U.S. Securities and Exchange Commission
Washington, D.C. 20549  FORM 10-QSB   ý
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2006o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from
________ to _________ Commission file number: 0-28806 EVER-GLORY INTERNATIONAL GROUP, INC.(Exact name of small business issuer as specified in its charter) Florida
65-0420146(State or other jurisdiction of
(IRS Employer identification No.)incorporation or organization) 17870 Castleton Street, #335 
City of Industry, California 91748 
(Address of principal executive offices)
 
(626) 839-9116 
(Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ý
No o Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o No ý Number of shares of common stock outstanding as of March 31, 2006: 19,971,758 o ý  
   EVER-GLORY INTERNATIONAL TRAVEL GROUP, INC.
FORM 10-QSB
INDEX
PageSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
2PART I. FINANCIAL INFORMATION
4Item 1.
Financial Statements (Unaudited)
4Condensed
Consolidated Balance Sheet  March 31, 2006
4Condensed
Consolidated Statements of Operations and Comprehensive Income  Three
   Months Ended 
March 31, 2006 and 2005
5Condensed
Consolidated Statements of Cash Flows  Three Months Ended March 31, 

   2006 and 2005
6Notes to Condensed Consolidated Financial Statements
7Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
12Item 3.
Controls and Procedures
21PART II. OTHER INFORMATION
22Item 1.
Legal proceedings
22Item 6.
Exhibits and Reports on form 8-K
22SIGNATURES
241

SPECIAL NOTE REGARDING FORWARDLOOKING STATEMENTS
On one or more occasions, we may make statements in this Quarterly Report on Form 10-QSB regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. All statements other than statements of historical
facts, included or incorporated by reference herein relating to managements current expectations of future financial performance, continued growth, changes in economic conditions or capital markets and changes in customer usage patterns and
preferences are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Words or phrases such as anticipates, may, will, should, believes, estimates, expects, intends, plans, predicts,
projects, targets, will likely result, will continue or similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties which could cause actual
results or outcomes to differ materially from those expressed. We caution that while we make such statements in good faith and believe such statements are based on reasonable assumptions, including without limitation, managements examination
of historical operating trends, data contained in records and other data available from third parties, we cannot assure you that our projections will be achieved. Factors that may cause such differences include but are not limited to:
the ability to timely and accurately complete product orders;
the ability to coordinate product design with its customers;
its dependence on a limited number of larger customers;
political and economic factors in the Peoples Republic of China;
the ability of the Companys internal production operations to increase production volumes on finished goods in a timely fashion in response to increasing demand and enable the Company to achieve timely delivery of finished goods to its
customers;
the Companys ability to expand and grow its distribution channels;
unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders;
a weakening of economic conditions which would reduce demand for products sold by the Company and could adversely affect profitability;
the effect of terrorist acts, or the threat thereof, on consumer confidence and spending, or the production and distribution of product and raw materials which could, as a result, adversely affect the Companys operations and financial
performance;
the acceptance in the marketplace of the Companys new products and changes in consumer preferences;
reductions in sales of products, either as the result of economic or other conditions, or reduced consumer acceptance of a product, could result in a buildup of inventory;
the ability to source raw materials and finished products at favorable prices to the Company;2

the potential impact of power crises on the Companys operations including
temporary blackouts at the Companys facilities;
foreign currency exchange rate fluctuations;
earthquakes or other natural disasters;
the Companys ability to identify and successfully execute cost control
initiatives;
the impact of quotas, tariffs, or safeguards on the importation or exportation of the
Companys products;
our ability to fund and execute our business plan;
our ability to maintain an effective internal control structure.
other risks outlined above and in the Companys other filings made periodically by the
Company.We have attempted to identify, in context, certain of the factors that we believe may cause actual future experience and results to differ materially from our current expectation regarding the relevant matter or subject area. In addition to the
items specifically discussed above, our business and results of operations are subject to the uncertainties described under the caption Risk Factors which is a part of the disclosure included in Item 2 of this Report entitled
Managements Discussion and Analysis of Financial Condition and Results of Operations.
From time to time, oral or written forward-looking statements are also included in our reports on Forms 10-KSB, 10-QSB and 8-K, Proxy Statements
on Schedule 14A, press releases, analyst and investor conference calls, and other communications released to the public. Although we believe that at the time made, the expectations reflected in all of these forward-looking statements are and will be
reasonable, any or all of the forward-looking statements in this quarterly report on Form 10-QSB, our reports on Forms 10-KSB and 8-K, our Proxy Statements on Schedule 14A and any other public statements that are made by us may prove to be
incorrect. This may occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this Quarterly Report on Form 10-QSB, certain of which are beyond our control, will be
important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion
of a forward-looking statement in this Quarterly Report on Form 10-QSB or other public communications that we might make as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such
forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in
our subsequent annual and periodic reports filed with the SEC on Forms 10-KSB, 10-QSB and 8-K and Proxy Statements on Schedule 14A.
Unless the context requires otherwise, references to we, us, our, the Company and Ever-Glory refer specifically to Ever-Glory International Group, Inc. and its subsidiaries.
3

PART I
(1) Item 1  Financial Statements (Unaudited)
EVER-GLORY INTERNATIONAL GROUP, INC.AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETAS OF MARCH 31, 2006 (UNAUDITED)ASSETS
CURRENT ASSETSCash and cash equivalents
$
1,287,239Accounts receivable, net of allowances

2,134,347Inventories, net

419,453Income tax recoverable

97,849Other receivables and prepaid expenses

65,877Total Current Assets

4,004,765PROPERTY AND EQUIPMENT, NET

6,378,419TOTAL ASSETS
$
10,383,184LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable
$
2,262,368Accounts payable - a related company

319,518Other payables and accrued liabilities

868,985Note payable

611,247Value added tax

93,787Income tax payable and other tax payable

589Total Current Liabilities

4,156,494COMMITMENTS AND CONTINGENCIES

-STOCKHOLDERS' EQUITYPreferred stock ($.0001 par value, authorized 5,000,000 shares,Nil shares issued and outstanding)

-Series A Convertible Preferred Stock ($.0001 par value,authorized 10,000 shares, 7,883 shares issued and outstanding)

1Common stock ($.0001 par value, authorized 100,000,000 shares,issued and outstanding 19,971,758 shares)

1997Additional paid-in capital

1,263,749Retained earningsUnappropriated

2,828,413Appropriated

2,012,041Accumulated other comprehensive income

120,489Total Stockholders' Equity

6,226,690TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
10,383,184The accompanying notes are an integral part of these financial statements
4

EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE INCOMEFOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005(UNAUDITED)
For the three

For the threemonths ended

months endedMarch 31, 2006

March 31, 2005NET SALESTo related parties
$
-
$
116,571To third parties

5,229,520

1,290,625Total net sales

5,229,520

1,407,196COST OF SALES

(4,320,640)

(1,141,045)GROSS PROFIT

908,880

266,151OPERATING EXPENSESSelling expenses

119,175

15,259General and administrative expenses

321,594

190,091Depreciation and amortization

8,709

3,534Total Operating Expenses

449,478

208,884INCOME FROM OPERATIONS

459,402

57,267OTHER INCOME (EXPENSES)Interest income

741

176Interest expenses

(9,936)

(1,565)Other income

7,235

-Other expenses

-

(453)Total Other Income (Expenses)

(1,960)

(1,842)INCOME BEFORE INCOME TAX EXPENSE

457,442

55,425INCOME TAX EXPENSE

(66,852)

(44,489)NET INCOME

390,590

10,936OTHER COMPREHENSIVE INCOMEForeign currency translation gain

87,061

-COMPREHENSIVE INCOME
$
477,651
$
10,936Net income share-basic
$
0.02
$
0.00Net income share-diluted
$
0.00
$
0.00Weighted average number of shares outstanding duringthe period-basic

19,971,758

58,317,270Weighted average number of shares outstanding duringthe period-diluted

79,886,746

58,317,270The accompanying notes are an integral part of these financial statements
5

EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (UNAUDITED)
For the three months

For the three monthsended March 31, 2006

ended March 31, 2005CASH FLOWS FROM OPERATING ACTIVITIESNet income
$
390,590
$
10,936Adjusted to reconcile net income to cash providedby operating activities:Depreciation and amortization - cost of sales

38,315

30,398Depreciation and amortization

8,709

3,534Changes in operating assets and liabilities(increase) decrease in:Accounts receivable

(1,898,058)

35,201Accounts receivable - related companies

-

(905,674)Other receivable and prepaid expenses

(44,922)

(316,685)Inventories

(23,246)

11,743Increase (decrease) in:Accounts payable

2,178,068

(170,851)Accounts payable - related companies

(166,957)

1,474,706Other payables and accrued liabilities

(185,957)

(20,722)Value add tax payables

44,511

(21,107)Income tax and other tax payables

(38,239)

(40,111)Net cash provided by operating activities

302,814

91,368CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment

(569,881)

(174,419)Net cash used in investing activities

(569,881)

(174,419)EFFECT OF EXCHANGE RATE ON CASH

87,061

-NET DECREASE IN CASH AND CASH EQUIVALENTS

(180,006)

(83,051)CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

1,467,245

160,612CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
1,287,239
$
77,561SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid during the period for:Interest expenses
$
9,936
$
1,565Cash paid during the period for:Income taxes
$
104,577
$
87,107The accompanying notes are an integral part of these financial statements
6

EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIESNOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 2006 (UNAUDITED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATIONEver-Glory International Group, Inc. (EGLY) (previously Andean Development Corporation) was incorporated in Florida on October 19, 1994.
Perfect Dream Limited (Perfect Dream) was incorporated in the British Virgin Islands on July 1, 2004. Goldenway Nanjing Garments Company Limited (Goldenway), a Peoples Republic of China (PRC) limited
liability company was incorporated on December 31, 1993.  Goldenway is principally engaged in the manufacturing and sale of garments.
During 2004, Perfect Dream acquired 100% of Goldenway for a cash consideration of $1,338,404. The transaction was accounted for as a reorganization of entities under common control as the companies were beneficially owned by principally
identical stockholders and shared common management.
On July 29, 2005, EGLY entered into an Agreement and Plan of Reorganization with the stockholders of Perfect Dream whereby the stockholders of Perfect Dream exchanged 100% of their shares of Perfect Dream for 7,673,325 shares of restricted common
stock of EGLY.
On completion of the reorganization, the merger of EGLY and Perfect Dream was treated for accounting purposes as a capital transaction and recapitalization by Perfect Dream (the accounting acquirer) and reorganization by EGLY (the
accounting acquiree). The financial statements have been prepared as if the reorganization had occurred retroactively.
Accordingly, the financial statements include the following:
(1)
The balance sheet consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost.(2)
The statement of operations includes the operations of the acquirer for the periods presented and the operations of the acquiree from the date of the merger.EGLY, Perfect Dream and Goldenway are hereinafter referred to as (the Company).
On November 17, 2005, the Company filed an Amendment to its Articles of Incorporation to change its name to Ever-Glory International Group, Inc.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments consisting only of normal recurring accruals considered necessary to present fairly the Company's financial position at March 31, 2006,
the results of operations for the three-month periods ended March 31, 2006 and 2005, and cash flows for the three months ended March 31, 2006 and 2005. The results for the period ended March 31, 2006 are not necessarily indicative of the results to
be expected for the entire fiscal year ending December 31, 2006.
NOTE 2. PRINCIPLES OF CONSOLIDATIONThe accompanying March 31, 2006 unaudited condensed consolidated financial statements include the accounts of EGLY, its 100% owned subsidiary Prefect Dream and its 100% owned subsidiary Goldenway. All significant inter-company balances and
transactions have been eliminated in consolidation.
7

EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIESNOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 2006 (UNAUDITED)
NOTE 3. USE OF ESTIMATESThe preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 4. CASH AND CASH EQUIVALENTSFor purpose of the unaudited condensed consolidated statements of cash flows, cash and cash equivalents include cash on hand and demand deposits with a bank with a maturity of less than 3 months.
NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTSStatement of Financial Accounting Standards No. 107, "Disclosure About Fair Value of Financial Instruments," requires certain disclosures regarding the fair value of financial instruments. Trade accounts receivable, accounts payable, and accrued
liabilities are reflected in the financial statements at fair value because of the short-term maturity of the instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be
determined with precision. Changes in assumptions can significantly affect estimated fair values.
The carrying value of cash and cash equivalents, accounts receivable (trade and others), accounts payable (trade and related party) and accrued liabilities approximate their fair value because of the short-term nature of these instruments. The
Company places its cash and cash equivalents with what it believes to be high credit quality financial institutions. The Company has a diversified customer base, most of which are in Europe, Japan, the United States and the PRC. The Company controls
credit risk related to accounts receivable through credit approvals, credit limit and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an
allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.
The Companys major operation is in the PRC, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the United States dollars (US$) and the
Chinese Renminbi (RMB). On July 21, 2005, the PRC let the RMB fluctuate thereby ending its decade-old valuation peg to the US$. The new RMB rate reflects an approximately 2% increase in value against the US$. Historically, the
PRC government has benchmarked the RMB exchange ratio against the US$, thereby mitigating the associated foreign currency exchange rate fluctuation risk. The Company does not believe that its foreign currency exchange rate fluctuation risk is
significant, especially if the PRC government continues to benchmark the RMB against the US$.
NOTE 6. REVENUE AND COST RECOGNITIONThe Company recognizes revenue upon delivery for local sales and upon shipment of the products for export sales, at which time title passes to the customer provided that: there are no uncertainties regarding customer acceptance; persuasive evidence
of an arrangement exists; the sales price is fixed and determinable; and collectability is deemed probable.
Local transportation, unloading charges and export quota fees are included in selling expenses.
Cost of goods sold includes the appropriate materials purchasing, receiving and inspection costs, inbound freight where applicable, direct labor cost and manufacturing overheads consistent with the revenue earned.
NOTE 7. FOREIGN CURRENCY TRANSLATIONEGLY, Perfect Dream and Goldenway maintain their accounting records in their functional currencies of US$, US$ and RMB respectively.
Foreign currency transactions during the year are translated to the functional currency at the approximate rates of exchange on the dates of transactions.  Monetary assets and liabilities denominated in foreign currencies at the balance sheet date
are translated at the approximate rates of exchange at that date.  No-monetary assets and liabilities are translated at the rates of exchange prevailing at the time the asset or liability was acquired.  Exchange gains or losses are recorded in the
statement of operations.
8

EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIESNOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 2006 (UNAUDITED)
NOTE 8. FOREIGN CURRENCY TRANSLATIONThe financial statements of Goldenway (whose functional currency is the RMB) are translated into US$ using the closing rate method.  The balance sheet items are translated into US$ using the exchange rates at the respective balance sheet
dates.  The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the year. All exchange differences are
recorded within equity. Translation gain for the periods ended March 31, 2006 and 2005 were $87,061 and $Nil respectively.
NOTE 9. COMPREHENSIVE INCOME (LOSS)The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to United States Dollar is reported as other comprehensive income (loss) in the statements of operations and stockholders
equity.
NOTE 10. INCOME PER SHAREBasic earnings per share are computed by dividing income available to common stockholders by the weighted average number common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except
that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
NOTE 11. SEGMENTSThe Company adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS 131). SFAS establishes standards for operating information regarding operating segments in
annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS 131 also establishes standards for related disclosures about products and services and
geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decision
how to allocate resources and assess performance. The information disclosed herein, materially represents all of the financial information related to the Companys principal operating segments. The Company operates in a single segment.
NOTE 12. INVENTORIESInventories at March 31, 2006 consisted of the following:Raw materials
$
51,843Work-in-progress

213,085Finished goods

154,525419,453Less: provision of obsolescence

-Inventories, net
$
419,453
NOTE 13. NOTE PAYABLE
Balance at March 31, 2006:Note payable to a bank, interest rate of 0.5115% per month,
$
611,247guaranteed by a related company, due August 23, 2006Less: current maturities

611,247$
-
9

EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIESNOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 2006 (UNAUDITED)
NOTE 14. NET INCOME PER SHARE
The following is net income per share information at March 31:2006

2005Net income
$
390,590
$
10,936Basic weighted-average common stock outstanding

19,971,758

58,317,270Effect of dilutive securitiesSeries A Convertible Perferred Stock

59,914,988

-Diluted weighted-average common stock outstanding

79,886,746

58,317,270Net income per share - basic
$
0.02
$
0.00Net income per share - diluted
$
0.00
$
0.00
NOTE 15. SEGMENTSThe following is geographic information of the Companys revenue for the period ended March 31:2006

2005Europe
$
3,015,273
$
819,371United States

1,344,675

164,060Japan

372,267

109,920The People Republic of China

353,034

313,845Russia

144,271

-$
5,229,520
$
1,407,196
NOTE 16. SHAREHOLDERS EQUITY(A)
Series A Convertible Preferred stockThe Company authorized 10,000 shares of Series A Convertible Preferred Stock, with a par value of $0.0001 per share.
Each share of the Series A Convertible Preferred Stock had upon issuance the same voting, dividend and liquidation rights as 1,000 shares of common stock and will convert back into common stock at such time as the Company is able to increase the
number of authorized shares of common stock. Effective November 8, 2005, the Company effected a 7.6 -for-1 forward stock split on the remaining outstanding 2,627,861 shares, which increased the number of outstanding shares to 19,971,743 shares.
Under the adjustment provisions of the Series A Convertible Preferred Stock, the conversion, voting, dividend and liquidation ratios of the Series A Convertible Preferred Stock were all increased by the forward stock split from 1,000 for one to
7,600 for one (a total of 59,914,988 shares of common stock fully converted). The Series A Convertible Preferred Stock will be converted back into common stock at such time as the number of shares of authorized common stock is increased to
100,000,000 or more via a proposed amendment to the Articles of Incorporation. The relative voting and equity ownership of the Companys stockholders was unchanged by the exchange for Series A Convertible Preferred Stock and the forward stock
split. If all the Series A Convertible Preferred Stock were converted as of March 31, 2006, there would be 79,886,746 outstanding shares of common stock.10

EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIESNOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 2006 (UNAUDITED)
NOTE 16.  SHAREHOLDERS EQUITY  (CONTINUED)
(B)
Appropriated retained earningsThe Company is required to make appropriations to reserves funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally
accepted accounting principles of the Peoples Republic of China (the PRC GAAP). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the
reserve is equal to 50% of the entities registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors.NOTE 17. RELATED PARTY TRANSACTIONSDuring the three months ended March 31, 2006, the Company sub-contracted certain manufacturing work valued at $692,456 to certain of its related companies.  The Company provided the raw materials to the sub-contractor who charged the Company a
fixed labor charge for the sub-contracting work.
As of March 31, 2006 the Company owed $319,518, to a related company for sub-contracting work done.
During 2006, the Company received rental income of $4,670 for the lease of factory space to a related company.
During 2006, on behalf of the
Company, a related company guaranteed a note payable to a bank for $611,247.
NOTE 18. COMMITMENTS AND CONTINGENCIES(A)
Employee BenefitsThe full time employees of the Company are entitled to employee benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a Chinese government mandated multi-employer defined contribution plan. The
Company is required to accrue for those benefits based on certain percentages of the employees salaries and make contributions to the plans out of the amount accrued for medical and pension benefits. The Chinese government is responsible for
the medical benefits and the pension liability to be paid to these employees.(B)
CommitmentsAccording to the Articles of Association of Goldenway, Goldenway has to fulfill registered capital requirements of $17,487,894 within three years from February 2, 2005. As of March 31, 2006, the Company has fulfilled $2,630,000 of its
registered capital requirements and has a registered capital commitment of $14,857,894, which is payable by February 1, 2008.At March 31, 2006, the Company had commitments for capital projects in progress of approximately $4,160,000.NOTE 19. CONCENTRATIONS AND RISKSDuring 2006, 100% of the Companys assets were located in China.
The Company principally relied on three customers for its revenue during 2006, details of which
are as follows:
Customer A
Customer B
Customer CDuring2006
27%
21%
15%
At March 31, 2006, accounts receivable to those customers totaled $535,996 respectively.
The Company principally relied on two suppliers for its materials during 2006, details of which are as follows:
Supplier A
Supplier BDuring2006
14%
12%
11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
Ever-Glory and its subsidiaries (the "Company") manufacture apparel for men, women and children for primarily middle to high-grade well-known casual wear, outerwear and sportswear brands and for a variety of companies. Most of our products are
exported to Japan, EU countries and the United States. The Companys customers include large retailers and well-known brands. The Company is the result of a merger of Andean Development Corporation, a corporation organized under the laws of the
State of Florida ("Andean"); and Perfect Dream Limited, a corporation organized under the laws of British Virgin Islands ("Perfect Dream"). Andean was formed on October 19, 1994 and engaged in the business of providing engineering and project
management services and electrical and mechanical equipment for energy and private works projects. As of June 30, 2005, Andean had zero assets and liabilities of $57,000. Perfect Dream was incorporated on July 1, 2004 in the British Virgin
Islands. In January of 2005, Perfect Dream acquired 100% of Goldenway Nanjing Garments Co., Ltd ("Goldenway").
Goldenway is a limited liability company, which was incorporated in the People's Republic of China (the "PRC") on December 31, 1993. Until December 2004, Goldenway was a subsidiary of Jiangsu. After its acquisition by Perfect Dream and effective as
of April 20, 2005, Goldenway changed its status to that of a wholly foreign owned enterprise and increased its registered capital from $2,512,106 to $20,000,000. The increased registered capital will be paid-in in installments within three
years of the issuance of Goldenway's updated business license. As of March 31, 2006, the Company has paid $2.6 million of its registered capital requirements.  The remaining $14.9 million is due on February 1, 2008.
In the three months ended March 31, 2006, approximately 58% of the Companys revenues came from customers in the EU, 7% from customers in Japan, 26% from customers in the United States and 7% from customers in China. In the three months ended
March 31, 2006, three customers represented approximately 63% of the Companys sales. Management believes that the relationship with these customers is good.
The Company purchases the majority of its raw materials directly from numerous local fabric and accessories suppliers.  The Company may also purchase finished goods from other contract manufacturers.  Two suppliers represented approximately 26% of
the Companys raw materials purchases in the three months ended March 31, 2006.  The Company has not experienced difficulty in obtaining raw materials essential to its business and management believes that the relationship with its suppliers is
good.
The Company currently operates one factory in the Nanjing Jiangning Economic and Technological Development Zone of mainland, China. The factory covers an area of 10,000 square meters and is equipped with highly advanced, state-of-the-art equipment.
The Company has put a deposit on 113,220 square meters of land in Nanjing Jiangning Economic and Technological Development Zone, which includes an existing facility of 26,629 square meters, which includes manufacturing and office space. The Company
expects to sign the purchase agreement and complete the purchase in the second or third quarter 2006. However, the Company has been allowed to take possession of the property prior to consummation of the purchase. The Company expects the new
manufacturing facility to be in full production by late 2006, which will replace the Companys current manufacturing facility.
The factory employs a staff of over 700 people with an annual production capacity of over 1,000,000 pieces. All of the Companys work force is non-union, and the Company considers its relations with its employees to be satisfactory.
In 2005, export quotas on most categories of the Companys products were eliminated.  In July 2005, the United States and the EU reinstituted export quotas on certain clothing categories.  The Chinese government allocated a portion of the
export quota to the Company based upon the amount of product that the Company exported in the prior year.  Although certain of the Companys apparel products fall within the categories subject to the safeguards in the U.S. and the EU,
the imposition of quotas as of March 31, 2006 did not have a material affect on
the Companys net sales, although it did impact its gross margin. See Results of
Operations below. As a result of the Companys prior export performance, it was
awarded a sufficient portion of the export quotas to enable it to increase its
sales to customers in the EU and the U.S. despite the reinstitution of export
quotas. In
12

order to
increase the Companys allocation of future export quotas, however, the Company accepted more orders for lower margin products, which had an adverse affect on the Companys gross margins. The Company believes that its customer mix and its
ability to adjust the types of apparel it manufactures will mitigate its exposure to such trade restrictions in the future.
Under the laws of the PRC, as a wholly foreign owned enterprise, in the fiscal year ended December 31, 2004, Goldenway was entitled to a 50% reduction in its income tax rate, from 24% to 12%.  In the fiscal year ended December 31, 2005, Goldenway as
a wholly foreign owned enterprise that exported over 70% of its products outside the PRC, is eligible for a 50% reduction in its tax rate from 24% to 12%.
The Company markets and sells its products through a combination of international distributors and direct sales primarily in Japan, Europe and the United States.
Our cost of net revenues consists of raw materials, garment finishing fees, direct labor and manufacturing overhead, including the Companys contributions to a government mandated multi-employer defined contribution plan, packing materials and
others. In addition, from time to time we subcontract manufacturing, which costs are included in our cost of net revenues.
Selling expenses consist primarily of salaries, commissions and related expenses for personnel engaged in marketing, sales and customer support functions, as well as costs associated with trade shows, promotional activities, transportation expenses
and inspection expenses including export quota fees.
General and administrative expenses consist primarily of salaries and related expenses for executive, finance, accounting, facilities and human resources personnel, office expenses and professional fees.
Results of OperationsThree Months Ended March 31, 2006 Compared To Three Months Ended March 31, 2005
Revenues, Cost of Revenues and Gross Margin
Revenues for the quarter ended March 31, 2006 were $5,229,520, an increase of 272% from $1,407,196  for same quarter in 2005. Our increase in revenues was primarily attributable to an overall increase in sales to customers in the EU, the US,
Japan and Russia.  As of March 31, 2006, sales to customers in the EU increased by $2,195,902 or 268%, sales to customers in the U.S. increased by approximately $1,180,615 or 720% , sales to customers in Japan increased by approximately
$262,347 or 239% and sales to customers in Russia increased by $144,271 as compared to 2005.
Cost of sales for the quarter ended March 31, 2006 was $4,320,640, an increase of $3,179,595 from $1,141,045     for the quarter ended March 31, 2005.  As a percentage of revenues, cost of sales increased to approximately 83 % for the
three months ended March 31, 2006 from approximately 81% for the quarter ended March 31, 2005 . Consequently, gross margin as a percentage of revenues decreased to approximately 17% for the three months ended March 31, 2006 from approximately 19%
for the three months ended March 31, 2005. The increase in cost of sales and the decrease in gross margin were attributable to the export quota factor. In July 2005, the Chinese government reinstituted textile export quotas in certain hot categories
because of substantial increases in exports from China to the U.S. and European markets. As a result, in order to maintain the Companys export quotas allocated by the Chinese government for 2006 and the next year, the Company accepted more
orders with lower gross margins.
Selling ,General and Administrative ExpensesSelling expenses as of March 31, 2006 increased by 681% from $15,259 in 2005 to $119,175 in 2006.  The increase in selling expenses was mainly attributable to an increase in transportation and logistic costs as well as an increase in export
quota fees.
General and Administrative expenses totaled $321,594 for the three months ended March 31, 2006, an increase of $131,503 from $190,091 for the three months ended March 31, 2005.  The increase in general and administrative expenses was
mainly due to the activities associated with the trading of the Companys shares on the Over The Counter Bulletin Board of $47,028 as well as the increase of our management salaries of $64,194.
13

Income before taxes for the three months ended March 31, 2006 was $457,442 a increase of $402, 017 from $55,425 for the three months ended March 31, 2005. The increase was largely due to the increase
in our net income.
LIQUIDITY AND CAPITAL RESOURCESAs of March 31, 2006, the Company had cash and cash equivalents of $1,287,239, other current assets of $2,717,526 and current liabilities of $4,156,494. To date, the Company has financed its operations primarily from operations and cash
flow from operations is expected to continue to be the Company's primary source of funds to finance its short-term cash needs.
Net cash provided by operating activities as of March 31, 2006 was $302,814, compared with same quarter $91,368 in 2005. The Companys primary source of operating cash flow was net income of $390,590. The increase in our net cash
was attributable to an increase in our net income as compared to the same quarter of 2005.
Net cash used in investing activities was approximately $569,881 as of March 31, 2006, compared with $174,419 in the same quarter of 2005. The increase was primarily attributable to construction costs of approximately $489,860 associated
with our new office building and factory.
Capital CommitmentsThe Company has a continuing program for the purpose of improving its manufacturing quality. As of March 31, 2006, the Company had commitments for capital projects in progress of approximately $4.16 million. The Company anticipates that cash
flows from operations will be used to pay for these capital commitments. Pursuant to the Articles of Association of Goldenway, registered capital of approximately $17.5 million must be paid into Goldenway by February 1, 2008. The increased
registered capital will be paid-in in installments within three years of the issuance of Goldenway's updated business license. As of March 31, 2006, the Company has paid $2.6 million of its registered capital requirements.  The remaining
$14.9 million is due on February 1, 2008.
The Company has put a deposit on 113,220 square meters of land in Nanjing Jiangning Economic and Technological Development Zone, which includes an existing manufacturing facility of 26,629 square meters The Company expects to sign the purchase
agreement and complete the purchase in 2006. However, the Company has been allowed to take possession of the property prior to consummation of the purchase. The Company expects the new manufacturing facility to be in production by late 2006, which
will replace the Companys current manufacturing facility. The Company expects to invest approximately $3.5 million in 2006 for improvements to this new facility, which the Companys expects to fund from cash from operations.
Uses of LiquidityThe Company's cash requirements as of March 31, 2006 are primarily to fund operations and to complete the construction of its new manufacturing facility in Nanjing. The Company also plans to acquire additional manufacturing capacity in the future to
strengthen and stabilize its manufacturing base. The Company is also looking to establish its own distribution and logistics channels in overseas markets and to launch its own brand directly to the Chinese market. In addition, the Company will need
to make the required capital contributions to its subsidiary, Goldenway.
On August 23, 2005, the Company entered into a short-term loan agreement with Shanghai Pudong Development Bank Nanjing Branch pursuant to which we borrowed approximately $610,000 at an interest rate of 6.138% per annum, all of which were
outstanding as of March 31, 2006. The funds were used for the purchase of raw materials. The loan matures on August 23, 2006, however, the loan may be extended for an additional year.  The borrowings were guaranteed by Jiangsu Ever-Glory Group, a
related company.
As of March 31, 2006, the Company did not have any standby letters of credit or standby repurchase obligations.
14

Sources of LiquidityThe Companys primary source of liquidity for its short-term cash needs is expected to be cash flow generated from operations, and cash and cash equivalents currently on hand. The Company believes that will be able to borrow additional funds if
needed.
The Company believes its cash flow from operations together with its cash and cash equivalents currently on hand will be sufficient to meet its working capital, capital expenditure and other commitments through December 2006. For its long-term cash
needs, the Company is currently considering a number of different financing opportunities including debt and equity financing. Adequate funds may not be available on terms acceptable to it. If additional funds are raised through the issuance of
equity securities, dilution to existing stockholders may result. If funding is insufficient at any time in the future, the Company may be unable to develop or enhance its products or services, take advantage of business opportunities or respond to
competitive pressures, any of which could have a material adverse effect on its financial position, results of operations and cash flows.
Foreign Currency Translation Risk.The Company's major operations are in the PRC, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the United States dollar and the Chinese Renminbi.  Sales of
the Company's products are in dollars.  During 2003 and 2004 the exchange rate of RMB to the dollar remained constant at 8.26 RMB to the dollar.  On July 21, 2005, the Chinese government adjusted the exchange rate from 8.26 to 8.09 RMB to the
dollar.  As a result, orders received prior to the adjustment were at prices based on the prior exchange rate, which negatively impacted our gross margins for the year ended December 31, 2005.  We now negotiate price adjustments with most of our
customers, which we believe will reduce our exposure to exchange rate fluctuations in the future.  However, if in the future the Chinese government should decide to adjust the RMB to dollar exchange rate unexpectedly, our gross margins and results
of operations and cash flows could be adversely affected.
The financial statements of Goldenway (whose functional currency is the RMB) are translated into US$ using the closing rate method.  The balance sheet items are translated into US$ using the exchange rates at the respective balance sheet
dates.  The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the year. All exchange differences are
recorded within equity. Translation gain for the periods ended March 31, 2006 and 2005 were $87,061 and $Nil respectively.
RISK FACTORSOur business is subject to certain risks, and we want you to review these risks while you are evaluating our business and our historical results. Please keep in mind that any of the following risks discussed below and elsewhere in this Annual Report
could materially and adversely affect us, our operating results, our financial condition and our projections and beliefs as to our future performance. As such, our results could differ materially from those projected in our forward-looking
statements. Additional risks and uncertainties not currently known to us or those we currently deem to be immaterial may also materially and adversely affect our business.
Risks Relating to the Industry in Which We CompeteOur sales are influenced by general economic cycles.
Apparel is a cyclical industry that is dependent upon the overall level of consumer spending. Our customers anticipate and respond to adverse changes in economic conditions and uncertainty by reducing inventories and canceling orders. As a result,
any substantial deterioration in general economic conditions, increases in energy costs or interest rates, acts of war, acts of nature or terrorist or political events that diminish consumer spending and confidence in any of the regions in which we
compete, could reduce our sales and adversely affect our business and financial condition.
15

Intense competition in the worldwide apparel industry could reduce our sales and prices.
We face a variety of competitive challenges from other apparel manufacturers both in China and elsewhere. Some
of these competitors have greater financial and marketing resources than we do and may be able to adapt to changes in consumer preferences or retail requirements more quickly, devote greater resources to the marketing and sale of their products or
adopt more aggressive pricing policies than we can. As a result, we may not be able to compete successfully with them.
The success of our business depends upon our ability to offer innovative and upgraded products at attractive price points.
The worldwide apparel industry is characterized by constant product innovation due to changing consumer preferences and by the rapid replication of new products by competitors. As a result, our success depends in large part on our ability to
continuously and rapidly respond to customer requirements for innovative and stylish products at a competitive pace, intensity, and price. Failure on our part to regularly and rapidly respond to customer requirements could adversely affect our
ability to retain our existing customers or to acquire new customers which would limit our sales growth.
The worldwide apparel industry is subject to ongoing pricing pressure.
The apparel market is characterized by low barriers to entry for both suppliers and marketers, global sourcing through suppliers located throughout the world, trade liberalization, continuing movement of product sourcing to lower cost countries,
ongoing emergence of new competitors with widely varying strategies and resources, and an increasing focus on apparel in the mass merchant channel of distribution. These factors contribute to ongoing pricing pressure throughout the supply chain.
This pressure has and may continue to:
require us to reduce wholesale prices on existing products;
result in reduced gross margins across our product lines;
increase pressure on us to further reduce our production costs and our operating expenses.Any of these factors could adversely affect our business and financial condition.
Increases in the price of raw materials or their reduced availability could increase our cost of goods and decrease our profitability.
The prices we charge for our products are dependent in part on the market price for raw materials used to produce them. The price and availability of our raw materials may fluctuate substantially, depending on a variety of factors, including demand,
crop yields, weather, supply conditions, transportation costs, government regulation, economic climates and other unpredictable factors. Any raw material price increases could increase our cost of goods and decrease our profitability unless we are
able to pass higher prices on to our customers. Moreover, any decrease in the availability of our raw materials could impair our ability to meet our production requirements in a timely manner.
Risks Relating to Our BusinessWe depend on a group of key customers for a significant portion of our sales. A significant adverse change in a customer relationship or in a customers performance or financial position could harm our business and financial condition.
Net sales to our ten largest customers totaled approximately 81% and 74% of total net sales in 2005 and 2004, respectively. Our largest customer accounted for approximately 22% and 12% of net sales in 2005 and 2004. The garment manufacturing
industry has experienced substantial consolidation in recent years, which has resulted in increased customer leverage over suppliers, greater exposure for suppliers to credit risk and an increased emphasis by customers on inventory management and
productivity.
A decision by a major customer, whether motivated by competitive considerations,
strategic shifts, financial requirements or difficulties, economic conditions or
otherwise, to decrease its purchases from us or to change its manner of doing
business with us, could adversely affect our business and financial condition.
In addition, while we have long-standing customer relationships, we do not have
long term contracts with any of our customers.
16

As a
result, purchases generally occur on an order-by-order basis, and the relationship, as well as particular orders, can generally be terminated by either party at any time.
We are subject to export quotas imposed by governments which could adversely affect our business.
Pursuant to the World Trade Organization (WTO) Agreement, effective January 1, 2005, the United States and other WTO member countries removed quotas from WTO members. In certain instances, the elimination of quotas affords the Company greater access
to foreign markets; however, as the removal of quotas resulted in an import surge from China, the U.S. took action in May 2005 and imposed safeguard quotas on seven categories of goods. Exports of each specified product category will continue to be
admitted into the United States in the ordinary course until the restraint level for that category is reached, after which further exports will be embargoed and will not be cleared until after January 2006. Additionally, on June 10, 2005, in
response to the surge of Chinese imports into the European Union (EU), the EU Commission signed a Memorandum of Understanding (MOU) with China in which ten categories of textiles and apparel will be subject to restraints and on November 8, 2005, the
U.S. and China entered into an MOU in which 21 categories of textiles and apparel will be subject to restraints. Certain of the Companys apparel products fall within the categories subject to the safeguards in the U.S. and the EU, which could
adversely affect the Companys ability to export and sell these products. There can be no assurance that additional trade restrictions will not be imposed on the exports of the Companys products in the future. Such actions could result in
increases in the cost of its products generally and may adversely affect the Companys results of operations. The Company continues to monitor the developments described above.
We must maintain sufficient development and manufacturing capacity to meet the needs of our customers.
We must maintain sufficient development and manufacturing capacity in an environment characterized by continuing cost pressure and demands for product innovation and speed-to-market.  We have made a deposit on 113,220 square meters of land in
Nanjing Jiangning Economic and Technological Development Zone, which includes an existing manufacturing facility of 26,629 square meters. The Company expects to sign the purchase agreement and complete the purchase in 2006. However, the Company has
been allowed to take possession of the property prior to consummation of the purchase. The Company expects the new manufacturing facility to be in production by late 2006 and will replace the Companys current manufacturing facility. If we are
unable for any reason to consummate the purchase of this facility, our manufacturing capacity will be seriously adversely affected. In addition, the cost to bring this facility into full production may exceed our expectations, which would have an
adverse affect on our results of operations and our liquidity.
In addition, garment design changes rapidly as a result of a number of factors, including changing fashion trends, changing consumer tastes, and new fabrics and design techniques.  In order to meet customer demands and changing customer preferences,
we have to continually update our manufacturing equipment and technology.  If we are unable to acquire state-of-the-art equipment and technology, we may not be able to meet customer demands, which could result in loss of customers and sales, which
would have an adverse affect on our results of operations and our liquidity.
The success of our business depends on our ability to attract and retain qualified employees.
We need talented and experienced personnel in a number of areas including our core business activities. An inability to retain and attract qualified personnel, especially our key executives, could harm our business. Turnover among our employees and
senior management could have a material adverse effect on our ability to implement our strategies and on our results of operations.
We will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act.
Failure to timely comply with the requirements of Section 404 or any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our debt securities.
We are not currently an accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. Beginning with our Annual Report for the year ending December 31, 2007, Section 404 of the Sarbanes-Oxley
Act of 2002 will require us to include an internal control report with our
Annual Report on
17

Form
10-KSB. That report must include managements assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal
control over financial reporting that we have identified. Additionally, our independent registered public accounting firm will be required to issue reports on managements assessment of our internal control over financial reporting and their
evaluation of the operating effectiveness of our internal control over financial reporting. Our assessment requires us to make subjective judgments and our independent registered public accounting firm may not agree with our assessment.
Achieving compliance with Section 404 within the prescribed period may require us to incur significant costs and expend significant time and management resources. We cannot assure you that we will be able to complete the work necessary for our
management to issue its management report in a timely manner, or that we will be able to complete any work required for our management to be able to conclude that our internal control over financial reporting is operating effectively. If we are not
able to complete the assessment under Section 404 in a timely manner, we and our independent registered public accounting firm would be unable to conclude that our internal control over financial reporting is effective as of December 31, 2007. As a
result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our debt securities. In addition, our independent registered public accounting firm may not agree with our
managements assessment or conclude that our internal control over financial reporting is operating effectively.
We must successfully maintain and/or upgrade our information technology systems.
We rely on various information technology systems to manage our operations and we regularly evaluate these systems against our current and expected requirements. We are currently implementing modifications and upgrades to our systems, including
replacing legacy systems with successor systems, making changes to legacy systems and acquiring new systems with new functionality. There are inherent costs and risks associated with replacing and changing these systems, including significant
capital expenditures and the risk of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems. Any information technology system disruptions, if not anticipated and appropriately mitigated, could
have an adverse effect on our business and operations.
We may engage in future acquisitions and strategic investments that dilute the ownership percentage of our stockholders and require the use of cash, incur debt or assume contingent liabilities.
As part of our business strategy, we expect to continue to review opportunities to buy or invest in other businesses or technologies that we believe would enhance our manufacturing capabilities, or that may otherwise offer growth opportunities. If
we buy or invest in other businesses in the future, we could:  require the use of cash, incur debt or assume contingent liabilities.
As part of our business strategy, we expect to continue to review opportunities to buy or invest in other businesses or technologies that we believe would complement our current products, expand the breadth of our markets or enhance our technical
capabilities, or that may otherwise offer growth opportunities. If we buy or invest in other businesses, products or technologies in the future, we could:
incur significant unplanned expenses and personnel costs;
issue stock that would dilute our current stockholders percentage ownership;
use cash, which may result in a reduction of our liquidity;
incur debt;
assume liabilities; and
spend resources on unconsummated transactions.We may not realize the anticipated benefits of past or future acquisitions and strategic investments, and integration of acquisitions may disrupt our business and management.
18

We may in the future acquire or make strategic investments in additional companies. We may not realize the anticipated benefits of these or any other acquisitions or strategic investments, which involve numerous risks, including:
problems integrating the purchased operations, technologies, personnel or products over geographically disparate locations;
unanticipated costs, litigation and other contingent liabilities;
diversion of managements attention from our core business;
adverse effects on existing business relationships with suppliers and customers;
incurrence of acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;
inability to retain key customers, distributors, vendors and other business partners of the acquired business; and
potential loss of our key employees or the key employees of an acquired organization.If we are not be able to successfully integrate businesses, products, technologies or personnel that we acquire, or to realize expected benefits of our acquisitions or strategic investments, our business and financial results may be adversely
affected.
International political instability and concerns about other international crises may increase our cost of doing business and disrupt our business.
International political instability may halt or hinder our ability to do business and may increase our costs. Various events, including the occurrence or threat of terrorist attacks, increased national security measures in the United States and
other countries, and military action and armed conflicts, can suddenly increase international tensions. Increases in energy prices will also impact our costs and could harm our operating results. In addition, concerns about other international
crises, such as the spread of severe acute respiratory syndrome (SARS), avian influenza, or bird flu, and West Nile viruses, may have an adverse effect on the world economy and could adversely affect our business operations or the
operations of our OEM partners, contract manufacturer and suppliers. This political instability and concerns about other international crises may, for example:
negatively affect the reliability and cost of transportation;
negatively affect the desire and ability of our employees and customers to travel;
adversely affect our ability to obtain adequate insurance at reasonable rates; and
require us to take extra security precautions for our operations.Furthermore, to the extent that air or sea transportation is delayed or disrupted, our operations may be disrupted, particularly if shipments of our products are delayed.
Business interruptions could adversely affect our business.
Our operations and the operations of our suppliers and customers are vulnerable to interruption by fire, earthquake, hurricanes, power loss, telecommunications failure and other events beyond our control. In the event of a major natural disaster, we
could experience business interruptions, destruction of facilities and loss of life. In the event that a material business interruption occurs that affects us or our suppliers or customers, shipments could be delayed and our business and financial
results could be harmed.
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We expect to experience volatility in our stock price, which could negatively affect stockholders investments.
The market price for shares of the Companys common stock may be volatile and may fluctuate based upon a number of factors, including, without limitation, business performance, news announcements or changes in general market conditions.
Other factors, in addition to the those risks included in this section, that may have a significant impact on the market price of the Companys common stock include, but are not limited to:
receipt of substantial orders or order cancellations;
quality deficiencies in services or products;
international developments, such as technology mandates, political developments or changes in economic policies;
government regulations;
energy blackouts;
acts of terrorism and war;
widespread illness;
strategic transactions, such as acquisitions and divestitures;
earthquakes or other natural disasters concentrated in Nanjing, China where a significant portion of the Companys operations are based.In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. Due to changes in the volatility of the Companys common stock price, the Company
may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert managements attention and resources.
Export QuotasPursuant to the World Trade Organization (WTO) Agreement, effective January 1, 2005, the United States and other WTO member countries removed quotas from WTO members. In certain instances, the elimination of quotas affords the Company greater access
to foreign markets; however, as the removal of quotas resulted in an import surge from China, the U.S. took action in May 2005 and imposed safeguard quotas on seven categories of goods. Exports of each specified product category will continue to be
admitted into the United States in the ordinary course until the restraint level for that category is reached, after which further exports will be embargoed and will not be cleared until after January 2006. Additionally, on June 10, 2005, in
response to the surge of Chinese imports into the European Union (EU), the EU Commission signed a Memorandum of Understanding (MOU) with China in which ten categories of textiles and apparel will be subject to restraints. Certain of the
Companys apparel products fall within the categories subject to the safeguards in the U.S. and the EU, which could adversely affect the Companys ability to export and sell these products. At this time, based on expected U.S. and EU
actions and other mitigating factors, the Company believes that such safeguard measures will not have a material impact on its sales in the U.S. and EU. On a longer term basis, if necessary, the Company expects to adjust the types of apparel it
manufactures and therefore believes that the aforementioned restraints and safeguard measures will not have a material impact on its sales and profitability. There can be no assurance that additional trade restrictions will not be imposed on the
exports of the Companys products in the future. Such actions could result in increases in the cost of its products generally and may adversely affect the Companys results of operations. The Company continues to monitor the developments
described above.
Possible Volatility of Stock PriceThe market price for shares of the Companys common stock may be volatile and may fluctuate based upon a number of factors, including, without limitation, business performance, news announcements or changes in general market conditions.
20

Other factors, in addition to the those risks included in this section, that may have a significant impact on the market price of the Companys common stock include, but are not limited to:
receipt of substantial orders or order cancellations of products;
quality deficiencies in services or products;
international developments, such as technology mandates, political developments or changes in economic policies;
changes in recommendations of securities analysts;
shortfalls in the Companys backlog, revenues or earnings in any given period relative to the levels expected by securities analysts or projected by the Company;
government regulations, including stock option accounting and tax regulations;
energy blackouts;
acts of terrorism and war;
widespread illness;
proprietary rights or product or patent litigation;
strategic transactions, such as acquisitions and divestitures;
rumors or allegations regarding the Companys financial disclosures or practices; or
earthquakes or other natural disasters concentrated in Nanjing, China where a significant portion of the Companys operations are based.In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. Due to changes in the volatility of the Companys common stock price, the Company
may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert managements attention and resources.
ITEM 3. CONTROLS AND PROCEDURESAs of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures.  Based on this evaluation, the Companys chief executive officer and chief financial officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to
material information required to be included in the Companys periodic SEC reports.  It should be noted that design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
On November 21, 2005, a Quarterly Report on Form 10-QSB, which purported to
contain the Companys financial results for the three and nine months ending
September 30, 2005 was filed with the SEC. This report was filed with neither
the approval of the Company nor with the prior review of its auditors and
contained numerous errors and omissions. The Company filed an amended Quarterly
Report on Form 10-QSB with the SEC on December 5, 2005 to correct these errors.
In addition, this Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2005 did not discuss the Companys outstanding borrowings in
21

Management's Discussion And
Analysis Of Financial Condition And Results Of Operations  Liquidity and Capital Resources  Sources of Liquidity, although the Company's balance sheet and cash flow statement correctly reported an outstanding note payable to a bank which
was consummated in August 2005. As a result, the Company's management concluded that during that period, the Company's disclosure controls and procedures were deficient.  The Company has taken steps to improve and strengthen its disclosure controls
and procedures, including hiring new legal counsel, and implementing new policies and procedures in an effort to correct these deficiencies.
Other than as set forth above, there has been no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1.  LEGAL PROCEEDINGS The Company is a named defendant in an action pending in the U.S. District Court for the Northern District of Ohio. The action was filed on February 22, 2006 by Plaintiff Douglas G. Furth. The other principal parties are named defendants John Zanic,
Wilson-Davis & Co., and Godwin, Pappas, Longley & Ronquillo, LLP. The action alleges that Company breached an agreement with the plaintiff under which it had promised to provide plaintiff 1,000,000 shares of its common stock in exchange for
certain assistance in marketing and financial public relations services. The action seeks an award of damages in excess of $75,000. The Company denies that it was a party to such an agreement, that it breached the agreement or that it is
otherwise liable. The Company intends to vigorously defend its legal position. After vigorously defending itself, the Company was voluntarily dismissed by the Plaintiff without prejudice from an action pending in the U.S. District Court for the
Northern District of Ohio. No payment was made to plaintiff and no settlement agreement was entered into between the Company and plaintiff.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS and Reports on Form 8-K
(a) The following exhibits are filed herewith:
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 2002.22

(b) Reports on Form 8-K:On February 22, 2006, the Registrant filed a Current Report on Form 8-K with the Commission regarding the filing of an action in the U.S. District Court for the Northern District of Ohio naming the Registrant as a defendant. The action was filed on
February 22, 2006 by plaintiff Douglas G. Furth which alleges that the Company breached an agreement with the plaintiff under which it had promised to provide plaintiff 1,000,000 shares of its common stock in exchange for certain assistance in
marketing and financial public relations services.  The action seeks an award of damages in excess of $75,000. The Company denies this allegation.
On April 3, 2006, the Registrant filed another Current Report on Form 8-K stating that after vigorously defending itself, the Company was voluntarily dismissed by the Plaintiff without prejudice from an action pending in the U.S. District Court for
the Northern District of Ohio. The action was filed on February 22, 2006 by plaintiff Douglas G. Furth. The action alleged that the Company breached an agreement and sought an award of damages in excess of $75,000. The Company denied that it was
a party to such an agreement, that it breached the agreement or that it is otherwise liable. No payment was made to plaintiff and no settlement agreement was entered into between the Company and plaintiff.
23

SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this Report on Form 10-QSB to be signed on its behalf by the undersigned, thereunto duly authorized.
EVER-GLORY INTERNATIONAL GROUP, INC.
(Registrant)
Date: May 10, 2006
By:
/s/ Guo YanChief Financial Officer(Principal Financial and Accounting Officer)24