NOTE 16 – RELATED PARTY TRANSACTIONS

Due from (to) related parties

Amount due from related parties are principally for advances in the normal course of business for parts and suppliers used in manufacturing.

Amount due from related parties are as follows (in thousands):

	December 31, 2014		December 31, 2013
Sanmen Branch of Zhejiang UFO Automobile Manufacturing Co., Ltd	$	1,427	$	4,973
JAZ		1,311		961
Jonway Motor Cycle		53		-
ZAP Hangzhou		-		127
Total	$	2,791	$	6,061

Amount due to related parties are follows (in thousands):

	December 31, 2014		December 31, 2013
Jonway Group	$	2,648	$	303
Jonway Motor Cycle		64		113
Taizhou Huadu		652		631
Shanghai Zapple		37		36
Ms. Lu		-		30
Mr. Wang		146		-
Betterworld		149		149
Taizhou Jonway Electric Vehicle Selling Co		2,306		-
Zhejiang Jonway Painting Co. Ltd.		472		372
Cathaya Operations Management Ltd.		297		797
Cathaya Management Ltd.		350		350
Total	$	7,121	$	2,781

Promissory notes and Down Payment Convertible Note from Jonway Group

On December 11, 2011, ZAP entered into a Down Payment Convertible Note agreement with Jonway Group pursuant to which ZAP may borrow $3 million for the production of seventy-five Alias electric vehicles to be delivered and sold in 2012. The unpaid principal amount of the note bears interest at a rate per annum equal to 8%, calculated on the basis of a 365 day year and the actual number of days lapsed. Upon the completion of selling seventy-five Alias vehicles, ZAP will repay the unpaid principal, together with any then unpaid and accrued interest, on or before December 31, 2012. Repayment shall be made at the option of Jonway Group in the form of either cash or ZAP's Common Stock priced as of the date the principal was deposited into Jonway's bank account on behalf of ZAP. As of December 31, 2014, no advance has been made to ZAP from Jonway Group.

Transactions with Jonway Group

Jonway Group is considered as a related party as the Wang Family, one of the principal shareholders of the Company, has controlling interests in Jonway Group. Jonway Group supplies some of plastics spare parts to Jonway and gave guarantees on Jonway short term bank facilities from China-based banks. Jonway made such purchase from Jonway Group for a total of $2.9 million and $1.4 million for the years ended December 31, 2014 and 2013, respectively.

Jonway Agreement with Zhejiang UFO

Based on a contract by and among the Zhejiang UFO, Jonway Group and Jonway dated as of January 1, 2006, Zhejiang UFO has authorized Jonway to operate its Sanmen Branch to assemble and sell UFO branded SUVs for a period of 10 years starting from January 1, 2006.

According to the contract, Jonway shall pay Zhejiang UFO a variable contractual fee which is calculated based on the number of SUVs that Jonway assembles in the Sanmen Branch every year, at the following rates (historical exchange rate):

The first 3,000 vehicles	$44 per vehicle
Vehicles from 3,001 to 5,000	$30 per vehicle
Vehicles over 5,000	$22 per vehicle

Zhejiang UFO is considered a related party because the Wang Family, who are shareholders of Jonway, has certain non-controlling equity interests in Zhejiang UFO. For the years ended December 31, 2014 and 2013, $281,000and $706,000 were recorded as assembling fees, respectively. Also during 2014, Jonway sold SUVs in the amount of $52,000 and spare parts in the amount of $1,379,000 to Zhejiang UFO. During 2013, Jonway sold SUVs in the amount of $95,000 and spare parts in the amount of $8,255,000 to Zhejiang UFO.

Other Related Party Transactions

During 2014, Jonway purchased spare parts in the amount of $18,000 and $352,000 from Jonway Motor Cycle and Taizhou Huadu, respectively. During 2013, Jonway purchased spare parts in the amount of $55,000 and $1,214,000 from Jonway Motor Cycle and Taizhou Huadu, respectively. In 2014, Jonway commenced business of Urbee and it sold Urbee in the amount of $8,755,000 to Taizhou Jonway Electric Vehicle Selling Company.

Cathaya Operations Management Limited and China Electric Vehicle Corp have elected to convert the amounts recorded as due to related parties to common stock. The amount of $967,543 due to Cathaya Operations Management Limited have been converted into 17,819,783 shares of common stock at 30% below market price based on the average trading prices of the previous 120 days after notification. The 17,819,783 shares of common stock have been issued in April 2014. In December, 2014, the company issued 4,513,163 shares to settle the cash advance of $410,800 from Cathaya Operations Management Limited.

China Electric Vehicle Corporation (CEVC) has elected to convert the interest of $639,068 due on the $20.7 million convertible note to 6,439,552 shares of common stock at the average of the closing prices for each trading day during such fiscal quarter ended on (and including) the last trading day of such fiscal quarter. The 6,439,552 shares of common stock have been issued in April 2014. In December 2014, the company issued 8,727,099 shares to settle the interest of $1,237,345 due on the convertible note.

In March 2014, Jonway Group agreed to pay all of the outstanding mold expenses of the Minivan that is currently still outstanding, and in return ZAP will share half of the asset value and share the IPR (50%) of the Minivan with Jonway Auto. The Minivan was purchased by ZAP from a prior agreement between ZAP and Jonway Group which was signed on January 18, 2012. In return for ZAP receiving worldwide exclusivity for the sales, distribution, and product IPR rights for all current and future models of the compressed natural gas (“CNG”) versions of Jonway Auto's Products, including, but not limited to, SUV, minivan, and all other models, the Company's Board of Directors authorized on March 28, 2014 to issue 61,000,000 shares of common stock to the companies owned by the Co-CEO and shareholder Alex Wang, including 20,000,000 shares to Major Management Limited, 20,000,000 shares to Max Reliance Management Limited and 21,000,000 shares to New Dragon Management Limited. The 61,000,000 shares of common stock have been issued in April 2014.