UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10 - Q

(Mark One)

|X|   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934
      For the quarterly period ended June 30, 2007


|_|   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:   0-25918
                                -------

                             EVERLAST WORLDWIDE INC.
                             -----------------------
             (Exact Name of Registrant as Specified in Its Charter)

                 DELAWARE                               13-3672716
      (State or Other Jurisdiction of                  (IRS Employer
       Incorporation or Organization)                Identification No.)


       1350 BROADWAY, SUITE 2300
              NEW YORK, NY                                 10018
  (Address of Principal Executive Offices)               (Zip Code)

                                 (212) 239-0990
              (Registrant's Telephone Number, Including Area Code)

                                 Not Applicable
                     (Former Name, Former Address and Former
                    Fiscal Year if Changed Since Last Report)

      Indicate  by check  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 past 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                        Yes |X|                    No |_|

      Indicate by check whether the Registrant is a large accelerated  filer, an
accelerated  filer or a  non-accelerated  filer.  See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [_]   Accelerated Filer [_]   Non-Accelerated Filer [X]

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

                        Yes |_|                    No |X|

      The number of common equity shares  outstanding  as of August 10, 2007 was
4,080,023 shares of Common Stock, $.002 par value.



                                      INDEX

PART I.  FINANCIAL INFORMATION                                            PAGE
                                                                          ----


  Item 1.  Consolidated Financial Statements

           Consolidated Balance Sheets -
           June 30, 2007 (Unaudited) and December 31, 2006                3

           Consolidated Statements of Operations -
           Three and Six Months ended June 30, 2007 and 2006 (Unaudited)  4

           Consolidated Statements of Cash Flows -
           Six Months ended June 30, 2007 and 2006 (Unaudited)            5

           Notes to Consolidated Financial Statements -

           Six Months ended June 30, 2007 - (Unaudited)                   6-14

  Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                      15-20

  Item 3.  Quantitative and Qualitative Disclosure About Market Risk      20

  Item 4.  Controls and Procedures                                        20

PART II. OTHER INFORMATION

  Items 2  through 3 and 5 not applicable

  Item 1   Legal update

  Item 4.  Submission of Matters to Vote of Security Holders 20

  Item 6.  Exhibits                                                       21


SIGNATURES                                                                22


                                      -2-


                                              EVERLAST WORLDWIDE INC.
                                            CONSOLIDATED BALANCE SHEETS

                                                                                         June 30,      December 31,
                                                                                           2007           2006
                                                                                      ------------    ------------
                                                                                       (Unaudited)       (Note)
 ASSETS
 Current assets:
  Cash and cash equivalents                                                           $    150,000    $    216,000
  Accounts and licensing receivables, net of allowance for
   doubtful accounts of $286,000 and $108,000, respectively                              9,984,000      15,649,000
  Inventories                                                                            9,577,000       8,766,000
  Prepaid expenses and other current assets                                              1,703,000       1,098,000
                                                                                      ------------    ------------
                Total current assets                                                    21,414,000      25,729,000

  Restricted cash                                                                        1,136,000       1,109,000
  Property and equipment, net                                                            6,321,000       6,235,000
  Goodwill                                                                               6,718,000       6,718,000
  Trademarks, net                                                                       22,664,000      22,664,000
  Other assets                                                                           2,485,000       2,821,000
                                                                                      ------------    ------------
                                                                                      $ 60,738,000    $ 65,276,000
                                                                                      ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Short-term borrowings from factor                                                   $  8,882,000    $  9,079,000
  Mortgage payable                                                                       2,320,000       2,419,000
  Current maturities of long-term debt                                                   4,040,000       3,953,000
  Accounts payable                                                                       4,418,000       5,638,000
  Accrued expenses and other current liabilities                                           971,000       1,696,000
                                                                                      ------------    ------------
                Total current liabilities                                               20,631,000      22,785,000

Other liabilities                                                                        1,380,000         667,000
Long-term debt, net of current maturities                                               17,785,000      19,161,000
                                                                                      ------------    ------------
                Total liabilities                                                       39,796,000      42,613,000
                                                                                      ------------    ------------


Stockholders' equity:
  Common stock, par value $.002; 19,000,000 shares authorized;
     4,254,023 issued in 2007and 4,240,525 issued in 2006;
     4,080,023 and 4,066,525 outstanding in 2007 and 2006                                   10,000          10,000
  Paid-in capital                                                                       17,811,000      17,380,000
  Retained earnings                                                                      3,848,000       6,000,000
                                                                                      ------------    ------------
                                                                                        21,669,000      23,390,000
  Less treasury stock, at cost (174,000 common shares)                                    (727,000)       (727,000)
                                                                                      ------------    ------------
                                                                                        20,942,000      22,663,000
                                                                                      ------------    ------------
                                                                                      $ 60,738,000    $ 65,276,000
                                                                                      ============    ============

See accompanying notes to the consolidated financial statements.

Note: The balance sheet at December 31, 2006 has been derived from the audited financial statements at that date.


                                                        -3-


                                                       EVERLAST WORLDWIDE INC.
                                                CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                        Three Months Ended                  Six Months Ended
                                                                             June 30,                           June 30,
                                                                 ------------------------------------------------------------------
                                                                     2007              2006              2007             2006

                                                                  (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)

Net sales                                                        $  8,674,000      $  6,798,000      $ 17,723,000      $ 13,765,000
Net license revenues                                                3,482,000         3,039,000         6,809,000         6,042,000
                                                                 ------------      ------------      ------------      ------------
Net revenues                                                       12,156,000         9,837,000        24,532,000        19,807,000

Cost of goods sold                                                  5,585,000         5,340,000        11,878,000        10,869,000
                                                                 ------------      ------------      ------------      ------------


Gross profit                                                        6,571,000         4,497,000        12,654,000         8,938,000
                                                                 ------------      ------------      ------------      ------------

Operating expenses:
  Selling and shipping                                              2,259,000         1,320,000         4,327,000         2,886,000
  Stock-based compensation and warrant costs                          202,000           135,000           363,000           219,000
  General and administrative                                        1,983,000         1,476,000         3,618,000         2,813,000
                                                                 ------------      ------------      ------------      ------------
                                                                    4,444,000         2,931,000         8,308,000         5,918,000
                                                                 ------------      ------------      ------------      ------------

Operating income                                                    2,127,000         1,566,000         4,346,000         3,020,000
                                                                 ------------      ------------      ------------      ------------

Other income (expense):
  Gain on early extinguishment of preferred
  stock and prepayment of notes payable, net                             --                --                --           2,032,000
  Non-recurring merger-related costs                               (4,215,000)             --          (4,215,000)             --
  Interest expense and financing costs, net of
  investment income                                                  (848,000)         (823,000)       (1,761,000)       (1,482,000)
                                                                 ------------      ------------      ------------      ------------
                                                                   (5,063,000)         (823,000)       (5,976,000)          550,000
                                                                 ------------      ------------      ------------      ------------

(Loss) income before (benefit) provision for income
taxes                                                              (2,936,000)          743,000        (1,630,000)        3,570,000

(Benefit) provision for income taxes                               (1,066,000)          341,000          (494,000)          684,000
                                                                 ------------      ------------      ------------      ------------

Net (loss) income                                                $ (1,870,000)     $    402,000      $ (1,136,000)     $  2,886,000
                                                                 ============      ============      ============      ============

Basic net (loss) earnings per common share                       $      (0.46)     $       0.10      $      (0.28)     $       0.77
                                                                 ============      ============      ============      ============
Diluted net (loss) earnings per common share                     $      (0.46)     $       0.10      $      (0.28)     $       0.72
                                                                 ============      ============      ============      ============

See accompanying notes to the consolidated financial statements.


                                                                -4-


                                                 EVERLAST WORLDWIDE INC.
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                       Six Months Ended
                                                                                            June 30,
                                                                               -------------------------------
                                                                                     2007              2006
                                                                               -------------------------------
                                                                                          (Unaudited)

Cash flows from operating activities:
  Net (loss) income                                                            $ (1,136,000)      $  2,886,000
  Adjustments to reconcile net (loss) income to net
    cash provided by operating activities:
       Gain on early extinguishment of preferred stock and notes payable               --           (2,032,000)
       Depreciation and amortization                                                687,000            568,000
       Non cash cost in connection with stock-based compensation
         and warrant issuance                                                       363,000            219,000
       Interest income on restricted cash                                           (27,000)           (23,000)
Changes in assets (increase) decrease:
       Accounts receivable                                                        5,361,000          3,508,000
       Inventories                                                                 (811,000)         2,270,000
       Prepaid expenses and other current assets                                   (604,000)         1,134,000
       Other assets                                                                 (87,000)           676,000
Changes in liabilities increase (decrease):
       Accounts payable, accrued expenses
       and other liabilities                                                     (1,919,000)        (1,066,000)
       License deposits payable                                                        --              (24,000)
                                                                               ------------       ------------
             Net cash provided by operating activities                            1,827,000          8,114,000
                                                                               ------------       ------------

Cash flows used by investing activities:
       Purchases of property and equipment                                         (376,000)          (278,000)
                                                                               ------------       ------------

Cash flows from financing activities:
       (Repayments of)/proceeds from term loan facility                          (1,270,000)        25,000,000
       Redemption of preferred stock and prepayment of notes payable                   --          (22,703,000)
       Deferred financing costs on term facility                                       --           (2,059,000)
       Repayments of short-term borrowings from Factor                             (197,000)       (10,050,000)
       Proceeds from exercises of stock options                                      68,000          2,912,000
       Repayments of other debt instruments                                        (118,000)          (752,000)
                                                                               ------------       ------------
             Net cash used by financing activities:                              (1,517,000)        (7,652,000)
                                                                               ------------       ------------

Net (decrease) increase in cash and cash equivalents                                (66,000)           184,000
Cash and cash equivalents, beginning of period                                      216,000             58,000
                                                                               ------------       ------------

Cash and cash equivalents, end of period                                       $    150,000       $    242,000
                                                                               ============       ============

Supplemental disclosures of cash flow information:
    Cash paid during the period for:
       Interest                                                                $  1,463,000       $  1,243,000
       Income taxes                                                                  32,000              8,000


See accompanying notes to consolidated financial statements.


                                                          -5-


                             EVERLAST WORLDWIDE INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.  EVERLAST WORLDWIDE INC. AND BASIS OF PRESENTATION:

    Everlast  Worldwide Inc. (herein  referred to as "the Company",  "we", "us",
    and "our") is a  manufacturer,  marketer  and  licensor of  sporting  goods,
    apparel,  footwear and other active  lifestyle  products  under the Everlast
    brand name. Our  consolidated  financial  statements  presented herein as of
    June 30, 2007 and for the three and six months  ended June 30, 2007 and 2006
    are unaudited  and, in the opinion of  management,  include all  adjustments
    (consisting  only of  normal  recurring  adjustments)  necessary  for a fair
    presentation of financial position and results of operations. Such financial
    statements do not include all of the  information  and footnote  disclosures
    normally  included in audited  financial  statements  prepared in accordance
    with generally accepted accounting  principles.  The accompanying  unaudited
    consolidated  financial statements have been prepared in accordance with the
    instructions  to Form 10-Q.  The results of operations for the three and six
    month  periods  ended June 30, 2007 are not  necessarily  indicative  of the
    results that may be expected for any other interim  periods or the full year
    ending  December  31,  2007.  We  have  reviewed  the  status  of our  legal
    contingencies  and have updated our  disclosures  from the Form 10-K for the
    year ended December 31, 2006 in the footnotes  below.  This report should be
    read in conjunction with the 2006 annual report on Form 10K.

2.  CHANGE IN ACCOUNTING PRINCIPLE AND PENDING ACCOUNTING  PRONOUCEMENTS

    We  adopted  the  provisions  of FASB  Interpretation  No.  48  ("FIN  48"),
    "Accounting  for  Uncertainty  in Income  Taxes," on  January 1, 2007.  This
    interpretation  impacts  our tax  position,  taken in previous  years,  with
    regard to one of our subsidiaries,  which is a domestic  international sales
    corporation  ("DISC").  Upon adoption,  we determined that it is more likely
    than  not,  that our tax  position  regarding  our  DISC,  for tax  benefits
    previously taken, will not be sustained upon examination.  In addition to an
    increase in its liabilities,  this adoption  results in a cumulative  effect
    adjustment, as a reduction to the opening balance of retained earnings as of
    January 1, 2007,  of  $1,016,000.  This does not  include  any  amounts  for
    interest and  penalties,  as none are  expected.  There was no change in the
    liability for  unrecognized  tax benefits from the date of adoption  through
    June 30, 2007.

    In September 2006, the Financial  Accounting Standards Board ("FASB") issued
    Statement of Financial  Accounting  Standards  ("SFAS") No. 157, "Fair Value
    Measurements."  This statement  defines fair value,  establishes a framework
    for measuring fair value in GAAP, and enhances  disclosures about fair value
    measurements.  This statement  applies when other accounting  pronouncements
    require  fair  value  measurements;  it does  not  require  new  fair  value
    measurements.  This statement  responds to investors'  requests for expanded
    information   about  the  extent  to  which  companies  measure  assets  and
    liabilities at fair value,  the information  used to measure fair value, and
    the  effect  of fair  value  measurement  on  earnings.  This  statement  is
    effective  for fiscal years  beginning  after  November 15, 2007 and interim
    periods  within  those  years.  The  Company is  evaluating  the effect this
    statement will have on its financial statements.

    In February  2007,  the FASB issued SFAS No. 159, "The Fair Value Option for
    Financial  Assets and Liabilities - Including an amendment of FASB Statement
    No.  115."  This  statement  permits  entities  to  choose to  measure  many
    financial  instruments and certain other items at fair value.  The objective
    is to improve financial reporting by providing entities with the opportunity
    to mitigate  volatility  in reported  earnings  caused by measuring  related
    assets and  liabilities  differently  without  having to apply complex hedge


                                      -6-


    accounting  provisions.   This  statement  is  effective  for  fiscal  years
    beginning  after  November 15, 2007 and interim  periods within those years.
    The  Company  is  evaluating  the  effect  this  statement  will have on its
    financial statements.

3.  RECENT BUSINESS DEVELOPMENTS:

    PENDING MERGER AGREEMENT

    On June 1, 2007,  we  entered  into a merger  agreement  with  Hidary  Group
    Acquisitions,  LLC and Hidary Group  Acquisitions,  Inc.  (which we refer to
    herein  as  the  "Prior  Merger   Agreement")  and  pursuant  to  which  our
    stockholders would receive $26.50 per share in merger consideration. On June
    15,  2007,  we filed a proxy  statement  with the  Securities  and  Exchange
    Commission  in  respect  of the Prior  Merger  Agreement.  The Prior  Merger
    Agreement  provided for a 30-day "go-shop" period during which time, we were
    permitted to solicit and encourage acquisition proposals for our company. On
    June 21, 2007, Brands Holdings Limited,  a private company limited by shares
    incorporated  in England and Wales,  and EWI  Acquisition,  Inc., a Delaware
    corporation  and a  wholly  owned  subsidiary  of  Brands  Holdings  Limited
    (collectively   "Brands  Holdings")   submitted  an  acquisition   proposal,
    providing for per share merger  consideration  of $30.00 per share,  that we
    determined was superior to the transaction  contemplated by the Prior Merger
    Agreement. Accordingly, on June 28, 2007, we paid Hidary Group Acquisitions,
    LLC a termination  fee of $3,000,000  (as  contemplated  by the Prior Merger
    Agreement and included in  non-recurring  merger related costs in the second
    quarter of 2007),  terminated the Prior Merger  Agreement in accordance with
    its terms and entered  into a merger  agreement  with Brands  Holdings ( the
    "Merger  Agreement").  On June 29, 2007, following receipt of an acquisition
    proposal from the parties to the Prior Merger Agreement providing for merger
    consideration  of $31.25 per  share,  Brands  Holdings  offered to amend the
    terms of the Merger Agreement to increase the merger consideration to $33.00
    per share. Accordingly,  on June 29, 2007, we entered into Amendment No.1 to
    the Merger Agreement.  On July 11, 2007, since amended on August 1, 2007, we
    filed a revised preliminary proxy statement with the Securities and Exchange
    Commission  on  Schedule  14A  pursuant to Section  14(a) of the  Securities
    Exchange  Act of 1934.  Consummation  of the Merger  Agreement is subject to
    customary closing conditions, including the expiration or termination of any
    waiting period under the  Hart-Scott-Rodino  Antitrust  Improvements  Act of
    1976, as amended and  stockholder  approval of a majority of the outstanding
    shares.  We expect the Merger Agreement with Brands Holdings to be completed
    and closed in the fall of 2007.

    PENDING MERGER LITIGATION

    On  July  10,  2007,  Hidary  Group  Acquisitions,   LLC  and  Hidary  Group
    Acquisitions,  Inc.  (collectively,  "Hidary")  brought a  complaint  in the
    Delaware Court of Chancery (the "Hidary Action"). The complaint, which names
    Everlast Worldwide Inc. as the defendant, among other things, alleges claims
    arising out of the proposed  transaction  with Brands Holdings for breach of
    the Prior Merger Agreement. The complaint sought a declaratory judgment that
    the Prior Merger  Agreement was a valid and enforceable  contract,  specific


                                      -7-


    performance of the Prior Merger Agreement,  a declaratory  judgment that our
    Merger Agreement with Brands Holdings was ineffective under its own terms, a
    permanent  injunction  against our proposed merger with Brands Holdings,  an
    award of  damages  against  us for our  alleged  breach of the Prior  Merger
    Agreement  and such other  relief as the court may deem just and proper.  On
    July 20,  2007,  Brands  Holdings  filed a Complaint  in  Intervention  (the
    "Intervention  Complaint").  The Intervention  Complaint sought, among other
    things,  specific  performance  of the Merger  Agreement,  and relief from a
    certain standstill agreement and payment of a certain termination fee in the
    event that the  Hidary  Action was  successful.  On August 3, 2007,  Hidary,
    Everlast  and  Brands  Holdings  (collectively,  "the  Parties")  reached an
    agreement in principle to settle the Hidary Action. In consideration for the
    settlement and release of all Claims (as defined below) released thereunder,
    the Parties  agreed among other things that Hidary shall cause the voluntary
    dismissal,  with prejudice, of the Hidary Action; provided that in the event
    of further litigation against Hidary by Everlast or Brands Holdings relating
    to the  currently  contemplated  sale of  Everlast  as a public  company for
    matters not released hereunder (including, without limitation, litigation in
    respect of  conduct  related to such sale of  Everlast  after the  Effective
    Date), none of Brands Holdings or Everlast would oppose the reinstitution by
    Hidary of that  component of the Hidary Action that relates solely to relief
    in the form of money  damages  not to  exceed  $1,500,000  in the event of a
    final  determination  that  under  the Prior  Merger  Agreement  Hidary  was
    entitled to a "Termination  Fee" (as defined in the Prior Merger  Agreement)
    of $4,500,000 and not $3,000,000.

    On or about June 6,  2007,  we were  served  with a  purported  class-action
    complaint  brought in the Supreme Court of the State of New York,  County of
    New York, on behalf of William  Sweet,  an alleged  stockholder of ours, and
    all others  similarly  situated.  The  complaint,  which names as defendants
    Everlast  Worldwide  Inc.,  and our  directors  Seth A.  Horowitz,  James K.
    Anderson, Edward R. Epstein, Larry A. Kring, Mark Ackereizen,  Steen Kanter,
    Theodore A. Atlas,  James J.  McGuire,  Jr.,  and Jeffrey M.  Schwartz  (the
    "Individual  Defendants"),  alleges  claims  arising  out  of  our  proposed
    transaction  with  affiliates of M. Hidary & Company,  Inc., for breaches of
    fiduciary  duty.  The  complaint  seeks  a  declaratory  judgment  that  the
    Individual  Defendants have breached their fiduciary duties to plaintiff and
    the purported  class members,  a preliminary  and permanent  injunction from
    consummating the proposed transaction and attorneys' fees and costs. On July
    24, 2007, the plaintiffs voluntarily withdrew the action that was pending in
    New York  state  court,  and  filed  such  action in the  Delaware  Court of
    Chancery.  No further action has taken place in the Delaware proceeding.  We
    believe that these claims are without merit and intend to defend this action
    vigorously.

    On July 10,  2007,  a purported  class-action  complaint  was brought in the
    Delaware  Court of  Chancery,  on behalf of Charles J.  Restivo,  an alleged
    stockholder of ours, and all others similarly situated. The complaint, which
    names as defendants Everlast Worldwide Inc., our directors Seth A. Horowitz,
    James K. Anderson, Edward R. Epstein, Larry A. Kring, Steen Kanter, Theodore
    A.  Atlas,  James J.  McGuire,  Jr.,  Jeffrey  M.  Schwartz  (the  "Director
    Defendants"),  Brands Holdings, Sports Direct International plc and Everlast
    alleges claims related to our proposed  transaction with Brands Holdings for
    breaches of fiduciary  duty (and aiding and  abetting  such  breaches).  The
    complaint  seeks a declaratory  judgment that the Director  Defendants  have
    breached  their  fiduciary  duties  to  plaintiff  and the  purported  class
    members,  an  injunction  against  the  proposed   transaction  with  Brands
    Holdings,  or,  if the  transaction  is  consummated,  a  rescission  of the
    proposed  transaction with Brands Holdings and attorneys' and experts' fees.
    The Delaware Court of Chancery has scheduled a hearing on plaintiff's Motion


                                      -8-


    for Preliminary Injunction for August 29, 2007. We have moved to dismiss the
    complaint  for  failure to state a claim upon which  relief can be  granted,
    which motion is pending.  We believe that these claims are without merit and
    intend to defend this action vigorously.

    PRELIMINARY REGISTRATION STATEMENT ON FORM S-1

    In March 2007,  we filed a  preliminary  registration  statement on Form S-1
    with the Securities and Exchange Commission to offer common shares, proceeds
    of which were  estimated to be  approximately  $30 million,  net of offering
    costs. We have agreed to cancel this  registration  statement as a condition
    to closing of the Merger Agreement.  We incurred  approximately  $470,000 in
    legal, accounting, printing and other costs associated with this preliminary
    registration  statement  and  have  included  such  costs  in  non-recurring
    merger-related costs.

4.  EARNINGS PER SHARE:

    We report  basic and  diluted  earnings  per share in  accordance  with SFAS
    Statement No. 128 "Earnings Per Share" ("SFAS No. 128").  Basic earnings per
    share amounts are computed  based on the weighted  average  number of shares
    actually  outstanding during the period.  Diluted earnings per share amounts
    are  based on an  increased  number  of  shares  that  would be  outstanding
    assuming the exercise of dilutive stock options and warrants.

    The following table sets forth the computation of basic and diluted earnings
    per share pursuant to SFAS No. 128:

                                                                             Three Months Ended                Six Months Ended
                                                                                  June 30,                         June 30,
                                                                         -----------------------------------------------------------
                                                                             2007            2006            2007            2006
                                                                         -----------------------------------------------------------
Numerator for basic and diluted earnings per common share --
                                                                         -----------      ----------     -----------      ----------
     Net (loss) income available to common stockholders                  $(1,870,000)     $  402,000     $(1,136,000)     $2,886,000
                                                                         -----------      ----------     -----------      ----------

Denominator for basic (loss) earnings per common share --
     Weighted average shares
     outstanding during the period                                         4,078,000       3,883,000       4,072,000       3,750,000
                                                                         -----------      ----------     -----------      ----------
Effect of diluted securities:
Stock options and warrants                                                      --           274,000            --           283,000
                                                                         -----------      ----------     -----------      ----------
Denominator for diluted earnings per common share --
     adjusted weighted average shares and assumed conversions              4,078,000       4,157,000       4,072,000       4,033,000
                                                                         ===========      ==========     ===========      ==========
     Basic net (loss) income per common share                            $     (0.46)     $     0.10     $     (0.28)     $     0.77
                                                                         ===========      ==========     ===========      ==========
     Diluted net (loss) income per common share                          $     (0.46)     $     0.10     $     (0.28)     $     0.72
                                                                         ===========      ==========     ===========      ==========


                                                                -9-



    As a result of the net loss per share  for the  three and six  months  ended
    June 30, 2007, the denominator for fully diluted shares excludes the effects
    of stock  options,  warrants  and other  equity  consideration,  aggregating
    307,000  and  336,000   shares   respectively,   as  the  results  would  be
    anti-dilutive.

5.  GAIN ON EARLY EXTINGUISHMENT OF SERIES A REDEEMABLE  PARTICIPATING PREFERRED
    STOCK ("PREFERRED STOCK") AND NOTES PAYABLE, AND LONG-TERM DEBT:

    On  February  8,  2006,  we  announced  the  entire  redemption  of our then
    outstanding   $20,000,000   of  preferred   stock  and  related  rights  and
    privileges, including the elimination of the profit-sharing mechanism (which
    were in the form of dividends),  the retirement of the two board of director
    seats reserved for the holders of the preferred  stock and the prepayment of
    our outstanding  $6,000,000 in notes payable to one of the former  preferred
    stockholders.  We reported a gain on the early redemption of preferred stock
    and  prepayment  of  notes  payable  of  $2,032,000,  in  our  Statement  of
    Operations in fiscal 2006.

    The redemptions and prepayment was accomplished by our company,  and all our
    wholly-owned  subsidiaries,  by entering into a $25,000,000  senior  secured
    four-year  term facility with Wells Fargo  Century,  Inc. Under the terms of
    the  facility,  we  redeemed  the  preferred  shares and  prepaid  our notes
    payable, and all rights and privileges thereof (including the elimination of
    the  make-whole  provision)  for an  aggregate  amount of  $22,700,000.  The
    remaining $2,300,000 of financing from the term facility was used to pay for
    financing and professional costs associated with the term facility. The term
    facility requires quarterly principal  installments of $635,000,  commencing
    April 30, 2006, with a balloon payment of up to $15,500,000 due December 31,
    2009,  along with monthly interest on the related  outstanding  principal at
    prime plus 1.0% (9.25% as of June 30, 2007). The term facility has customary
    covenants  in place,  including a minimum  fixed-charge  financial  covenant
    ratio,  and excess cash-flow  recapture  (which we currently  estimate to be
    $1,500,000  at June 30, 2007 and have  reclassified  $1,500,000 of long-term
    debt into  current  maturities  of  long-term  debt.) The term  facility  is
    secured by all of our tangible and intangible assets, as defined.

6.  INVENTORIES:

    Inventories  are  stated at the  lower of cost  (determined  on a  first-in,
    first-out basis) or market and consist of.

                                                      As of          As of
                                                    June 30,      December 31,
                                                      2007            2006
                                                  ------------    ------------
                                                  (unaudited)      (audited)
        Raw materials ........................    $  389,000      $1,197,000
        Work-in-process ......................        55,000         233,000
        Finished goods .......................     9,133,000       7,336,000
                                                  ----------      ----------
                                                  $9,577,000      $8,766,000
                                                  ==========      ==========

7.  OPERATING SEGMENTS:

    Our  operating  segments  are  evidenced  by the  structure  of our internal
    organization.  The segments of sporting  goods  equipment  and licensing are
    defined for operations participating in Everlast brand sales activity, which
    are separately broken out and disclosed on our statement of operations.

    Our  sporting  goods  business  predominately  operates  in  one  geographic
    segment,  the United States and Canada.  As of January 1, 2007 our licensing
    segment receives  approximately 46% of its revenues from domestic licensees,
    26% from European licensees and 28% from all other countries.


                                      -10-


    Where  applicable,  "other"  represents  items  necessary to  reconcile  the
    consolidated   financial  statements,   which  generally  include  corporate
    activity  and  costs,  to the  segment  financial  information  provided  as
    follows:

FOR THE THREE MONTHS ENDED JUNE 30, 2007

                                       Sporting
                                         Goods       Licensing        Other          Total
                                     ------------   ------------   ------------   ------------

Operating income ( loss)             $ 1,585,000    $ 3,332,000    $(2,790,000)   $ 2,127,000
                                     -----------    -----------    -----------    -----------

Interest and financing costs, net          --             --          (848,000)      (848,000)

Non-recurring merger-related costs         --             --        (4,215,000)    (4,215,000)

                                     -----------    -----------    -----------    -----------

Income (loss) before income taxes    $ 1,585,000    $ 3,332,000    $(7,853,000)   $(2,936,000)
                                     ===========    ===========    ===========    ===========

FOR THE THREE MONTHS ENDED JUNE 30, 2006

                                      Sporting
                                        Goods       Licensing        Other          Total
                                    ------------   ------------   ------------   ------------

Operating income (loss)             $   141,000    $ 2,908,000    $(1,483,000)   $ 1,566,000
                                    -----------    -----------    -----------    -----------

Interest and financing costs, net         --             --          (823,000)      (823,000)

                                    -----------    -----------    -----------    -----------
Income (loss) before income taxes   $   141,000    $ 2,908,000    $(2,306,000)   $   743,000
                                    ===========    ===========    ===========    ===========

FOR THE SIX MONTHS ENDED JUNE 30, 2007

                                        Sporting
                                          Goods       Licensing         Other           Total
                                      ------------   -------------   -------------   -------------

Operating income ( loss)             $  2,798,000    $  6,568,000    $ (5,020,000)   $  4,346,000
                                     ------------    ------------    ------------    ------------

Interest and financing costs, net           --              --         (1,761,000)     (1,761,000)

Non-recurring merger-related costs          --              --         (4,215,000)     (4,215,000)

                                     ------------    ------------    ------------    ------------
Income (loss) before income taxes    $  2,798,000    $  6,568,000    $(10,996,000)   $ (1,630,000)
                                     ============    ============    ============    ============


                                               -11-


FOR THE SIX MONTHS ENDED JUNE 30, 2006

                                                    Sporting
                                                      Goods       Licensing        Other          Total
                                                  ------------   ------------   ------------   ------------

Operating income (loss)                           $   (88,000)   $ 5,834,000    $(2,726,000)   $ 3,020,000
                                                  -----------    -----------    -----------    -----------

Gain on early extinguishment of preferred stock
and prepayment of notes payable                         --             --         2,032,000      2,032,000

Interest and financing costs, net                       --             --        (1,482,000)    (1,482,000)

                                                  -----------    -----------    -----------    -----------
Income (loss) before income taxes                 $   (88,000)   $ 5,834,000    $(2,176,000)   $ 3,570,000
                                                  ===========    ===========    ===========    ===========


8.  STOCKHOLDERS' EQUITY:

    During  the six  months  ended  June 30,  2007,  paid in  capital  increased
    $363,000  which was a result for the recording of non-cash  equity awards in
    the form of stock  based  compensation  and  $68,000  from the  proceeds  of
    exercised  stock  options.  In  addition,  our  opening  balance of retained
    earnings was reduced by $1,016,000  for the adoption of FIN 48. See footnote
    2 above.

    On June 20, 2007, we were notified by Contender  Partners LLC of the initial
    network order of ten episodes of the third season of The  Contender  reality
    television series.  Consequently,  pursuant to the Company's  agreement with
    Contender  Partners  LLC,  the  Company is  required  to issue  warrants  to
    purchase 189,529 shares of the Company's common stock,  $.002 par value (the
    "Warrant"),   to  Contender   Partners  LLC.  The  Warrant  is   immediately
    exercisable  and  terminates on June 20, 2017.  The exercise price is $13.11
    per share of common stock. The Warrant also provides that some of the shares
    of common stock issued upon the  exercise of the Warrant are  returnable  to
    the Company if less than ten episodes of The Contender is actually  aired on
    network television. Assuming all ten episodes air, we estimate that the fair
    value  of  the  warrant,   utilizing  the   Black-Scholes   method,   to  be
    approximately $1.8 million,  net of an approximate $1.2 million tax benefit,
    and will be recorded as a non-cash warrant issuance cost in our statement of
    operations  and  stockholder's  equity in the third  quarter of fiscal 2007,
    which is the timing of the episodes.

9.  LEGAL MATTERS:

    On  December  20,  2000,  a claim  was  brought  against  our  company,  our
    subsidiary  Everlast World's Boxing  Headquarters  Corp.  ("EWBH"),  and two
    officers of our company.  The complaint  was  initiated by a EWBH  licensing
    representative  in the Supreme Court of the State of New York. The plaintiff
    alleged  breach  of  contract,   tortious   interference   with  contractual
    relations,  tortuous  interference with prospective  business  relations and
    unjust enrichment stemming from our merger completed on October 24, 2000. On
    November 30, 2001,  the claims  against the officers  were  dismissed by the
    court. On June 27, 2002, the Appellate  Divisions  unanimously  affirmed the
    order dismissing the plaintiff's claims.

    On December  23,  2002,  the case against us was  dismissed.  The  plaintiff
    subsequently  filed a motion seeking permission to further appeal its claims
    to the Court of  Appeals.  The  plaintiff's  appeal of that  portion  of the
    decision  dismissing  its claim for a breach of contract  was denied and the
    dismissal was unanimously affirmed by the Appellate Division on December 16,
    2003.


                                      -12-


    A separate  arbitration  was commenced by the same  plaintiff  following the
    termination of its representation agreement by the Company.  Hearings in the
    arbitration commenced in November 2004. In April 2005, we were notified that
    the  arbitrator's  award  held  that  our  termination  of  the  plaintiff's
    representation  agreement  was void and  declared not to be  terminated.  We
    filed a motion in the Supreme  Court,  New York  County  seeking an order to
    vacate the award. On January 6, 2006, the court rendered a written  decision
    and order  granting  the  petition to confirm the award and  dismissing  our
    counterclaim  to vacate  that  portion of the award made in the  plaintiff's
    favor and awarding the plaintiff  approximately  $690,000 due as of December
    31,  2005.  In  February  2006,  the  judgment  was  entered and we paid the
    plaintiff  $690,000 plus amounts owed for commissions earned in January 2006
    and interest thereon through February 24, 2006 aggregating $710,000. As part
    of the settlement we were also required to pay  commissions to the plaintiff
    for the year ended  December  31,  2006,  which  amounted  to  approximately
    $400,000.

    On April 25, 2007, our company and our chief  financial  officer were served
    with new motion papers by the plaintiff,  asserting that we had violated the
    court's  judgment by failing to continue to remit monies to plaintiff  after
    December 31, 2006. The motion seeks to hold our company and chief  financial
    officer in contempt; seeks to compel resumption in payments to the licensing
    representative;  and seeks a fine,  interest  and costs.  We believe that no
    monies are or were due to the plaintiff after December 31, 2006 and that the
    motion lacks merit; and we intend to vigorously oppose the motion.

10. STOCK-BASED COMPENSATION:

    At June 30, 2007, the Company had two active stock-based  compensation plans
    that grant equity awards:  the 2000 Stock Option and  Restricted  Stock Plan
    and the 2005 Non-Employee Director Stock Option Plan. The 2000 Plan provides
    for the grant of stock  options and  restricted  stock to  employees  of the
    Company who are not directors.  For all stock-based  compensation plans, the
    exercise  price of the  options  is  determined  by the Board of  Directors,
    provided that the exercise price for an incentive stock option or restricted
    stock award  cannot be less than 100% of the fair market value of the common
    stock on the grant  date and the  exercise  price for a  nonqualified  stock
    option  cannot be less than 80% of the fair market value of the common stock
    on the grant date. The outstanding  options for all four  outstanding  plans
    generally  vest over a period of three years and  generally  expire 10 years
    (seven years for grants under the director's plans) from the grant date. The
    estimated  fair value of the Company's  stock-based  awards,  less estimated
    forfeitures,  is amortized over the awards' expected life on a straight-line
    basis.

    For all of the Company's  stock-based  compensation plans, the fair value of
    each grant was estimated at the date of grant using the Black-Scholes option
    pricing model. Black-Scholes utilizes assumptions related to volatility, the
    risk-free  interest rate,  the dividend  yield and expected  life.  Expected
    volatilities utilized in the model are based on the historical volatility of
    the Company's stock price. The volatility for the 2007 grants was calculated
    to be 84%. The  risk-free  interest  rate is derived from the U.S.  Treasury
    yield curve in effect at the time of grant,  which  approximated  4.5%.  The
    model incorporates exercise and post-vesting forfeiture assumptions based on
    an analysis of historical  data. The expected life of the fiscal 2007 grants
    is derived from  historical  information  and other  factors.  The following
    summary presents the activity of all our award based equity plans in the six
    months ended fiscal 2007:


                                      -13-


                                                                        1995            2005
                                        2000             1993       Non-employee    Non-employee
                                    Stock option     Stock option  director stock  director stock                Weighted average
                                        plan             plan        option plan     option plan       Total      exercise price
                                    ------------     ------------  --------------  --------------    --------    ----------------

Outstanding at January 1,2007         596,803           9,856          19,377          36,300         662,336       $    7.66

Granted                                81,500            --              --            43,200         124,700       $   18.18

Forfeited                             (33,333)           --              --            (9,334)        (42,667)      $   10.06

Exercised                             (11,832)         (3,000)           --            (1,667)        (16,499)      $    4.07
                                      -------           -----          ------          ------         -------

Outstanding at June 30,2007           633,138           6,856          19,377          68,499         727,870       $    9.56
                                      =======           =====          ======          ======         =======


    The  weighted-average  grant-date  fair value for options granted during the
    fiscal period ended June 30, 2007, was $12.65.  The intrinsic value for such
    options was $0. As of June 30, 2007, total  unrecognized  compensation costs
    related to non-vested share-based compensation  arrangements (without regard
    to any future awards and grants), net of tax, is $1.6 million.


                                                               -14-


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

    Certain   statements   contained  in  this   quarterly   report   constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and  Sections  21E of the  Exchange  Act.  Such  forward-looking  statements
involve known and unknown risks,  uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements, or industry
results, to be materially different from any future results, levels of activity,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements. Such factors include, among others, the following:  general economic
and  business  conditions,  our  ability  to  implement  our  business  strategy
including  expanding our brand  through our  marketing  and product  development
initiatives;  our ability to obtain  financing for general  corporate  purposes;
competition;  availability  of key personnel,  and changes in, or the failure to
comply with,  government's  regulations,  among other geo-political and economic
risk factors.  As a result of the foregoing and other factors,  no assurance can
be given as to the future  results,  levels of  activity  and  achievements  and
neither  we  nor  any  person  assume   responsibility   for  the  accuracy  and
completeness of these statements.

OVERVIEW

We are a leading  designer,  manufacturer,  and  marketer  of boxing and fitness
related sporting goods equipment under the  well-recognized  Everlast brand name
and a worldwide licensor of the Everlast brand for apparel,  footwear,  sporting
goods  equipment  and  other   complementary   active  lifestyle   products  and
accessories.  Since 1910, Everlast has been the preeminent brand in the world of
boxing and among the most  recognized  brands in the overall  sporting goods and
apparel industries.  Over the past 97 years, our products were used for training
and in  professional  fights by many of the biggest  names in boxing,  including
Jack Dempsey,  Joe Louis,  Rocky  Marciano,  Muhammad  Ali, Joe Frazier,  George
Foreman,  "Sugar" Ray Leonard,  Evander  Holyfield,  Mike Tyson,  "Sugar"  Shane
Mosley and Jermain Taylor and our products established a reputation for quality,
durability  and  performance.  In order to  capitalize  on the rich heritage and
authenticity  of the Everlast  brand,  we extended the Everlast brand outside of
the  boxing  ring into  complementary  product  categories,  including  apparel,
footwear, eyewear,  nutritional products,  fragrances and other active lifestyle
products. We accomplished this through 86 licensing  arrangements with licensees
in over  100  countries  who have  expertise  in these  product  categories  and
territories.  Our  strategy  is to continue  to  leverage  the unique  qualities
represented by the Everlast  brand -- Strength,  Dedication,  Individuality  and
Authenticity  -- to become a leading global  athletic brand and a necessary part
of the lives of consumers who train, compete and live an active lifestyle.

We operate our business through two business segments:  sporting goods equipment
and licensed products.

SPORTING  GOODS  EQUIPMENT.  Under our sporting  goods  equipment  business,  we
design,  manufacture,  source  and market  sporting  goods  equipment  primarily
related to the sport of boxing and fitness, including boxing gloves, heavy bags,
speed bags,  boxing trunks and other related gym equipment and  accessories.  We
currently sell our sporting goods equipment in  approximately  5,000 U.S. retail
locations across a broad range of distribution channels including sporting goods
retailers,  mass merchants,  mid-tier department stores, specialty retailers and
fitness clubs. We also sell these products directly through the internet and the
Everlast  catalog.  We  believe  we are the  market  leader in nearly all of our
product categories and maintain strong  relationships with our retail customers.
Approximately  30.0% of our sporting goods equipment  sales are  manufactured at
our Missouri  facility.  The remaining 70.0% of our products,  including  boxing
gloves,  headgear,  heavy bag stands and other  sporting  goods  equipment,  are
manufactured by third party factories, predominately in Asia under the direction
of our team of representatives.

LICENSED PRODUCTS.  We currently manage 26 domestic licensing  arrangements with
licensees  who design,  source and market a range of products in the U.S.  under
the Everlast  brand  including  apparel,  footwear,  sporting  goods  equipment,
eyewear,  nutritional products and other active lifestyle products. In addition,
to capitalize on the worldwide  recognition of the Everlast  brand,  we expanded


                                      -15-


our  presence  in  international  markets  through a global  network of licensee
partners.  We currently utilize 60 licensing  arrangements in over 100 countries
worldwide with licensees who design,  source,  manufacture and market a range of
products  under  the  Everlast  brand,   including  boxing  and  sporting  goods
equipment,  apparel,  footwear,  eyewear,  nutritional products,  fragrances and
other active lifestyle products. In return for rights to market products bearing
our  trademarks,  our  licensees  pay us  royalties  based upon the net sales of
Everlast  branded  products.  In addition,  a significant  number of our license
agreements  contain  contractual  guaranteed  minimum  royalties.  Our licensing
business  model  provides  higher  margins  with lower  operating  risk than our
sporting goods equipment business.

RECENT  BUSINESS  DEVELOPMENTS.  On June  1,  2007,  we  entered  into a  merger
agreement  with Hidary Group  Acquisitions,  LLC and Hidary Group  Acquisitions,
Inc. (which we refer to herein as the "Prior Merger  Agreement") and pursuant to
which our stockholders  would receive $26.50 per share in merger  consideration.
On June 15, 2007, we filed a proxy  statement  with the  Securities and Exchange
Commission in respect of the Prior Merger Agreement.  The Prior Merger Agreement
provided for a 30-day  "go-shop"  period during which time, we were permitted to
solicit and encourage  acquisition  proposals for our company. On June 21, 2007,
Brands Holdings  Limited,  a private  company limited by shares  incorporated in
England and Wales,  and EWI  Acquisition,  Inc.,  a Delaware  corporation  and a
wholly  owned  subsidiary  of  Brands  Holdings  Limited  (collectively  "Brands
Holdings")  submitted an  acquisition  proposal,  providing for per share merger
consideration  of $30.00 per  share,  that we  determined  was  superior  to the
transaction contemplated by the Prior Merger Agreement. Accordingly, on June 28,
2007, we paid Hidary Group Acquisitions, LLC a termination fee of $3,000,000 (as
contemplated by the Prior Merger Agreement and included in non-recurring  merger
related  costs in the  second  quarter  of 2007),  terminated  the Prior  Merger
Agreement in accordance with its terms and entered into a merger  agreement with
Brands Holdings ( the "Merger  Agreement").  On June 29, 2007, following receipt
of an  acquisition  proposal  from the  parties  to the Prior  Merger  Agreement
providing for merger  consideration of $31.25 per share, Brands Holdings offered
to amend the terms of the Merger Agreement to increase the merger  consideration
to $33.00 per share.  Accordingly,  on June 29, 2007, we entered into  Amendment
No.1 to the Merger Agreement. On July 11, 2007, since amended on August 1, 2007,
we filed a revised  preliminary proxy statement with the Securities and Exchange
Commission on Schedule 14A pursuant to Section 14(a) of the Securities  Exchange
Act of 1934.  Consummation  of the Merger  Agreement  is  subject  to  customary
closing  conditions,  including  the  expiration or  termination  of any waiting
period  under  the  Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976,  as
amended and  stockholder  approval of a majority of the outstanding  shares.  We
expect the Merger  Agreement with Brands Holdings to be completed in the fall of
2007.

RESULTS OF OPERATIONS

NET  REVENUES.  Net revenues  include net sales from the sale of sporting  goods
equipment and net license  revenues.  Net sales from the sale of sporting  goods
equipment are recorded net of estimated  sales  discounts and returns based upon
specific  customer  agreements and historical  trends.  All sales are final upon
shipment.  Net license revenues represent  royalties paid by licensees in return
for  exclusive  rights  to  market  products  bearing  Everlast  trademarks.   A
significant  portion of our net  license  revenue  is  generated  by  guaranteed
minimum   royalties.   One  licensee,   Jacques  Moret,   Inc.,   accounted  for
approximately  23.9% of our  gross  license  revenues,  with no  other  licensee
representing  greater  than  10.0% of gross  license  revenues,  during the most
recent year ended 2006.

COST OF GOODS SOLD.  Our cost of goods sold  represents our costs to manufacture
products in our own  facilities,  including raw materials costs and all overhead
expenses  related  to  production,  as well as the  cost  to  purchase  finished
products  from our third party  manufacturers.  Cost of goods sold also includes
the cost to transport these products to our distribution  centers. Cost of goods
sold is  recognized  at the time  products are shipped to the customer and title
transfers.

SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES.  Our  selling,  general  and
administrative  expenses  consist  primarily  of selling,  marketing,  wages and
related  payroll and employee  benefit costs,  non cash equity  issuance  costs,
which  includes  stock-based  compensation  and warrant issue costs,  travel and
insurance  expenses,  depreciation,  amortization,  professional fees,  facility
expenses, bank charges, and warehouse and outbound freight expenses.


                                      -16-


THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO JUNE 30, 2006

NET REVENUES. Net revenues increased 23.6% to $12.2 million for 2007 compared to
$9.8  million  for 2006.  Net  sales  from  sporting  goods  equipment  for 2007
increased  27.6% to a record $8.7  million  compared  to $6.8  million for 2006.
Growth was driven by a combination of the  introduction  of new products and new
distribution,  as well as  continued  increases  in the  appeal of the  Everlast
brand,  evidenced  by strong  sell-throughs  at the retail  level.  Net  license
revenues  increased  14.6% to $3.5 million for 2007 compared to $3.0 million for
2006.  The growth was driven from organic  increases in licensing  income by our
worldwide  licensees,  particularly  South Korea, Chile and select categories in
North America.  This growth offset the termination of a European  sporting goods
equipment  licensee,  who was not acting in accordance  with our product quality
and  distribution  standards.  This  licensee has since been replaced by another
licensee  and  shipping of  sporting  goods  equipment  in Europe is expected to
resume in the third quarter of this year.

GROSS  PROFIT.  Gross  margin  increased  46.1% to $6.6  million  (54.1%  of net
revenues)  compared  to $4.5  million  (45.7% of net  revenues)  for  2006.  The
increase in gross margin  dollars and  percentage was achieved from two factors:
an increase in revenues from both our sporting  goods and licensing  businesses;
and our sporting goods  business gross profit  improving 14.2 percent versus the
year-ago period. The second quarter higher gross profit margin on sporting goods
was due to a combination of higher product  margins on new products,  logistical
and operational  efficiencies,  and  improvements  in sourcing,  benefiting from
initiatives  implemented  in the second half of fiscal  2006.  This was slightly
offset by the  revenue  mix toward  equipment  which has a overall  lower  gross
margin than our licensing business.

SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES.  Selling and shipping  expenses
increased  to $2.3 million  (18.6% of net  revenues)  for 2007  compared to $1.3
million (13.4% of net revenues) for 2006. The increase was primarily a result of
planned increased marketing to support our global brand integration. General and
administrative  expenses  increased  to $2.0  million for 2007  compared to $1.5
million  for  2006.  The  increase  was a result of  higher  corporate  overhead
directly  related to support  our higher  revenue  base and also to support  our
global brand  integration.  During 2007,  we incurred  stock-based  compensation
expense of $202,000, net of tax benefits, compared to $135,000 in 2006.

OPERATING INCOME. Operating income increased 35.8% to $2.1 million (17.5% of net
revenues)  for 2007  compared to $1.6 million  (15.9% of net revenues) for 2006.
The increase in operating income and operating margin for 2007 was primarily the
result of higher net revenues and improved gross margins, as explained above.

OTHER  (INCOME)EXPENSE.  During the second  quarter of 2007,  we recorded a $4.2
million  pre-tax  non-recurring  merger-related  charge  related  to the  Merger
Agreement, as amended,  signed on June 28, 2007 with Brands Holdings,  mentioned
above. The $4.2 million pre-tax charge is made up of  approximately  $470,000 in
costs  associated with a follow-on  common stock offering that we have agreed to
cancel as a condition  to the closing of this  merger,  $745,000 in  transaction
costs related to the pending merger and $3.0 million termination fee incurred as
a result of the  termination  of the Prior  Merger  Agreement  signed on June 1,
2007.

INTEREST EXPENSE AND FINANCING COSTS. Interest expense and finance costs, net of
interest  income,  increased to $848,000 for 2007 compared to $823,000 for 2006.
The increase was due to the funding of the $3 million  termination  fee incurred
as part of the Merger Agreement and for working capital  purposes,  specifically
inventory to support the increase in sporting goods net sales.

(LOSS) INCOME BEFORE (BENEFIT)  PROVISION FOR INCOME TAXES. (Loss) income before
income taxes  decreased to a loss of ($2.9)  million for 2007 compared to income
of $743,000 for 2006.  The decrease was primarily a result of the  non-recurring
merger-related  charge,  as explained  above,  offset by higher operating income
achieved in 2007 compared to 2006.


                                      -17-


(BENEFIT)  PROVISION  FOR INCOME  TAXES.  We  recognized  a tax  benefit of $1.1
million for 2007 compared to a tax provision of $341,000 for 2006. We expect our
tax rate to be approximately 39% in 2007.

NET (LOSS) INCOME. Net loss increased to $(1.9) million for 2007 compared to net
income of  $402,000  for 2006 due the  non-recurring  merger  related  charge as
explained above.

SIX MONTHS ENDED JUNE 30, 2007 COMPARED TO JUNE 30, 2006

NET REVENUES. Net revenues increased 23.9% to $24.5 million for 2007 compared to
$19.8  million  for 2006.  Net sales  from  sporting  goods  equipment  for 2007
increased  28.8% to a record $17.7  million  compared to $13.8 million for 2006.
Growth was driven by a combination of the  introduction  of new products and new
distribution,  as well as  continued  increases  in the  appeal of the  Everlast
brand,  evidenced  by strong  sell-throughs  at the retail  level.  Net  license
revenues  increased  12.7% to $6.8 million for 2007 compared to $6.0 million for
2006.  The growth was driven from organic  increases in licensing  income by our
worldwide licensees, particularly in South Korea, Chile and select categories in
North America.  This growth offset the termination of a European  sporting goods
equipment  licensee,  who was not acting in accordance  with our product quality
and  distribution  standards.  This  licensee has since been replaced by another
licensee  and  shipping of  sporting  goods  equipment  in Europe is expected to
resume in the third quarter of this year.

GROSS  PROFIT.  Gross  margin  increased  41.6% to $12.7  million  (51.6% of net
revenues)  compared  to $8.9  million  (45.1% of net  revenues)  for  2006.  The
increase in gross margin  dollars and  percentage was achieved from two factors:
an increase in revenues from both our sporting  goods and licensing  businesses;
and our sporting goods  business gross margin  improving 12.0 percent versus the
year-ago  period.  The year to date higher gross profit margin on sporting goods
was due to a combination of higher product  margins on new products,  logistical
and operational  efficiencies,  and  improvements  in sourcing,  benefiting from
initiatives implemented in the second half of fiscal 2006.
SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES.  Selling and shipping  expenses
increased  to $4.3 million  (17.6% of net  revenues)  for 2007  compared to $2.9
million (14.6% of net revenues) for 2006. The increase was primarily a result of
planned increased marketing to support our global brand integration. General and
administrative  expenses  increased  to $3.6  million for 2007  compared to $2.8
million  for  2006.  The  increase  was a result of  higher  corporate  overhead
directly  related to support  our higher  revenue  base and also to support  our
global brand  integration.  During 2007,  we incurred  stock-based  compensation
expense of $363,000, net of tax benefits compared to $219,000 in 2006.

OPERATING INCOME. Operating income increased 43.9% to $4.3 million (17.7% of net
revenues)  for 2007  compared to $3.0 million  (15.2% of net revenues) for 2006.
The increase in operating income and operating margin for 2007 was primarily the
result of higher net revenues and improved gross margins, as explained above.

OTHER  (INCOME)  EXPENSE.  During the second quarter of 2007, we recorded a $4.2
million  pre-tax  non-recurring  merger  related  charge  related  to the Merger
Agreement, as amended,  signed on June 28, 2007 with Brands Holdings,  mentioned
above. The $4.2 million pre-tax charge is made up of  approximately  $470,000 in
costs  associated with a follow-on  common stock offering that we have agreed to
cancel as a condition  to the closing of this  merger,  $745,000 in  transaction
costs related to the pending merger and $3.0 million termination fee incurred as
a result of the  termination  of the Prior  Merger  Agreement  signed on June 1,
2007.  In  February  2006,  we  recorded  a $2.0  million  gain  from the  early
redemption of our then Series A Redeemable  Participating Preferred Stock in the
aggregate   principal  amount  of  $20.0  million  and  the  prepayment  of  our
outstanding $6.0 million in notes payable to one of the holders of the Preferred
Stock by entering  into Term  Facility with Wells Fargo  Century,  Inc.  ("Wells
Fargo".)

INTEREST EXPENSE AND FINANCING COSTS. Interest expense and finance costs, net of
interest income, increased to $1.8 million for 2007 compared to $1.5 million for
2006.  The increase was due to higher  borrowing  costs this year as compared to
last year  associated  with the closing of the Term Facility with Wells Fargo in
the  middle of the  first  quarter  of 2006 and the  funding  of the $3  million
termination fee incurred as part of the Merger Agreement.


                                      -18-


(LOSS) INCOME BEFORE (BENEFIT)  PROVISION FOR INCOME TAXES. (Loss) income before
income taxes  decreased to a loss of ($1.6)  million for 2007 compared to income
of  $3.6  million  for  2006.  The  decrease  was  primarily  a  result  of  the
non-recurring  merger related charge in 2007 and the gain on  extinguishment  of
debt in 2006, as explained above,  offset by higher operating income achieved in
2007 compared to 2006.

(BENEFIT)  PROVISION FOR INCOME  TAXES.  We recognized a tax benefit of $494,000
for 2007  compared to a tax  provision of $684,000  for 2006.  We expect our tax
rate to be approximately 39% in 2007 .

NET (LOSS) INCOME. Net loss increased to $(1.1) million for 2007 compared to net
income of $2.9 million for 2006 due the non-recurring  merger related charge and
the gain on extinguishment of debt, as explained above.

LIQUIDITY AND CAPITAL RESOURCES

We finance our  operations and growth  primarily with cash flows  generated from
operations  and from the  asset-based  availability  to  borrow  from our  $17.0
million demand line of credit through our asset-based lending agreement.

Net cash provided by operating  activities for 2007 was $1.8 million as compared
to $8.1 million for 2006. The 2007 operating cash flows were negatively impacted
as a result of the $4.2 million merger  transaction costs and the 2006 operating
cash  flows  were   positively   impacted  by  the  $2.0  million  gain  on  the
extinguishment  of preferred  stock.  Operating cash flows in both 2007 and 2006
were used to repay the short-term  borrowings from our factoring agreement.  Net
cash used for investing  activities for 2007 and 2006 was $376,000 and $278,000,
respectively,  as our operations and business model are not capital intensive at
this moment.

Cash used in financing  activities  was $1.5 million  during 2007 as compared to
cash used in financing activities of $7.7 million during 2006. In 2007 we repaid
the  installments  on the  aforementioned  term  facility  of $1.3  million.  In
February 2006, we recorded a $2.0 million gain from the early  redemption of our
preferred  stock in the  aggregate  principal  amount of $20.0  million  and the
prepayment  of our  outstanding  $6.0  million  in notes  payable  to one of the
holders of the  preferred  stock by  entering  into a term  facility  with Wells
Fargo.  Using  the  proceeds  from  the  term  facility,  we  redeemed  all  our
outstanding  preferred  stock,  prepaid  all of our  outstanding  notes  payable
associated with the preferred stock, and eliminated all rights and privileges of
holders of the preferred stock,  for an aggregate  amount of $22.7 million.  The
remaining  $2.3  million  available  under  the  term  facility  was used to pay
financing and  professional  costs  associated with the term facility.  The term
facility requires quarterly principal installments of $635,000, commencing April
30, 2006,  with a balloon  payment of up to $15.5 million due December 31, 2009,
along with monthly interest on the related  outstanding  principal at prime plus
1.0% (9.25% at December 31,  2006.) The term  facility  provides  for  customary
covenants including a minimum  fixed-charge  financial covenant ratio and excess
cash-flow  recapture.  The term  facility  is secured by all of our  assets.  In
addition,  we  amended  our  $17.0  million  demand  line  of  credit  with  our
asset-based lending agreement.

Effective  February  2006, we have a $17.0 million  advance limit  pursuant to a
asset-based  lending  agreement with Wells Fargo that is used for the assignment
and funding of certain of our accounts  receivable and to fund inventory working
capital needs. The amount due under our factoring agreement as of June 30, 2007,
aggregating  $8.9 million,  represents  advances  received in excess of net cash
receipts  received  from the  assignment of these  receivables,  which serves as
collateral. The borrowings are also collateralized by our inventory, as defined.
Interest is charged at 1.0% above prime on advances.  At August 7, 2007,  we had
availability under this facility of up to $4.0 million.

At June 30, 2007, cash and cash equivalents was $150,000 as compared to $216,000
at December 31, 2006.  Working capital was $783,000 at June 30, 2007 compared to
$2.9 million at December 31, 2006.

We  anticipate  that we will  generate  and  maintain  sufficient  cash and cash
equivalent  balances,  along with an  asset-based  availability  under our $17.0
million demand line of credit from our asset-based lending agreement to fund our


                                      -19-


contractual obligations and working capital needs, although no assurance to that
effect can be given.  Positive  cash flow,  if it occurs,  will  create  working
capital  to  fund  our  anticipated  growth  over  the  next 12  months  and our
contractual  obligations related to our debt instruments'  scheduled maturities.
If a  positive  cash flow does not occur,  there will be a decrease  in cash and
cash equivalent balances or borrowings pursuant to our f agreement or with other
lenders will increase.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

    There have been no changes in financial market risk as originally  discussed
in our Annual Report on Form 10-K for the year ended December 31, 2006.

ITEM 4.  CONTROLS AND PROCEDURES

    Based on  their  evaluation,  as of the end of the  period  covered  by this
report,  our Chief Executive  Officer and Chief Financial Officer have concluded
that our  disclosure  controls  and  procedures  (as defined in Rules 13a-14 and
15d-14 under the Securities  Exchange Act of 1934) are effective.  There were no
changes in our internal  controls that occurred  during the last fiscal  quarter
that have materially  affected or are reasonably likely to materially affect our
internal control over financial reporting.


PART II.         OTHER INFORMATION

ITEM 1.  LEGAL UPDATE.

    On or about June 6,  2007,  we were  served  with a  purported  class-action
complaint  brought in the Supreme Court of the State of New York,  County of New
York, on behalf of William Sweet, an alleged stockholder of ours, and all others
similarly situated. The complaint,  which names as defendants Everlast Worldwide
Inc., and our directors Seth A. Horowitz, James K. Anderson,  Edward R. Epstein,
Larry A. Kring,  Mark  Ackereizen,  Steen  Kanter,  Theodore A. Atlas,  James J.
McGuire,  Jr., and Jeffrey M. Schwartz (the  "Individual  Defendants"),  alleges
claims arising out of our proposed  transaction  with  affiliates of M. Hidary &
Company, Inc., for breaches of fiduciary duty. The complaint seeks a declaratory
judgment that the Individual  Defendants have breached their fiduciary duties to
plaintiff  and  the  purported  class  members,   a  preliminary  and  permanent
injunction from  consummating  the proposed  transaction and attorneys' fees and
costs. On July 24, 2007, the plaintiffs voluntarily withdrew the action that was
pending in New York state court,  and filed such action in the Delaware Court of
Chancery.  No further  action has taken  place in the  Delaware  proceeding.  We
believe  that these  claims are  without  merit and intend to defend this action
vigorously.

    On July 10,  2007,  a purported  class-action  complaint  was brought in the
Delaware  Court of  Chancery,  on behalf  of  Charles  J.  Restivo,  an  alleged
stockholder of ours, and all others  similarly  situated.  The complaint,  which
names as defendants  Everlast  Worldwide  Inc.,  our directors Seth A. Horowitz,
James K. Anderson,  Edward R. Epstein, Larry A. Kring, Steen Kanter, Theodore A.
Atlas, James J. McGuire,  Jr., Jeffrey M. Schwartz (the "Director  Defendants"),
Brands  Holdings,  Sports Direct  International  plc and Everlast alleges claims
related to our  proposed  transaction  with  Brands  Holdings  for  breaches  of
fiduciary duty (and aiding and abetting such  breaches).  The complaint  seeks a
declaratory  judgment that the Director Defendants have breached their fiduciary
duties to plaintiff and the purported class members,  an injunction  against the
proposed   transaction  with  Brands   Holdings,   or,  if  the  transaction  is
consummated,  a rescission of the proposed  transaction with Brands Holdings and
attorneys'  and experts'  fees.  The Delaware  Court of Chancery has scheduled a
hearing on plaintiff's Motion for Preliminary Injunction for August 29, 2007. We
have  moved to dismiss  the  complaint  for  failure to state a claim upon which
relief can be granted, which motion is pending. We believe that these claims are
without merit and intend to defend this action vigorously.


                                      -20-


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    On June 1, 2007,  we held our annual  meeting of  stockholders,  whereby the
stockholders:  elect two members of the Board of  Directors,  and to serve until
the annual meeting of  stockholders  when the term of their  respective  classes
expire and their  successors are elected and qualified and;  approved a proposal
to ratify the appointment of J H Cohn, LLP (formerly doing business as Berenson,
LLP) as our  independent  auditors for the fiscal year ending December 31, 2007.
The votes on such matters were as follows:


    1.  Election of directors - The  following  two nominees were elected as our
directors:

                              For      Withheld    Class   Term Expires
                           ---------   --------    -----   ------------
    Jeffrey M. Schwartz    3,550,654    37,575       I         2010
    Steen Kanter           3,550,649    37,580       I         2010


    2.  Amendment to our 2000 Stock Option Plan:  To amend our 2000 Stock Option
Plan, as amended, to allow for the grant of restricted stock:

                                                                 Broker
                              For       Against      Abstain    Non-Votes
                           ---------    -------      -------    ---------
                           2,148,082    111,903       3,940     1,324,304

    3.  Ratification  of appointment of auditors:  To ratify the  appointment of
Berenson  LLP,  subsequently  merged  into J H  Cohn  LLP,  as  our  independent
registered public accounting firm for the fiscal year ending December 31, 2007.

                              For        Against     Abstain
                           ---------     -------     -------
                           3,578,075      8,875       1,280


ITEM 6. EXHIBITS

    (a) Exhibits

    31.1  Certification  of Chief Executive  Officer  pursuant to Rule 13a-14(a)
          and Rule 15d-14(a) of the Securities Exchange Act, as amended
    31.2  Certification  of Chief Financial  Officer  pursuant to Rule 13a-14(a)
          and Rule 15d-14(a) of the Securities Exchange Act, as amended
    32.1  Certification of Chief Executive  Officer Pursuant to 18 U.S.C.  1350,
          as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    32.2  Certification of Chief Financial  Officer Pursuant to 18 U.S.C.  1350,
          as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


                                      -21-


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                         EVERLAST WORLDWIDE INC.

Date: August 13, 2007                    By: /s/ Seth Horowitz
                                             -----------------------------------
                                         Name:  Seth Horowitz
                                         Title: Chief Executive Officer,
                                                President

                                         By: /s/ Gary J. Dailey
                                             -----------------------------------
                                         Name:  Gary J. Dailey
                                         Title: Chief Financial Officer,
                                                Chief Accounting Officer


                                      -22-