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 March 31, ~~2021~~2022

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

For the transition period from ____________ to ____________

Commission file number: 0-28806

Ever-Glory International Group Inc.

(Exact name of registrant as specified in its charter)

Florida

65-0420146

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Ever-Glory Commercial Center,

509 Chengxin Road, Jiangning Development Zone,

Nanjing, Jiangsu Province,

People’s Republic of China

(Address of principal executive offices)

86-25-5209-6831

(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 May 8, ~~2021, 14,810,660~~2022, 14,814,354 shares of the Company’s common stock, $0.001 par value, were issued and outstanding.

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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

Item 1.		Financial Statements (unaudited)	1
	~~Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (unaudited)~~	1

		Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2022 and December 31, 2021	1

		Condensed Consolidated Statements of ~~Income (loss)~~Loss and Comprehensive ~~Income (loss)~~Loss (unaudited) for the Three Months Ended March 31, ~~2021~~2022 and ~~2020 (unaudited)~~2021	2

		Condensed Consolidated Statements of Equity (unaudited) for The Three Months Ended March 31, ~~2021~~2022 and ~~2020 (unaudited)~~2021	3

		Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, ~~2021~~2022 and ~~2020 (unaudited)~~2021	4


		Notes to the Condensed Consolidated Financial Statements (unaudited)	5

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.		Controls and Procedures	27

PART II. OTHER INFORMATION			28

Item 1.		Legal Proceedings	28

Item 1A.		Risk Factors	28

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.		Defaults Upon Senior Securities	28

Item 4.		Mine Safety Disclosure	28

Item 5.		Other Information	28

Item 6.		Exhibits	29

SIGNATURES			30

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 (’SEC’).

PART I. FINANCIAL INFORMATION

~~ITEM 1.~~

~~Financial Statements~~

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)

March 31,
2021 December 31,
2020
ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 78,056 $ 81,865
Restricted cash 45,660 39,858
Trading securities 3,036 1,792
Accounts receivable, net 46,719 53,285
Inventories 43,342 53,893
Advances on inventory purchases 7,802 10,261
Value added tax receivable 1,183 1,244
Other receivables and prepaid expenses 5,956 5,479
Amounts due from related parties 674 567
Total Current Assets 232,428 248,244

NON-CURRENT ASSETS
Equity security investment 3,877 3,932
Intangible assets, net 4,712 4,794
Property and equipment, net 31,881 32,164
Operating lease right-of-use assets 55,839 41,690
Deferred tax assets 879 902
Total Non-Current Assets 97,188 83,482
TOTAL ASSETS $ 329,616 $ 331,726

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Bank loans $ 71,534 $ 65,919
Accounts payable 52,083 67,762
Accounts payable and other payables – related parties 2,829 3,764
Other payables and accrued liabilities 13,522 16,073
Value added and other taxes payable 684 909
Income tax payable 704 1,062
Current operating lease liabilities 47,327 33,481
Total Current Liabilities 188,683 188,970

NON-CURRENT LIABILITIES
Non-current operating lease liabilities 8,622 8,307
TOTAL LIABILITIES 197,305 197,277

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS’ EQUITY
Stockholders’ equity:
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 3,655 3,650
Retained earnings 108,001 109,171
Statutory reserve 20,376 20,376
Accumulated other comprehensive income 3,238 4,590
Amounts due from related party (2,974 ) (3,353 )
Total equity 132,311 134,449
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 329,616 $ 331,726

	March 31, 2022			December 31, 2021
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	41,717		$	56,573
Restricted cash		42,525			40,768
Trading securities		2,965			3,251
Accounts receivable, net		55,025			69,859
Inventories		65,013			63,841
Advances on inventory purchases		5,065			8,179
Value added tax receivable		1,296			1,693
Other receivables and prepaid expenses		6,732			6,345
Amounts due from related parties		1,308			220
Total Current Assets		221,646			250,729

NON-CURRENT ASSETS
Equity security investment		5,229			5,682
Intangible assets, net		4,770			4,794
Property and equipment, net		36,838			36,340
Operating lease right-of-use assets		52,751			50,077
Deferred tax assets		202			899
Other non-current assets		1,575			784
Total Non-Current Assets		101,365			98,576
TOTAL ASSETS	$	323,011		$	349,305

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Bank loans	$	69,300		$	68,992
Accounts payable		50,533			67,930
Accounts payable and other payables – related parties		1,474			1,332
Other payables and accrued liabilities		13,288			18,531
Value added and other taxes payable		-			999
Income tax payable		500			334
Current operating lease liabilities		44,287			41,633
Total Current Liabilities		179,382			199,751

NON-CURRENT LIABILITIES
Non-current operating lease liabilities		8,628			8,596
TOTAL LIABILITIES		188,010			208,347

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS’ EQUITY
Common stock ($0.001 par value, authorized 50,000,000 shares, 14,814,354 and 14,812,312 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively)		15			15
Additional paid-in capital		3,665			3,660
Retained earnings		103,121			108,210
Statutory reserve		21,245			21,245
Treasury stock (at cost,162,080 and 147,334 shares at March 31,2022 and December 31, 2021, respectively)		(400	)		(363	)
Accumulated other comprehensive income		7,355			8,191

Total equity		135,001			140,958
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	323,011		$	349,305

See the accompanying notes to the condensed consolidated financial statements.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED

CONSOLIDATED STATEMENTS OF ~~INCOME (LOSS)~~LOSS AND COMPREHENSIVE ~~INCOME (LOSS)~~LOSS (Unaudited)

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

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

	Three Months Ended
	March 31, 2022			March 31, 2021

NET SALES	$	64,773		$	70,814

COST OF SALES		47,401			48,379

GROSS PROFIT		17,372			22,435

OPERATING EXPENSES
Selling expenses		13,686			15,548
General and administrative expenses		6,994			7,851
Total operating expenses		20,680			23,399

LOSS FROM OPERATIONS		(3,308	)		(964	)

OTHER (EXPENSE) INCOME
Interest income		186			224
Interest expense		(613	)		(492	)
Government subsidy		3			259
(Loss) gain from changes in fair values of investments		(762	)		339
Other income		517			193
Total Other (Expense) Income, Net		(669	)		523

LOSS BEFORE INCOME TAX EXPENSE		(3,977	)		(441	)

INCOME TAX EXPENSE		(1,112	)		(729	)

NET LOSS	$	(5,089	)	$	(1,170	)
Foreign currency translation loss		(836	)		(1,352	)

COMPREHENSIVE LOSS	$	(5,925	)	$	(2,522	)
LOSS PER SHARE
Basic and diluted	$	(0.34	)	$	(0.08	)
Weighted average number of shares outstanding Basic and diluted		14,813,787			14,810,001

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, 2022 AND 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

																				Total equity
	Common Stock				Additional					Retained Earnings					Accumulated other			Amounts due from		attributable to stockholders			Non-
	Shares		Amount		paid-in capital		Treasury Stock			Unrestricted			Statutory reserve		Comprehensive income			related party		of the Company			controlling Interest		Total equity
Balance at January 1, 2022		14,812,312	$	15	$	3,660	$	(363	)	$	108,210		$	21,245	$	8,191		$	-	$	140,958		$	-	$	140,958

Stock issued for compensation		2,042		-		5		-			-			-		-			-		5					5
Net loss		-		-		-		-			(5,089	)		-		-			-		(5,089	)		-		(5,089	)
Repurchase of 14,746 shares of common stock		-		-		-		(37	)					-		-			-		(37	)		-		(37	)
Foreign currency translation loss																(836	)		-		(836	)		-		(836	)
Balance at March 31, 2022		14,814,354	$	15	$	3,665	$	(400	)	$	103,121		$	21,245	$	7,355		$	-	$	135,001		$	-	$	135,001

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

																				Total equity
	Common Stock				Additional				Retained Earnings					Accumulated other			Amounts due from			attributable to stockholders			Non-
	Shares		Amount		paid-in capital		Treasury Stock		Unrestricted			Statutory reserve		Comprehensive income			related party			of the Company			controlling Interest		Total 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 issued for compensation		1,500		-		5		-		-			-		-			-			5					5
Net income (loss)		-		-		-		-		(1,170	)		-		-			-			(1,170	)		-		(1,170	)
Transfer to reserve		-		-		-		-		-			-		-			-			-					-
Payments received from related party under counter guarantee agreement		-		-		-		-		-			-		-			379			379			-		379
Repurchase of 147,334 shares of common stock		-		-		-		-					-		-			-			-			-		-
Foreign currency translation gain															(1,352	)		-			(1,352	)		-		(1,352	)
Balance at December 31, 2021		14,810,660	$	15	$	3,655	$	-	$	108,001		$	20,376	$	3,238		$	(2,974	)	$	132,311		$	-	$	132,311

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)

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

	Three Months Ended
	March 31, 2022			March 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net less	$	(5,089	)		(1,170	)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		2,147			1,377
Loss from sale of property and equipment		52			102
Loss on deconsolidation of a subsidiary		-			-
Provision of (recovering from) bad debt allowance		298			(196	)
Provision for obsolete inventories		3,759			3,583
Changes in fair value of trading securities		(283	)		(262	)
Changes in fair value of investment		479			28
Deferred income tax		701			17
Stock-based compensation		5			5
Changes in operating assets and liabilities
Accounts receivable		14,815			6,509
Inventories		(4,680	)		6,805
Value added tax receivable		405			52
Other receivables and prepaid expenses		(278	)		(367	)
Advances on inventory purchases		3,150			2,544
Amounts due from related parties		(1,089	)		(71	)
Accounts payable		(16,838	)		(14,690	)
Accounts payable and other payables- related parties		226			(769	)
Other payables and accrued liabilities		(6,252	)		(3,221	)
Value added and other taxes payable		(1,067	)		(220	)
Income tax payable		165			(358	)
Net cash (used in) operating activities		(9,374	)		(302	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(2,507	)		(1,378	)
Net purchase (proceeds from) of trading securities		569			(983	)
Investment payment		(788	)		-
Net cash used in investing activities		(2,726	)		(2,361	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		12,600			12,336
Repayment of bank loans		(12,600	)		(6,168	)
Repurchase of common stock		(37	)		-
Net collection of amounts due from related party (equity)		-			148
Net cash (used in) provided by financing activities		(37	)		6,316

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(962	)		(1,660	)

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(13,099	)		1,993

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		97,341			121,723

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	84,242		$	123,716

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

Cash and Cash Equivalents		41,717			78,056
Restricted cash		42,525			45,660
	$	84,242		$	123,716

Cash paid during the period for:
Interest	$	613		$	492
Income taxes	$	1,112		$	729

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 THREE MONTHS ENDED MARCH 31, ~~2021~~2022 AND ~~2020~~2021

(UNAUDITED)

NOTE 1 BASIS OF PRESENTATION

Ever-Glory International Group, Inc. (the “Company”), together with its subsidiaries, is an apparel manufacturer, supplier and retailer in The People’s Republic of China (“China or “PRC”), with a wholesale segment and a retail segment. The Company’s wholesale business consists of recognized brands for department and specialty stores located in China, Europe, Japan and the United States. The Company’s retail business consists of flagship stores and store-in-stores 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 Rui Lian Technology Company Limited (“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”), ~~Xizang He Meida Trading Company Limited (“He Meida”),~~ and Nanjing Tai Xin Garments Trading Company Limited (“Tai Xin”).

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.

He Meida was closed in April 2021, which is not a strategic shift and does not have major effect on the Company’s 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 March 31, ~~2021~~2022 the condensed consolidated statements of ~~income (loss)~~loss and comprehensive ~~income (loss),~~loss, condensed consolidated statements of equity, and condensed consolidated statements of cash flows for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021. 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 Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements.

Wholesale revenues are generally higher in the third and fourth fiscal quarters, while retail revenues are generally higher in the first and fourth fiscal quarters. The results of operations for the three months ended March 31, ~~2021~~2022 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, ~~2020.~~2021.

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, ~~2020~~2021 filed with the SEC (“~~2020~~2021 Form 10-K.”)

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,~~ 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 consolidated balance sheets. Net gains and losses recognized during the three months periods are summarized as follows (In thousands of U.S. Dollars).

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 $ -

	March 31, 2022		March 31, 2021
	(In thousands of U.S. Dollars)
Net gains recognized during the period on equity securities	$	283	$	262
Less: Net gains recognized during the period on equity securities sold during the period		2		54
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date	$	281	$	208

Equity security investment

In August 2020, Ever-Glory Apparel invested ~~$2.9~~$3.2 million (RMB 20.0 million) for 2.38% ownership in a partnership (“Partnership”). In December 2020, the Partnership invested in a public 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.

In December 2020, the Partnership invested in a public company in China. Since there is readily determinable fair value of the equity investment, the Company started to measure its equity investment at fair value using the public company’s stock price and the Company’s shares since December 31, 2020. At each reporting period, the Company 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. SoThere were no indications of impairment during the ~~investment was not impaired at~~period ended March 31, ~~2021.~~2022.

Investment advances

In September 2021, Goldenway signed an agreement and promised to invest $7.9 million (RMB 50.0 million) cash for 20% interest of a Chinese private company. Under the agreement, Goldenway has the liquidation privilege to receive its share of the investee’s residual of its liquidated assets. If Goldenway’s share is less than its original investment amount plus 8% of annual return on investment, all other shareholders who signed this agreement shall use their shares of the liquidated assets to compensate Goldenway. The investee also shall compensate Goldenway if the investee cannot make agreed upon profits and the number of customers. As of March 31, 2022 , Goldenway advanced $1.6 million (RMB10.0 million) to the investee. Additional $ 0.8 million (RMB 5.0 million) was made in April 2022. The investment advances were recorded as other non-current assets.

NOTE 4 INVENTORIES

Inventories at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of the following:

March 31,
2021 December 31,
2020
(In thousands of
U.S. Dollars)
Raw materials $ 1,029 $ 1,297
Work-in-progress 11,211 8,130
Finished goods 31,102 44,466
Total inventories $ 43,342 $ 53,893

	March 31, 2022		December 31, 2021
	(In thousands of U.S. Dollars)
Raw materials	$	1,463	$	1,375
Work-in-progress		24,285		14,375
Finished goods		39,265		48,091
Total inventories	$	65,013	$	63,841

NOTE 5 RESTRICTED CASH

As of March 31, 2022 and December 31, 2021, restricted cash of $40.9 million (RMB260.0 million) and $39.2 million (RMB250.0 million) were cash on demand and time deposits pledged to Shanghai Pudong Development Bank for loans. As of March 31, 2022 and December 31, 2021, restricted cash of $1.6 million (RMB10.0 million) and $1.6 million (RMB10.0 million) were cash on demand and time deposits pledged to Nanjing Bank. (see Note 6)

NOTE 6 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 March 31, ~~2021~~2022 and December 31, ~~2020.~~2021.

March 31,
2021 December 31,
2020
Bank (In thousands of
U.S. Dollars)
Shanghai Pudong Development Bank $ 47,943 $ 42,157
Industrial and Commercial Bank of China 21,308 21,462
Nanjing Bank 2,283 2,300
$ 71,534 $ 65,919

	March 31, 2022		December 31, 2021
Bank	(In thousands of U.S. Dollars)
Shanghai Pudong Development Bank	$	40,950	$	39,200
Industrial and Commercial Bank of China		20,475		21,952
Nanjing Bank		7,875		7,840
	$	69,300	$	68,992

In August 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~~$29.9 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,~~2021, 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~~$29.9 million (RMB 190.0 million) under this line of certificate with an annual interest rate from ~~2.50%~~2.60% to ~~3.10%~~2.90% and due on between ~~May 2021 and October 2021.~~June to November 2022.

In December 2020, Goldenway entered into a certificate of three-year time deposit of ~~$16.7~~$17.3 million (RMB110.0 million) with the Shanghai Pudong Development Bank with an annual interest rate of 3.85%. From ~~November 2020~~July 2021 to February ~~2021,~~2022, Goldenway pledged the certificate of three-year time deposit to the Shanghai Pudong Development Bank and Goldenway had borrowed ~~$16.7~~$11.0 million (RMB ~~110.0~~70.0 million) under this line of certificate with annual interest rate offrom 2.60% to 2.90% ~~and 3.4%~~, due between ~~May 2021~~June 2022 and February ~~2022.~~2023.

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~~$6.3 million (RMB40.0 million). These loans are collateralized by the Company’s property and equipment. As of March 31, ~~2021,~~2022, Goldenway had borrowed ~~$6.1~~$6.3 million (RMB40.0 million) from Industrial and Commercial Bank of China with an annual interest rate 4.57% and due in August ~~2021.~~2022.

In ~~July~~August 2019, Ever-Glory Apparel entered into a line of credit agreement for approximately ~~$15.2~~$15.8 million (RMB100.0 million) with Industrial and Commercial Bank of China, which is collateralized by assets of ~~Nanjing Knitting, an equity investee of~~Jiangsu LA GO GO, Tianjin LA GO GO and Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), an entity controlled by Mr. Kang, the Company’s Chairman and Chief Executive Officer, under a collateral agreement executed among Ever-Glory Apparel, ~~Nanjing Knitting~~Jiangsu LA GO GO , Tianjin LA GO GO, Jiangsu Ever-Glory and the bank. As of March 31, ~~2021,~~2022, Ever-Glory Apparel had borrowed ~~$15.2~~$14.2 million (RMB ~~100.0~~90.0 million) under this line of credit with annual interest rates ranging from ~~3.95%~~3.92% to 4.35% and due between May ~~2021~~ to October 2022.As of March ~~2022.~~31, 2022, approximately $1.6 (RMB 10.0 million) million was unused and available under this line of credit.

In April 2020, Goldenway entered into a line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately ~~$6.9~~$7.1 million (RMB45.0 million). ~~These~~In May 2021,Goldenway pledged $1.6 million (RMB10.0 million) to Nanjing Bank, and the maximum amount available from this line of credit increased to $8.7 million (RMB55.0 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.~~equipment and guaranteed by Jiangsu Ever-Glory. In June 2021, Goldenway borrowed $4.7 million (RMB 30.0 million) with an annual interest rate 3.36% and due in June 2022. In September 2021, Goldenway borrowed $3.2 million (RMB 20.0 million) with an annual interest rate 3.44% and due in September 2022. As of March 31, ~~2021,~~2022, approximately ~~$6.9~~$0.8 million (RMB 5.0 million) was unused and available under this line of credit.

In June 2020, LA GO GO entered into a revolving line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately $3.0 million (RMB20.0 million). The line of credit is guaranteed by Mr. Kang and Goldenway. As of March 31, 2021, LA GO GO had borrowed $2.3 million (RMB 15.0 million) under this line of credit with annual interest 4.55% and due in September 2021. As of March 31, 2021, approximately $0.7 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 $9.1 million (RMB60.0 million) with Nanjing Bank and guaranteed by Jiangsu Ever-Glory, Mr. Kang and Goldenway. As of March 31, 2021, approximately $9.1 million was unused and available under this line of credit.

In March 2021, Ever-Glory Apparel entered into a line of credit agreement for approximately $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 March 31, 2021, approximately $4.6 million was unused and available under this line of credit.

All bank loans are used to fund our daily operations. ~~All~~There were no loans ~~have been repaid before or at maturity date.~~in default as of March 31, 2022.

Total interest expense on bank loans amounted to ~~$0.5~~$0.6 million and ~~$0.3~~$0.5 million for the three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively.

NOTE 67 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.

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 loss for the three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~taxable~~ in the following jurisdictions:

2021 2020
(In thousands of
U.S. Dollars)
PRC $ (438 ) $ (1,748 )
BVI - (720 )
Others (3 ) (3 )
$ (441 ) $ (2,471 )

	2022			2021
	(In thousands of U.S. Dollars)
PRC	$	(3,974	)	$	(438	)
Others		(3	)		(3	)
	$	(3,977	)	$	(441	)

The following table reconciles the ~~PRC~~U.S. statutory rates to the Company’s effective tax rate for the three months ended March 31, ~~2021~~2022 and ~~2020:~~2021:

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 )%

	2022			2021
	(In thousands of U.S. Dollars)
U.S. tax rate		21.0	%		21.0	%
Valuation allowance recognized with respect to the loss		(52.9	)%		(103.9	)%
Foreign tax rate differential		4.0	%		4.0	%
Others		-			(86.8	)%
Effective income tax rate		(27.9	)%		(165.7	)%

Income tax expense for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 is as follows:

2021 2020
(In thousands of
U.S. Dollars)
Current $ 706 $ 345
Deferred 23 (118 )
Income tax expense $ 729 $ 227

	2022		2021
	(In thousands of U.S. Dollars)
Current
U.S. Federal
Foreign	$	415	$	706
Total Deferred	$	415	$	706
Deferred
U.S. Federal
Foreign	$	697	$	23
Total Deferred	$	697	$	23
Income tax expense	$	1,112	$	729

~~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.~~

~~The Company has not recorded U.S. deferred income taxes on approximately $110.2 million~~Deferred tax assets net of ~~its non-U.S. subsidiaries’ undistributed earnings because such amounts are intended to be reinvested outside the United States indefinitely.~~ valuation allowance as of:

	March 31, 2022			December 31, 2021
	(In thousands of U.S. Dollars)
Inventories, net	$	2,623		$	1,684
Accounts receivable, net		580			624
Deferred income		2,092			2,387
Accrued expenses		1,148			2,464
Depreciation		156			108
Net operating loss carryforward		4,659			3,782
Deferred tax assets		11,258			11,049
Valuation allowance		(11,056	)		(10,150	)
Deferred tax assets, net	$	202		$	899

The U.S. Tax Reform signed into law on December 22, 2017 significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory deemed repatriation of previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign 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 changes for the year ended March 31, ~~2021.~~2022.

NOTE 78 STOCKHOLDERS’ EQUITY

~~On January 15, 2020, the Company~~Common stock 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 $1.41 per share, which was the average market price of the common stock for the five days before the grant date.

On February 9, 2021, the Company issued 1,500 shares of the Company’s common stock to ~~two~~2 of the Company’s independent directors as compensation for their services rendered during the third and fourth quarter of 2020. The shares issued in 2021 were valued at $3.34 per share, which was the average market price of the common stock for the five days before the grant date.

On January 26, 2022, the Company issued 2,042 shares of the Company’s common stock to 2 of the Company’s independent directors as compensation for their services rendered during the third and fourth quarter of 2021. The shares issued in 2022 were valued at $2.47 per share, which was the average market price of the common stock for the five days before the grant date.

Treasury stock (after "stock issued to independent directors")

In August 2021, the Company's Board of Directors authorized and the Company repurchased 147,334 shares of its common stock through negotiated transactions. In January 2022, the Company repurchased additional 14,746 shares. These treasury shares may be resold or cancelled in the future. The treasury stock is carried at cost of $400 as of March 31, 2022.

NOTE 89 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 some Company’s retail stores since the third quarter of 2014.

2021 2020
(In thousands of
U.S. Dollars)
The Company received from the customers $ 3 3
The Company paid to Wubijia (3 ) (3 )
The net income recorded as other income $ - $ -

	2022		2021
	(In thousands of U.S. Dollars)
The Company received from the customers	$	-		3
The Company paid to Wubijia		-		(3	)
The net income recorded as other income	$	-	$	-

Included in other income for the ~~years~~three months ended March 31, ~~2021~~2022 and ~~2020~~2021 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~~$6,502 and ~~$5,916~~$6,366 for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

Other expenses due to Related Parties

Included in other expenses for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 are rent due to entities controlled by Mr. Kang under operating lease agreements as follows:

2021 2020
(In thousands of
U.S. Dollars)
Chuzhou Huarui 55 50
Kunshan Enjin 23 22
Total $ 78 $ 72

	2022		2021
	(In thousands of U.S. Dollars)
Chuzhou Huarui		56		55
Kunshan Enjin		12		23
Total	$	68	$	78

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~~$0.2 million during the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

In addition, the Company sub-contracted certain manufacturing work to related companies totaled ~~$4.7~~$4.5 million and ~~$3.1~~$4.7 million for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. The Company provided raw materials to the sub-contractors and charged a fixed fee for labor provided by the sub-contractors. Purchase advances or prepaid sub-contracting fees are recorded as amounts due from related parties.

Sub-contracts with related parties included in cost of sales for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 are as follows:

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

	2022		2021
	(In thousands of U.S. Dollars)
Ever-Glory Vietnam	$	3,269	$	3,083
Chuzhou Huarui		301		491
Fengyang Huarui		288		319
Nanjing Ever-Kyowa		438		391
Nanjing Knitting		245
EsC’eLav		-		6
Jiangsu Ever-Glory		-		457
Total	$	4,541	$	4,747

Accounts Payable – Related Parties

The accounts payable to related parties at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:

2021 2020
(In thousands of
U.S. Dollars)
Ever-Glory Vietnam $ 2,211 1,727
Fengyang Huarui 2 150
Nanjing Ever-Kyowa - 384
Chuzhou Huarui 215 1,234
Nanjing Knitting 228 257
Jiangsu Ever-Glory 173 12
Total $ 2,829 $ 3,764

	2022		2021
	(In thousands of U.S. Dollars)
Ever-Glory Vietnam	$	-		395
Fengyang Huarui		116		161
Nanjing Ever-Kyowa		133		-
Chuzhou Huarui		414		59
Nanjing Knitting		648		668
Jiangsu Ever-Glory		163		49
Total	$	1,474	$	1,332

Amounts Due From Related Parties-current assets

The amounts due from related parties at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:

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

	2022		2021
	(In thousands of U.S. Dollars)
Jiangsu Ever-Glory	$	-	$	220
Ever-Glory Vietnam		1,308		-
Total	$	1,308	$	220

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 months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company and Jiangsu Ever-Glory purchased raw materials on behalf of each other in order to obtain cheaper purchase prices. The Company purchased raw materials on Jiangsu Ever-Glory’s behalf and sold to Jiangsu Ever-Glory at cost for ~~$1.8~~$0.02 million and ~~$0.2~~$1.8 million during the three month period ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Jiangsu Ever-Glory purchased raw materials on the Company’s behalf and sold to the Company at cost for ~~$0.5~~$0.0 million and ~~$0.7~~$0.5 million during the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, 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 March 31, 2021 and December 31, 2020, Jiangsu Ever-Glory has provided guarantees for approximately $35.8 million (RMB 235 million) and $36 million (RMB 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 $31.3 million (RMB 205.5 million) and $31.5 million (RMB 205.5 million) as of March 31, 2021 and December 31, 2020 respectively. Mr. Kang has also provided a personal guarantee for $12.2 million (RMB 80.0 million) and $14.8 million (RMB 96.3 million) as of March 31, 2021 and December 31, 2020, respectively.

At December 31, 2020, $3.1 million (RMB 20.0 million) was outstanding due from Jiangsu Ever-Glory under the counter guarantee agreement. During the three months ended March 31, 2021, an additional $0.2 million (RMB 1.2 million) was provided to and repayment of $0.3 million (RMB 2.2 million) was received from Jiangsu Ever-Glory under the counter-guarantee. As of March 31, 2021, the amount of the counter-guarantee was $2.9 million (RMB 19.1 million) (the difference represents currency exchange adjustment of $0.02 million), which was 8.11% of the aggregate amount of lines of credit. This amount plus accrued interest of $0.07 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G. At March 31, 2021 and December 31, 2020, the amount classified as a reduction of equity was $3.0 million and $3.4 million, respectively. Interest of 0.5% was 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 months ended March 31, 2021 and 2020 was approximately $0.3 thousands and $0.02 million, respectively.

NOTE 910 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.

The weighted average remaining lease term excluding stores in the shopping malls is 3029 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 three months ended March 31, 2022, the costs of the leases recognized in cost of revenues and general administrative expenses are $7.2 million and $0.2 million, respectively. Cash paid for the operating leases including in the operating cash flows was $7.4 million. In the three months ended 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 $6.0 million and $0.2 million, respectively. Cash paid for the operating leases including in the operating cash flows was $6.2 million.

The following table summarizes the maturity of operating lease liabilities:

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

Year ending March 31, (In thousands of U.S. Dollars)
2022	$	573
2023		883
2024		441
2025		441
2026		441
Thereafter		12,718
Total lease payment		15,497
Less: Interest		6,869
Total	$	8,628

Legal Proceedings

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, during the normal course of our business operations, subject to various litigation claims and legal disputes. We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our financial position, results of operations or liquidity.

~~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.

NOTE 1011 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 in 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 three-month period ended March 31, 2022, the Company had two wholesale customer that represented approximately 13.2% and 10.0% of the Company’s revenues. For the three-month period ended March 31, 2021, the Company had only one wholesale customer that represented approximately 12.6% of the Company’s revenues. ~~For the three-month period ended March 31, 2020, the Company had four wholesale customers 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 months ended March 31, 2022 and 2021. ~~The~~

For the retail business, the Company relied on ~~one~~three raw material ~~supplier~~suppliers that represented ~~11%~~approximately 45.2%，34.7% and 20.1% of ~~the total~~ raw material purchases during the three months ended March 31, ~~2020.~~

~~For the retail business, the~~2022. The Company relied on two raw material suppliers that represented approximately 46% and 38% of raw material purchases during the three months ended March 31, 2021. ~~The Company relied on two raw material suppliers that represented approximately 60% and 34% of raw material purchases~~

For the wholesale business, during the three months ended March 31, ~~2020.~~

~~For~~2022 the ~~wholesale business,~~Company relied on one finished goods supplier which is a related-party that represented 22.4% of the total finished goods purchases and during the three months ended March 31, 2021, the Company relied on one manufacturer that represented 14.4% of finished goods purchases.

For the retail business, the Company did not rely on any supplier that represented more than 10% of the total finished goods purchases ~~and~~ during the three months ended March 31, ~~2020, the Company relied on one manufacturer that represented 11% of finished goods purchases.~~2022 and 2021.

The Company’s revenues for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 were earned in the following geographic areas:

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

	2022		2021
	(In thousands of U.S. Dollars)
Mainland China	$	9,175	$	7,490
Hong Kong China		4,293		4,056
United Kingdom		759		1,053
Europe-Other		4,927		4,146
Japan		5,145		3,405
United States		5,578		3,069
Total wholesale business		29,877		23,219
Retail business		34,896		47,595
Total	$	64,773	$	70,814

NOTE 1112 SEGMENTS

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

~~(a) Wholesale segment~~

(a)

Wholesale segment

~~(b) Retail segment~~

(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, 2022
Segment profit or loss:
Net revenue from external customers	$	29,877			34,896			64,773
Loss from operations	$	490			(3,798	)		(3,308	)
Interest income	$	171			15			186
Interest expense	$	613			0			613
Depreciation and amortization	$	464			1,683			2,147
Loss before income tax expense		(495	)		(3,482	)		(3,977	)
Income tax expense	$	413			699			1,112
Segment assets:
Additions to property, plant and equipment		1,972			535			2,507
Inventory		26,866			38,147			65,013
Total assets		178,818			144,193			323,011

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

	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

NOTE 1213 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~~2022 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.”

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

The following discussion and analysis of our financial condition and results of operations for the three months ended March 31, ~~2021~~2022 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), 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”), Nanjing Tai Xin Garments Trading Company Limited (“Tai Xin”), and Xizang He Meida Trading Company Limited (“He Meida”). He Media was closed in April 2021.

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;

	●	Exploring the overseas low-cost manufacturing 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 March 31, ~~2021,~~2022, we had ~~921~~848 stores (including store-in-stores), which includes 114 stores that were opened and 2636 stores that were closed in the first quarter of ~~2021. We expect to increase an additional 50 to 100 stores in 2021.~~2022.

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~~

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

~~Partnership Investment~~Equity Investments

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.

In September 2021, Goldenway signed an agreement and promised to invest $7.9million (RMB 50.0 million) in a Chinese private company for 20% shares of the investee. As of March 31, 2022, Goldenway advanced $1.6 million (RMB 10.0 million) to the investee. In April 2022, Goldenway made additional advances of $0.8 million (RMB 5.0 million). The investment advances were recorded as other non-current assets.

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~~2021 and ~~2021.~~2022.

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.

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, ~~2020,~~2021, filed with the SEC on ~~March 30,~~ April 12, 2022 (“2021 ~~(“2020~~ Form 10-K.”)

Estimates and Assumptions

~~In preparing our~~

The preparation of the condensed consolidated financial statements ~~we use~~in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and ~~disclosures. Our~~liabilities and disclosure of contingent assets and liabilities, as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. If these 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 causediffer significantly from actual results, the impact to ~~differ~~the condensed consolidated financial statements may be material. There have been no material changes in our critical accounting policies and estimates from ~~estimated amounts. Significant estimates~~those disclosed in on the 2021 Form 10-K. Please refer to Part II, Item 7 of such a report for a discussion of our critical accounting policies and 2020 include the assumptions used to value tax liabilities, the estimates of the allowance for deferred tax assets, and the accounts receivable allowance, and impairment of long-lived assets and inventory write-offs.estimates.

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.

Results of Operations

The following table summarizes our results of operations for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021. The table and the discussion below should be read in conjunction with the condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.

Three Months Ended 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 )%

	Three Months Ended March 31,
	2022					2021
	(In thousands of U.S. dollars, except for percentages)
Sales	$	64,773		100.0	%	$	70,814		100.0	%
Gross Profit		17,372		26.8			22,435		31.7
Operating Expenses		20,680		31.9			23,399		33.0
Loss From Operations		(3,308	)	(5.1	)		(964	)	(1.4	)
Other (Loss) Income, net		(669	)	(1.0	)		523		0.7
Income Tax Expense		1,112		1.7			729		1.0
Net Loss	$	(5,089	)	(7.9	)%	$	(1,170	)	(1.7	)%

Revenue

The following table sets forth a breakdown of our total sales, by region, for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

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 %

	2022					2021					Growth (decrease)
Wholesale business	(In thousands of U.S. dollars)		% of total sales			(In thousands of U.S. dollars)		% of total sales			in 2022 compared with 2021
Mainland China	$	9,175		14.2	%	$	7,490		10.6	%		22.5	%
Hong Kong		4,293		6.6			4,056		5.7			5.8
United Kingdom		759		1.2			1,053		1.5			(28.0	)
Europe-Other		4,927		7.6			4,146		5.9			18.8
Japan		5,145		7.9			3,405		4.8			51.1
United States		5,578		8.6			3,069		4.3			81.8
Total Wholesale business		29,877		46.1			23,219		32.8			28.7
Retail business		34,896		53.9			47,595		67.2			(26.7	)
Total sales	$	64,773		100.0	%	$	70,814		100.0	%		(8.5	)%

Total sales for the three months ended March 31, ~~2021~~2022 were ~~$70.8~~$64.8 million, ~~an increase~~a decrease of ~~21.4%~~8.5% from the three months ended March 31, ~~2020.~~2021. This ~~increase~~decrease was primarily attributable to a ~~4.2%~~28.7% ($6.7 million) increase in our wholesale business and a ~~32.0% increase~~26.7% ($12.7 million) decrease in our retail business.

Sales generated from our wholesale business contributed ~~32.8%~~46.1% or ~~$23.2~~$29.9 million of our total sales for the three months ended March 31, ~~2021,~~2022, an increase of ~~4.2%~~28.7% compared to ~~$22.3~~$23.2 million in the three months ended March 31, ~~2020.~~2021. This increase was primarily attributable to increased sales in Mainland China, Hong Kong, Japan and the United ~~Kingdom,~~States, and other European markets partially offset ~~for~~by decreased sales in ~~Japan and~~ the United ~~States.~~Kingdom.

Sales generated from our retail business contributed ~~67.2%~~53.9% or ~~$47.6~~$34.9 million of our total sales for the three months ended March 31, ~~2021, an increase~~2022, a decrease of ~~32.0%~~26.7% compared to ~~61.8%~~67.2% or ~~$36.1~~$47.6 million in the three months ended March 31, ~~2020.~~2021. This ~~increase~~decrease was primarily due to the ~~increase~~decrease in same-store sales.

Total retail store square footage and sales per square foot for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 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

	2022		2021
Total store square footage		956,623		1,001,864
Number of stores		848		921
Average store size, square feet		1,128		1,088
Total store sales (in thousands of U.S. dollars)	$	34,896	$	47,595
Sales per square foot	$	36	$	48

Same-store sales and newly opened store sales for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 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

	2022		2021
	(In thousands of U.S. dollars)
Sales from stores opened for a full year	$	27,758	$	35,885
Sales from newly opened store sales	$	2,735	$	3,933
Sales from e-commerce platform	$	2,916	$	3,440
Other*	$	1,487	$	4,337
Total	$	34,896	$	47,595

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

We remodeled or relocated 54137 stores in year ~~2020,~~2021, and 25 stores during the three months ended March 31, ~~2021.~~2022. We plan to relocate or remodel 50-100 stores in ~~2021.~~2022. 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.~~2022. 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 three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

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 March 31,								Growth (Decrease) in 2022
	2022				2021				compared
	(In thousands of U.S. dollars, except for percentages)								with 2021
Wholesale Sales	$	29,877	100.0	%	$	23,219	100.0	%		28.7	%
Raw Materials		13,374	44.8			10,385	44.7			28.8
Labor		445	1.5			333	1.4			33.6
Outsourced Production Costs		10,205	34.2			7,833	33.7			30.3
Other and Overhead		141	0.5			105	0.5			34.3
Total Cost of Sales for Wholesale		24,165	80.9			18,656	80.4			29.5
Gross Profit for Wholesale		5,712	19.1			4,562	19.6			25.2

Net Sales for Retail		34,896	100.0			47,595	100.0			(26.7	)
Production Costs		16,050	46.0			19,764	41.5			(18.8	)
Rent		7,186	20.6			9,959	20.9			(27.9	)
Total Cost of Sales for Retail		23,236	66.6			29,723	62.4			(21.8	)
Gross Profit for Retail		11,660	33.4			17,873	37.6			(34.8	)

Total Cost of Sales		47,401	73.2			48,379	68.3			(2.0	)
Gross Profit	$	17,372	26.8	%	$	22,435	31.7	%		(22.6	)%

Raw material costs for our wholesale business were ~~44.7%~~44.8% of our total wholesale business sales in the three months ended March 31, ~~2021, an increase of 2.9%~~2022, compared ~~to 45.3%~~with 44.7% in the three months ended March 31, ~~2020. The cost percentage to total sale increase was mainly due to the higher raw material prices.~~2021. There were no significant changes.

Labor costs for our wholesale business were ~~1.4%~~1.5% of our total wholesale business sales in the three months ended March 31, ~~2021, an increase of 36.0%~~2022, compared ~~to 1.1%~~with 1.4% in the three months ended March 31, ~~2020. The marginal increase was mainly due to the increased labor fee.~~ 2021. There were no significant changes.

Outsourced production costs for our wholesale business decreased by 6.4% to $7.8 million in the three months ended March 31, 2020 from $8.4 million in the three months ended March 31, 2020. As a percentage of total wholesale sales, outsourced production costs were ~~33.7%~~34.2% of our total wholesale sales in the three months ended March 31, ~~20210, a decrease of 6.4% from~~2022, compared with 33.7% in the three months ended March 31, ~~2020.~~2021. This ~~decrease~~increase in percentage was primarily attributable to ~~increased~~higher outsourced ~~orders to our related entities in Vietnam, which have lower~~ labor ~~costs compared to orders outsourced to Chinese factories.~~costs.

Overhead and other expenses for our wholesale business accounted for 0.5% and ~~0.4%~~0.5% of our total wholesale business sales for the three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Gross profit for our wholesale business for the three months ended March 31, ~~2021~~2022 was ~~$4.6~~$5.7 million, an increase of ~~30.5%~~25.2% compared to the three months ended March 31, ~~2020.~~2021. Gross margin was 19.1% for the three months ended March 31, 2021, a decrease of 0.5% compared to 19.6% for the three months ended March 31, ~~2021, an increase of 30.5% compared to 15.7% for the three months ended March 31, 2020.~~2021. The ~~increase~~decrease in gross margin was mainly due to the ~~decreased~~increased outsourced production costs.

Production costs for our retail business were $16.0 million during the three months ended March 31, 2022 compared to $19.8 million during the three months ended March 31, ~~2021 compared to $15.8 million during the three months ended March 31, 2020.~~2021. As a percentage of retail sales, retail production costs accounted for ~~41.5%~~46.0% of our total retail sales in the three months ended March 31, ~~2021,~~2022, compared to ~~43.9%~~41.5% of total retail sales in the three months ended March 31, ~~2020.~~2021. The ~~decrease~~increase in percentage was due to ~~lower~~higher discounts on our products ended March 31, ~~2021~~2022 compared with the same period of the prior year.

Rent costs for our retail business were $7.2 million for the three months ended March 31, 2022 compared to $10.0 million for the three months ended March 31, ~~2021 compared to $7.7 million for the three months ended March 31, 2020.~~2021. As a percentage of retail sales, rent costs accounted for ~~20.9%~~20.6% of our total retail sales for the three months ended March 31, ~~2021,~~2022, compared to ~~21.3%~~20.9% of total retail sales for the three months ended March 31, ~~2020.~~2021. The decrease ~~in percentage~~ was primarily attributable to lower rent at certain locations.

Gross profit in our retail business for the three months ended March 31, 2022 was $11.7 million and gross margin was 33.4%. Gross profit in our retail business for the three months ended March 31, 2021 was $17.9 million and gross margin was 37.6%. ~~Gross profit in our retail business for the three months ended March 31, 2020 was $12.5 million and gross margin was 34.8%.~~ The ~~increase~~decrease in gross margin was ~~attributable~~primarily due to ~~decreased rent costs and~~increased production costs.

Total cost of sales for the three months ended March 31, ~~2021~~2022 was ~~$48.4~~$47.4 million, compared to ~~$42.3~~$48.4 million for the three months ended March 31, ~~2020,~~2021, an ~~increase~~decrease of ~~14.3%~~2.0%. As a percentage of total sales, cost of sales ~~decreased~~increased to 73.2% of total sales for the three months ended March 31, 2022, compared to 68.3% of total sales for the three months ended March 31, ~~2021, compared~~2021. Consequently, gross margin decreased to ~~72.5% of total sales~~26.8% for the three months ended March 31, ~~2020. Consequently, gross margin increased to~~2022 from 31.7% for the three months ended March 31, ~~2021 from 27.5% for the three months ended March 31, 2020.~~2021.

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 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 %

	Three Months Ended March 31,
	2022					2021
	(In thousands of U.S. dollars, except for percentages)										(Decrease) Increase
Gross Profit	$	17,372		26.8	%	$	22,435		31.7	%		(22.6	)%
Operating Expenses
Selling Expenses		13,686		21.1			15,548		22.0			(12.0	)
General and Administrative Expenses		6,994		10.8			7,851		11.1			(10.9	)
Total Operating Expenses		20,680		31.9			23,399		33.0			(11.6	)
Loss from Operations	$	(3,308	)	(5.1	)%	$	(964	)	(1.4	)%		243.2	%

Selling expenses ~~increased 15.4%~~decreased 12.0% to $13.7 million for the three months ended March 31, 2022 from $15.5 million for the three months ended March 31, ~~2021 from $13.5~~2021. The decrease was attributable to the decreased salaries.

General and administrative expenses decreased 10.9% to $7.0 million for the three months ended March 31, ~~2020. The increase was attributable to the increased sales.~~

~~General and administrative expenses increased 35.7% to~~2022 from $7.9 million for the three months ended March 31, ~~2020 from $5.8 million for the three months ended March 31, 2020.~~2021. As a percentage of total sales, general and administrative expenses ~~increased~~decreased to 10.8% of total sales for the three months ended March 31, 2022, compared to 11.1% of total sales for the three months ended March 31, ~~2021, compared~~2021. The decrease was attributable to ~~9.9% of total sales~~the decreased salaries.

Loss from Operations

Loss from operations was $3.3 million for the three months ended March 31, ~~2020. The increase was mainly attributable~~2022, compared 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.~~2021. As a percentage of sales, loss from operations accounted for ~~1.4%~~5.1% of our total sales for the three months ended March 31, ~~2021,~~2022, an increase of ~~70.1%~~3.7% compared to ~~5.5%~~1.4% for the three months ended March 31, ~~2020~~2021 as a result of ~~increased~~decreased gross profit.

Interest Expense

Interest expense was ~~$0.5~~$0.6 million for the three months ended March 31, ~~2021,~~2022, an increase of ~~44.3%~~24.6% compared to the same period in ~~2020.~~2021. The increase was due to the increased bank loans.

Income Tax Expenses

Income tax expense was ~~$0.7~~$1.4 million and ~~$0.2~~$0.7 million for the three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively.

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

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

Net Loss

Net loss for the three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~$1.2~~$5.1 million and ~~$2.7~~$1.2 million, respectively. Our basic and diluted loss per share were ~~$0.08~~$0.34 and ~~$0.18~~$0.08 for the three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Summary of Cash Flows

Summary cash flows information for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 is as follows:

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 )

	2022			2021
	(In thousands of U.S. dollars)
Net cash (used in) operating activities	$	(9,374	)	$	(302	)
Net cash (used in) investing activities	$	(2,726	)	$	(2,361	)
Net cash (used in) provided by financing activities	$	(37	)	$	6,316

Net cash ~~(used in) provided by~~used in 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)~~$9.4 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively. This increase was mainly due to increased inventory purchase and ~~2020.~~more accounts payable and other payable payments, partially offset by more collection of accounts receivable.

Net cash used in investing activities was $2.7 million and $2.4 million for the three months ended March 31, 2022 and 2021. This change was mainly due to that we ~~purchased property~~made investment advances in 2022 and ~~equipment in the three months ended March 31, 2021 more than the same period of 2020. In addition, we~~ purchased more fixed assets, offset by more proceeds from sale of trading securities.

Net cash (used in) provided by ~~(used in)~~ financing activities were ~~$6.3~~($0.04) million and ~~($2.7)~~$6.3 million for the three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~During~~The decrease was primarily because we repaid more loans to the ~~three months ended March 31, 2021, we received new bank loans of $12.3 million and repaid the bank loans of $6.2 million.~~banks.

Liquidity and Capital Resources

As of March 31, ~~2021,~~2022, we had cash and cash equivalents ~~$78.0~~$41.7 million, current assets other than cash ~~$154.4~~$179.9 million and current liabilities ~~$188.7~~$179.4 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 December 2020, Goldenway entered into a certificate of three-year time deposit of ~~$16.7~~$17.3 million (RMB110.0 million) with the Shanghai Pudong Development Bank with an annual interest rate of 3.85%. From ~~November 2020~~July 2021 to February ~~2021,~~2022, Goldenway pledged the certificate of three-year time deposit to the Shanghai Pudong Development Bank and Goldenway had borrowed ~~$16.7~~$11.0 million (RMB ~~110.0~~70.0 million) under this line of certificate with annual interest ~~rates of~~rate from 2.60% to 2.90% ~~and 3.4%~~, due between ~~May 2021~~June 2022 and February ~~2022.~~2023.

In April 2020, Goldenway entered into a line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately ~~$6.9~~$7.1 million (RMB45.0 million). In May 2021, Goldenway pledged $1.6 million (RMB10.0 million) to Nanjing Bank, and the maximum amount available from this line of credit increased to $8.7 million (RMB55.0 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.~~equipment and guaranteed by Jiangsu Ever-Glory. In June 2021, Goldenway borrowed $4.7 million (RMB 30.0 million) with an annual interest rate 3.36% and due in June 2022. In September 2021, Goldenway borrowed $3.2 million (RMB 20.0 million) with an annual interest rate 3.44% and due in September 2022. As of March 31, ~~2021,~~2022, approximately ~~$6.9~~$0.8 million (RMB 5.0 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 March 31, ~~2021,~~2022, we had access to approximately ~~$47.9~~$30.7 million in lines of credit, of which approximately ~~$22.0~~$2.4 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 $35.8 million (RMB 235.0 million) and approximately $2.9 million (RMB 19.10 million) was provided to Jiangsu Ever-Glory as the counter guarantee as of 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 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 March 31, 2022 and December 31, 2021, the market foreign exchange ~~rate had decreased to~~rates were RMB ~~6.57~~6.35 and RMB 6.38 to one U.S. ~~dollar.~~dollar, respectively. 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.

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 loss for the 3three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~$1.4~~$0.8 million and $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 March 31, ~~2021.~~2022. 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 first quarter of ~~2021,~~2022, 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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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 ($~~10.75~~11.00 million) in the Tianjin No.1 Intermediate People’s Court based on processing contracts between the parties. The Company has applied for interim measures with the court and has frozen bank accounts of Client A for a total amount of RMB 68.12 million ($~~10.44~~10.68 million). The Company has delivered goods worth RMB 62.06 million ($~~9.51~~9.73 million) to Client A pursuant to the processing contracts. The Company also seeks Client A for the payment of the loss incurred from the cost of raw materials paid to suppliers in the amount of RMB 8.09 million ($~~1.24~~1.27 million) in reliance on the processing contracts. The Company received RMB 71.4 million ($~~10.9~~11.20 million) from Client A in April 2021 which settled the complaint amount.

Lawsuits against Client B

In November 2020, Goldenway filed a complaint against Client B (“Client B”)for unpaid goods worth RMB3.89 million ($0.60 million) and accrued default interests RMB332,293 ($50,941) in the Shanghai People’s Court of Pudong New Area based on sales contracts between the parties. Goldenway has applied for interim measures with the court. However, Client B counterclaimed that Goldenway delayed delivered part of the goods worth RMB922,005 ($126,013). The Company received RMB 3.92 million ($0.61million) from Client B in March 2021 which settled the 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, 2021.~~April 12, 2022.

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 March 31, ~~2021:~~2022:

	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~~ (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

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

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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.

May 13, ~~2021~~2022	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)

Ever-Glory International Group, Inc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 false 86 --12-31 Q1 00000 0000943184 25-5209-6831

	March 31, 2021			December 31, 2020
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	78,056		$	81,865
Restricted cash		45,660			39,858
Trading securities		3,036			1,792
Accounts receivable, net		46,719			53,285
Inventories		43,342			53,893
Advances on inventory purchases		7,802			10,261
Value added tax receivable		1,183			1,244
Other receivables and prepaid expenses		5,956			5,479
Amounts due from related parties		674			567
Total Current Assets		232,428			248,244

NON-CURRENT ASSETS
Equity security investment		3,877			3,932
Intangible assets, net		4,712			4,794
Property and equipment, net		31,881			32,164
Operating lease right-of-use assets		55,839			41,690
Deferred tax assets		879			902
Total Non-Current Assets		97,188			83,482
TOTAL ASSETS	$	329,616		$	331,726

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Bank loans	$	71,534		$	65,919
Accounts payable		52,083			67,762
Accounts payable and other payables – related parties		2,829			3,764
Other payables and accrued liabilities		13,522			16,073
Value added and other taxes payable		684			909
Income tax payable		704			1,062
Current operating lease liabilities		47,327			33,481
Total Current Liabilities		188,683			188,970

NON-CURRENT LIABILITIES
Non-current operating lease liabilities		8,622			8,307
TOTAL LIABILITIES		197,305			197,277

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS’ EQUITY
Stockholders’ equity:
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		3,655			3,650
Retained earnings		108,001			109,171
Statutory reserve		20,376			20,376
Accumulated other comprehensive income		3,238			4,590
Amounts due from related party		(2,974	)		(3,353	)
Total equity		132,311			134,449
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	329,616		$	331,726

	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

	March 31, 2021		December 31, 2020
Bank	(In thousands of U.S. Dollars)
Shanghai Pudong Development Bank	$	47,943	$	42,157
Industrial and Commercial Bank of China		21,308		21,462
Nanjing Bank		2,283		2,300
	$	71,534	$	65,919

	2021			2020
	(In thousands of U.S. Dollars)
PRC	$	(438	)	$	(1,748	)
BVI		-			(720	)
Others		(3	)		(3	)
	$	(441	)	$	(2,471	)

	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 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	%