30, 2020,~~March 31, 2021, LA GO GO had borrowed ~~$2.2~~$2.3 million (RMB 15.0 million) under this line of credit with annual interest 4.55% and due onin September 2021. As of ~~September 30, 2020,~~March 31, 2021, approximately $0.7 million was unused and available under this line of credit.

In August 2019, Ever-Glory Apparel and Goldenway collectively entered into a secured banking facility agreement for a combined revolving import facility, letter of credit, invoice financing facilities and a credit line for treasury products of up to $2.5 million with the Nanjing Branch of HSBC (China) Company Limited (“HSBC”). This agreement is guaranteed by the Company and Mr. Kang. As of September 30, 2020, approximately $2.5 million was unused and available under this line of credit.
25

In September 2019, Ever-Glory Apparel entered into a line of credit agreement for approximately ~~$8.8~~$9.1 million (RMB60.0 million) with Nanjing Bank and guaranteed by Jiangsu Ever-Glory, Mr. Kang and Goldenway. As of ~~September 30, 2020,~~March 31, 2021, approximately ~~$8.8~~$9.1 million was unused and available under this line of credit.

In September 2019, LA GO GO entered into a line of credit agreement for approximately $2.9 million (RMB20.0 million) with the Bank of Communications and guaranteed by Jiangsu Ever-Glory, Ever-Glory Apparel and Jiangsu LAGOGO. As of September 30, 2020, approximately $2.9 million was unused and available under this line of credit.
~~In September 2019,~~March 2021, Ever-Glory Apparel entered into a line of credit agreement for approximately $5.9 million (RMB40.0 million) with the Shanghai Pudong Development Bank and guaranteed by Goldenway. As of September 30, 2020, Ever-Glory Apparel had borrowed $2.2 million (RMB 15.0 million) under this line of credit with annual interest 3.01% and due on September 2021. As of September 30, 2020, approximately $3.7 million was unused and available under this line of credit. In March 2020, Ever-Glory Apparel entered into a certificate of three-year time deposit of $20.6 million (RMB140.0 million) with the Shanghai Pudong Development Bank with annual interest rates ranging from 3.85% to 3.99%. From July to September 2020, Ever-Glory Apparel pledged the certificate of three-year time deposit to the Shanghai Pudong Development Bank and Ever-Glory Apparel had borrowed $20.6 million (RMB 140.0 million) under this line of certificate with an annual interest rate of 2.62% and due on from July to September 2021.
In October 2019, LA GO GO entered into a line of credit agreement for approximately $2.9 million (RMB20.0 million) with China Minsheng Bank and guaranteed by Ever-Glory Apparel and Mr. Kang. As of September 30, 2020, LA GO GO had borrowed $2.9 million (RMB20.0 million) from China Minsheng Bank with an annual interest rate of 5.0% and due in November 2020.
In December 2019, Goldenway entered into a line of credit agreement with Industrial and Commercial Bank of China, which allows the Company to borrow up to approximately $5.9 million (RMB40.0 million). These loans are collateralized by the Company’s property and equipment. As of September 30, 2020, Goldenway had borrowed $5.9 million (RMB40.0 million) from Industrial and Commercial Bank of China with an annual interest rate 4.57% and due on August 2021.
~~In April 2020, Ever-Glory Apparel entered into a line of credit agreement for approximately $4.4~~$4.6 million (RMB30.0 million) with Bank of China and guaranteed by Jiangsu Ever-Glory. These loans are also collateralized by assets of Jiangsu Ever-Glory’s equity investee, Chuzhou Huarui, under a collateral agreement executed by Ever-Glory Apparel, Chuzhou Huarui and Bank of China. As of ~~September 30, 2020,~~March 31, 2021, approximately ~~$4.4~~$4.6 million was unused and available under this line of credit.

All bank loans are used to fund our daily operations. All loans have been repaid before or at maturity date.

Capital Commitments

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

Uses of Liquidity

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

Sources of Liquidity

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

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

As of ~~September 30, 2020,~~March 31, 2021, we had access to approximately ~~$58.2~~$47.9 million in lines of credit, of which approximately ~~$30.3~~$22.0 million was unused and available. These credit facilities do not include any covenants. We have agreed to provide Jiangsu Ever-Glory a counter-guarantee of not less than 70% of the maximum aggregate lines of credit and borrowings guaranteed by Jiangsu Ever-Glory and collateralized by the assets of Jiangsu Ever-Glory and its equity investee, Nanjing Knitting, under agreements executed between the Company, Jiangsu Ever-Glory, Nanjing Knitting, and the banks. The maximum aggregate lines of credit and available borrowings was approximately ~~$38.2~~$35.8 million (RMB ~~260~~235.0 million) and ~~$3.2~~approximately $2.9 million (RMB ~~21.4~~19.10 million) was provided to Jiangsu Ever-Glory as the counter guarantee as of ~~September 30, 2020.~~March 31, 2021.

Foreign Currency Translation Risk

Our operations are, for the most part, located in the PRC, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility in foreign exchange rates between the United States dollar and the Chinese RMB. Most of our wholesale sales are in ~~dollars.~~USD. During 2003 and 2004, the exchange rate of RMB to the dollar remained constant at RMB 8.26 to the dollar. On July 21, 2005, the Chinese government adjusted the exchange rate from RMB 8.26 to 8.09 to the dollar. From that time, the RMB continued to appreciate against the U.S. dollar. As of ~~September 30, 2020,~~March 31, 2021, the market foreign exchange rate had ~~increased~~decreased to RMB ~~6.81~~6.57 to one U.S. dollar. We are continuously negotiating price adjustments with most of our customers based on the daily market foreign exchange rates, which we believe will reduce our exposure to exchange rate fluctuations in the future and will pass some of the increased cost to our customers.
26

In addition, the financial statements of subsidiaries located in China (whose functional currency is RMB) are translated into US dollars using the closing rate method. The balance sheet items are translated into US dollars using the exchange rates at the respective balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the period. All translation adjustments are included in accumulated other comprehensive income in the statement of equity. The foreign currency translation ~~gain (loss)~~loss for the ~~three and nine~~3 months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was ~~$4.7 million, $3.0 million, ($3.7)~~$1.4 million and ~~($2.2)~~$1.4 million, respectively.

OFF-BALANCE SHEET ARRANGEMENTS

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Limitations on the Effectiveness of Disclosure Controls.  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.

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures for the period ended ~~September 30, 2020.~~March 31, 2021. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were operating effectively.

Changes in Internal Control Over Financial Reporting

Other than described above, during the ~~third~~first quarter of ~~2020,~~2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

27

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~From~~We are not aware of any pending legal proceedings to which we are a party which is material or potentially material, either individually or in the aggregate. We are from time to time, ~~we may become involved in claims, suits, investigations and proceedings arising in~~during the ~~ordinary~~normal course of ~~business.~~our business operations, subject to various litigation claims and legal disputes. We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our financial position, results of operations or liquidity.

Lawsuits against Client A
In ~~March 2019, Shanghai La Go Go Fashion~~November 2020, the Company’s two subsidiaries, Ever-Glory International Group Apparel Inc. and Goldenway Nanjing Garments Company Limited ~~(“LA GO GO”)~~ filed a complaint against ~~Shanghai Chijing Investment Management Co., Ltd.~~Client A (“~~Shanghai Chijing”~~Client A”) for unpaid ~~rent of RMB0.27~~goods worth RMB 70.15 million ($~~0.04~~10.75 million) ~~per month~~ in the ~~Shanghai~~Tianjin No.1 Intermediate People’s Court based on processing contracts between the parties. The Company has applied for ~~Jiading District (the “District Court”). The rent arrears began accumulating from April 2018 to~~interim measures with the actual payment date. In July 2019, Shanghai Chijing filed counterclaims against LA GO GO to claim RMB10.19 million ($1.45 million) in damages, alleging that LA GO GO had not fulfilled its corresponding obligations as a landlord. As a result, the District Court froze thecourt and has frozen bank accounts of ~~both Shanghai Chijing and LA GO GO. As of December 31, 2019,~~Client A for a total ~~balance~~amount of ~~RMB15.38~~RMB 68.12 million ($~~2.2~~10.44 million) ~~was frozen~~. The Company has delivered goods worth RMB 62.06 million ($9.51 million) to Client A pursuant to the processing contracts. The Company also seeks Client A for the payment of the loss incurred from the cost of raw materials paid to suppliers in the ~~bank accounts~~amount of LA GO GO. As of December 31, 2019, the Company had booked this restricted cash in other receivables. On March 10, 2020, the District Court entered a judgment in favor of LA GO GO and dismissed most of Shanghai Chijing’s counterclaims. The District Court ordered Shanghai Chijing to pay to LA GO GO an aggregate sum of RMB4.77RMB 8.09 million ($0.68 million), which is the accumulated unpaid rent from April 2018 to January 2020. The District Court also ordered LA GO GO to pay Shanghai Chijing RMB1.49 ($0.21 million) for the expenses incurred from remodeling. Both parties were required to pay the monetary damages within ten days after the District Court’s decision. LA GO GO appealed to the Shanghai Second Appellate Court (the “Appellate Court”) to claim more damages, while Shanghai Chijing appealed to reverse the judgment. LA GO GO later requested to withdraw its appeal, which was granted by the Appellate Court. In June 2020, the Appellate Court entered a final decision to dismiss the appeal of Shanghai Chijing and sustained the District Court’s judgment. LA GO GO has not received RMB4.77 million ($0.681.24 million) in ~~monetary damages~~reliance on the processing contracts. The Company received RMB 71.4 million ($10.9 million) from ~~Shanghai Chijing as of September 30, 2020, and has applied for compulsory enforcement with~~Client A in April 2021 which settled the ~~District Court. The total balance of RMB15.38 million ($2.2 million) in LA GO GO’s bank accounts were unfrozen after the final decision in July 2020.~~complaint amount.

ITEM 1A. RISK FACTORS

As of the date of this report and except as set forth below, there have been no material changes to the risk factors disclosed in our annual report on Form 10-K filed with the SEC on March 30, ~~2020.~~2021.
~~Unfavorable global economic conditions, including as a result of health and safety concerns, could adversely affect our business, financial condition or results of operations.~~
The Company’s results of operations could be adversely affected by general conditions in the global economy, including conditions that are outside of its control, such as the impact of health and safety concerns from the outbreak of COVID-19. The outbreak in China has resulted in the reduction of customer traffic and temporary closures of shopping malls as mandated by the provincial governments in various provinces of China from late January to March, which has adversely affected the company is the retail business with a decline in sales since February 2020. The Company’s wholesale business is also significantly affected as the Company is facing a sharp decline in its order quantities. Some of the Company’s wholesale clients have also cancelled or postponed existing orders. Due to the Chinese factories’ shutdowns and traffic restrictions during the outbreak in China and potential shutdowns and traffic restrictions in the countries where the Company’s suppliers are located, The Company’s supply chain and business operations of its suppliers may be affected. Disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of the Company’s or its suppliers’ or customers’ products, could have adverse ripple effects on the Company’s manufacturing output and delivery schedule. The Company could also face difficulties in collecting its accounts receivables due to the effects of COVID-19 on its customers and risk gaining a large amount of bad debt. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which the Company, its suppliers and customers operate.
Although China has already begun to recover from the outbreak of COVID-19, the epidemic continues to spread on a global scale and there is the risk of the epidemic returning to China in the future, thereby causing further business interruption. While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its common stock. If the Company’s future sales continue to decline significantly, it may risk facing financial difficulties due to its recurring fixed expenses. The extent to which COVID-19 impacts the Company’s operating is uncertain and cannot be predicted at this time, and it will depend on many factors and future developments, including new information about COVID-19 and any new government regulations which may emerge to contain the virus, among others.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Securities Authorized for Issuance under Equity Incentive Plans

The following table presents information regarding equity instruments outstanding under our 2014 Equity Incentive Plan as of ~~September 30, 2020:~~March 31, 2021:

Equity Incentive Plan Information
Number of Securities to be issued upon exercise of outstanding options, warrants and rights Weighted-
average exercise price of outstanding options, warrants and rights Number of securities available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category (a) (b) (c)
Equity incentive plans approved by security holders - $     - 1,500,000
Total     - $ - 1,500,000
28

ITEM 6. EXHIBITS

The following exhibits are filed herewith:

Exhibit No. Description

3.1 Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of our Annual Report on Form 10-KSB, filed March 29, 2006);

3.2 Articles of Amendment as filed with the Department of State of Florida, effective November 20, 2007 (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, filed November 29, 2007);

3.3 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of our Current Report Form 8-K filed on April 22, 2008);

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

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

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

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

101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

29

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.

~~November~~May 13, ~~2020~~2021 EVER-GLORY INTERNATIONAL GROUP, INC.

By: /s/ Edward Yihua Kang
Edward Yihua Kang
Chief Executive Officer
(Principal Executive Officer)

By: /s/ Jiansong Wang
Jiansong Wang
Chief Financial Officer
(Principal Financial and Accounting Officer)

3530

	Three months ended						Nine months ended
	September 30,						September 30,
	2020			2019			2020			2019
NET SALES	$	79,908		$	113,326		$	188,350		$	278,598
COST OF SALES		56,235			88,967			134,193			195,895

GROSS PROFIT		23,673			24,359			54,157			82,703

OPERATING EXPENSES
Selling expenses		12,996			17,944			39,101			58,651
General and administrative expenses		7,818			7,584			19,574			22,450
Total Operating Expenses		20,814			25,528			58,675			81,101

INCOME (LOSS) FROM OPERATIONS		2,859			(1,169	)		(4,518	)		1,602

OTHER INCOME (EXPENSES)
Interest income		313			215			930			699
Interest expense		(700	)		(265	)		(1,607	)		(1,036	)
Other income, net		574			502			2,236			1,616
Total Other Income, Net		187			452			1,559			1,279

INCOME (LOSS) BEFORE INCOME TAX EXPENSE		3,046			(717	)		(2,959	)		2,881
Income tax expense		(822	)		(387	)		(1,315	)		(2,667	)

NET INCOME (LOSS)		2,224			(1,104	)		(4,274	)		214

Net loss (income) attributable to the non-controlling interest		(8	)		28			(4	)		46
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY		2,216			(1,076	)		(4,278	)		260

NET INCOME (LOSS)	$	2,224		$	(1,104	)	$	(4,274	)	$	214

Foreign currency translation gain (loss)		4,664			(3,729	)		2,964			(2,244	)
COMPREHENSIVE INCOME (LOSS)		6,888			(4,833	)		(1,310	)		(2,030	)

Comprehensive loss (income) attributable to the non-controlling interest		51			15			53			67
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	6,939		$	(4,818	)	$	(1,257	)	$	(1,963	)

EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY’S STOCKHOLDERS
Basic and diluted	$	0.15		$	(0.07	)	$	(0.29	)	$	0.02
Weighted average number of shares outstanding Basic and diluted		14,808,737			14,801,770			14,805,987			14,801,770

Net gains and (losses) recognized during the period on equity securities	$	(14	)
Less: Net gains and (losses) recognized during the period on equity securities sold during the period		(1	)
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(13	)

	March 31, 2021		March 31, 2020
	(In thousands of U.S. Dollars)
Net gains recognized during the period on equity securities	$	262	$	-
Less: Net gains recognized during the period on equity securities sold during the period		54		-
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date	$	208	$	-

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
	(In thousands of U.S. Dollars)				(In thousands of U.S. Dollars)
Raw materials	$	1,051	$	1,468	$	1,029	$	1,297
Work-in-progress		7,349		8,025		11,211		8,130
Finished goods		38,043		57,862		31,102		44,466
Total inventories	$	46,443	$	67,355	$	43,342	$	53,893

	Three months ended						Nine months ended
	June 30,						September 30,
	2020			2019			2020			2019
PRC statutory rate		25.0	%		25.0	%		25.0	%		25.0	%
Temporary difference between US GAAP and PRC tax accounting		2.0			(78.9	)		(69.5	)		67.5
Effective income tax rate		27.0	%		(53.9	)%		(44.5	)%		92.5	%

	2021			2020
PRC statutory rate		25.0	%		25.0	%
Temporary difference between US GAAP and PRC tax accounting		(190.7	)		(34.2	)
Effective income tax rate		(165.7	)%		(9.2	)%

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(In thousands of U.S. Dollars)
Chuzhou Huarui	$	421	$	1,197	$	1,411	$	4,664
Fengyang Huarui		625		1,071		1,025		1,619
Nanjing Ever-Kyowa		166		342		608		1,097
Ever-Glory Vietnam		4,019		4,689		9,498		9,737
Nanjing Knitting		504		339		991		939
EsCeLav		9		28		33		129
Jiangsu Ever-Glory		144		345		771		815
	$	5,888	$	8,011	$	14,337	$	19,000

Year ending December 31, (In thousands of U.S. Dollars)
2020	387
2021		387	$	563
2022		387		751
2023		401		766
2024		401		432
2025				432
Thereafter		12,374		12,883
	$	14,337
Total lease payment				15,827
Less: Interest				7,092
Total			$	8,735

	Wholesale segment		Retail segment			Total
	(In thousands of U.S. Dollars)
Nine months ended September 30, 2020
Segment profit or loss:
Net revenue from external customers	$	89,403		98,947			188,350
Income (loss) from operations	$	3,467		(7,985	)		(4,518	)
Interest income	$	865		65			930
Interest expense	$	1,382		225			1,607
Depreciation and amortization	$	841		3,273			4,114
Income tax expense	$	965		350			1,315
Segment assets:
Additions to property, plant and equipment		2,494		275			2,769
Total assets		126,755		164,258			291,013

Nine months ended September 30, 2019
Segment profit or loss:
Net revenue from external customers	$	147,090		131,508			278,598
Income from operations	$	6,925		(5,323	)		1,602
Interest income	$	673		26			699
Interest expense	$	775		261			1,036
Depreciation and amortization	$	1,179		5,645			6,824
Income tax expense	$	1,617		1,050			2,667
Segment assets:
Additions to property, plant and equipment		1,069		5,486			6,555
Total assets		114,789		170,456			285,245

	●	Expanding our global sourcing network;

	●	~~Expanding our~~Exploring the overseas low-cost manufacturing ~~base (outside of mainland China);~~base;

	●	Focusing on high value-added products and continuing our strategy to produce mid-to-high end apparel;

	●	Continuing to emphasize product design and technology utilization;

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

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

	●	Building our retail brand to be recognized as a major player in the mid-to-high end women’s apparel market in China;

	●	Expanding our retail network throughout China;

	●	Improving our retail stores’ efficiency and increasing same-store sales;

	●	Continuing to launch retail flagship stores in Tier-1 cities and increasing our penetration and coverage in Tier-2 and Tier-3 cities; and

	●	~~Becoming~~Taking advantage of our position as a multi-brand operator.

	~~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).~~

	Three Months Ended September 30,
	2020				2019
	(In thousands of U.S. dollars, except for percentages)
Sales	$	79,908	100.0	%	$	113,326		100.0	%
Gross Profit	$	23,673	29.6	%	$	24,359		21.5	%
Operating Expense	$	20,814	26.0	%	$	25,528		22.5	%
Income (Loss) From Operations	$	2,859	3.6	%	$	(1,169	)	(1.0	)%
Other Income	$	187	0.2	%	$	452		0.4	%
Income tax expense	$	822	1.0	%	$	387		0.3	%
Net Income (Loss)	$	2,224	2.8	%	$	(1,104	)	(1.0	)%

	Three Months Ended March 31,
	2021					2020
	(In thousands of U.S. dollars, except for percentages)
Sales	$	70,814		100.0	%	$	58,355		100.0	%
Gross Profit		22,435		31.7			16,038		27.5
Operating Expenses		23,399		33.0			19,263		33.0
Loss Income From Operations		(964	)	(1.4	)		(3,225	)	(5.5	)
Other Income, net		523		0.7			754		1.3
Income Tax Expense		729		1.0			227		0.4
Net Loss	$	(1,170	)	(1.7	)%	$	(2,698	)	(4.6	)%

	2020		% of total sales			2019		% of total sales			Growth (Decrease) in 2020 compared with 2019
Wholesale business	(In thousands of U.S. dollars)					(In thousands of U.S. dollars)
Mainland China	$	7,171		9.0	%	$	23,241		20.4	%		(69.1	)%
Hong Kong China		12,019		15.0			14,574		12.8			(17.5	)
Germany		48		0.1			981		0.9			(95.1	)
United Kingdom		7,116		8.9			10,555		9.3			(32.6	)
Europe-Other		8,642		10.8			12,523		11.1			(31.0	)
Japan		3,124		3.9			10,056		8.9			(68.9	)
United States		6,945		8.7			9,807		8.7			(29.2	)
Total Wholesale business		45,065		56.4			81,737		72.1			(44.9	)
Retail business		34,843		43.6			31,589		27.9			10.3
Total sales	$	79,908		100.0	%	$	113,326		100.0	%		(29.5	)%

	2021					2020					Growth (decrease)
Wholesale business	(In thousands of U.S. dollars)		% of total sales			(In thousands of U.S. dollars)		% of total sales			in 2021 compared with 2020
Mainland China	$	7,490		10.6	%	$	4,653		8.0	%		61.0	%
Hong Kong		4,056		5.7			2,992		5.1			35.6
United Kingdom		1,053		1.5			837		1.4			25.8
Europe-Other		4,146		5.9			4.093		7.1			1.3
Japan		3,405		4.8			4,385		7.5			(22.3	)
United States		3,069		4.3			5,328		9.1			(42.4	)
Total Wholesale business		23,219		32.8			22,288		38.2			4.2
Retail business		47,595		67.2			36,067		61.8			32.0
Total sales	$	70,814		100.0	%	$	58,355		100.0	%		21.4	%

	2021		2020
Total store square footage		1,001,864		1,088,007
Number of stores		921		1,038
Average store size, square feet		1,088		1,048
Total store sales (in thousands of U.S. dollars)	$	47,595	$	36,067
Sales per square foot	$	48	$	33

									Growth
									(Decrease) in 2020
	Three months ended September 30,								Compared
	2020				2019				with 2019
	(In thousands of U.S. dollars, except for percentages)
Net Sales for Wholesale Sales	$	45,065	100.0	%	$	81,737	100.0	%		(44.9	)%
Raw Materials		20,435	45.3			39,488	48.3			(48.3	)
Labor		366	0.8			635	0.8			(42.3	)
Outsourced Production Costs		14,915	33.1			31,176	38.1			(52.2	)
Other and Overhead		157	0.3			181	0.2			(13.4	)
Total Cost of Sales for Wholesale		35,873	79.6			71,480	87.4			(49.8	)
Gross Profit for Wholesale		9,192	20.4			10,257	12.6			(10.4	)
Net Sales for Retail		34,843	100.0			31,589	100.0			10.3
Production Costs		13,212	37.9			12,765	40.4			3.5
Rent		7,150	20.5			4,722	14.9			51.4
Total Cost of Sales for Retail		20,362	58.4			17,487	55.3			16.4
Gross Profit for Retail		14,481	41.6			14,102	44.7			2.7
Total Cost of Sales		56,235	70.4			88,967	78.5			(36.8	)
Gross Profit	$	23,673	29.6	%	$	24,359	21.5	%		(2.8	)%

	Three Months Ended March 31,								Growth (Decrease) in 2021
	2021				2020				compared
	(In thousands of U.S. dollars, except for percentages)								with 2020
Wholesale Sales	$	23,219	100.0	%	$	22,288	100.0	%		4.2	%
Raw Materials		10,385	44.7			10,090	45.3			2.9
Labor		333	1.4			245	1.1			36.0
Outsourced Production Costs		7,833	33.7			8,370	37.6			(6.4	)
Other and Overhead		105	0.5			86	0.4			21.8
Total Cost of Sales for Wholesale		18,656	80.4			18,791	84.3			(0.7	)
Gross Profit for Wholesale		4,562	19.6			3,497	15.7			30.5

Net Sales for Retail		47,595	100.0			36,067	100.0			32.0
Production Costs		19,764	41.5			15,847	43.9			24.7
Rent		9,959	20.9			7,679	21.3			29.7
Total Cost of Sales for Retail		29,723	62.4			23,526	65.2			26.3
Gross Profit for Retail		17,873	37.6			12,541	34.8			42.5

Total Cost of Sales		48,379	68.3			42,317	72.5			14.3
Gross Profit	$	22,435	31.7	%	$	16,038	27.5	%		39.9	%

	Three Months Ended September 30,									Increase (Decrease) in 2020 Compared
	2020				2019					to 2019
	(In thousands of U.S. dollars, except for percentages)
Gross Profit	$	23,673	29.6	%	$	24,359		21.5	%		(2.8	)%
Operating Expenses:
Selling Expenses		12,996	16.3			17,944		15.8			(27.6	)
General and Administrative Expenses		7,818	9.8			7,584		6.7			3.1
Total		20,814	26.0			25,528		22.5			(18.5	)
Income (Loss) from Operations	$	2,859	3.6	%	$	(1,169	)	(1.0	)%		344.5	%

	Nine Months Ended September 30,
	2020					2019
	(In thousands of U.S. Dollars, except for percentages)
Sales	$	188,350		100.0	%	$	278,598	100.0	%
Gross Profit		54,157		28.8			82,703	29.7
Operating Expense		58,675		31.2			81,101	29.1
(Loss) Income From Operations		(4,518	)	(2.4	)		1,602	0.6
Other Income		1,559		0.8			1,279	0.5
Income tax expense		1,315		0.7			2,667	1.0
Net (Loss) Income	$	(4,274)		(2.3	)%	$	214	0.1	%

	Equity Incentive Plan Information
	Number of Securities to be issued upon exercise of outstanding options, warrants and rights		Weighted- average exercise price of outstanding options, warrants and rights		Number of securities available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category	(a)		(b)		(c)
Equity incentive plans approved by security holders		-	$	-		1,500,000
Total		-	$	-		1,500,000

Exhibit No.		Description

3.1		Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of our Annual Report on Form 10-KSB, filed March 29, 2006);

3.2		Articles of Amendment as filed with the Department of State of Florida, effective November 20, 2007 (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, filed November 29, 2007);

3.3		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of our Current Report Form 8-K filed on April 22, 2008);

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

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

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

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

101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

~~November~~May 13, ~~2020~~2021	EVER-GLORY INTERNATIONAL GROUP, INC.

	By:	/s/ Edward Yihua Kang
		Edward Yihua Kang
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Jiansong Wang
		Jiansong Wang
		Chief Financial Officer
		(Principal Financial and Accounting Officer)