RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2016

NOTE 10 – RELATED PARTY TRANSACTIONS

Due from (to) related parties

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

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

	September 30, 2016		December 31, 2015

Sanmen Branch of Zhejiang UFO Automobile Manufacturing Co., Ltd	$	-	$	998
Shanghai Zapple		123		-
Jonway Economy and Trade Co., Ltd.		1		616
	$	124	$	1,614

In addition, accounts receivable included in accounts receivable due from related parties as follows (in thousands):

	September 30, 2016		December 31, 2015

Jonway EV selling Ltd.	$	3,317	$	4,659
Sanmen Branch of Zhejiang UFO Automobile Manufacturing Co., Ltd		1,054		212
Jonway Motorcycle		405		301
	$	4,776	$	5,172

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

	September 30, 2016		December 31, 2015

Jonway Group	$	11,413	$	12,606
Jonway Motor Cycle		64		64
Taizhou Huadu		-		846
Shanghai Zapple		-		35
Mr. Alex Wang, the CEO		4		74
Mr. Huaiyi Wang		14		-
Betterworld		149		149
Zhejiang Jonway Painting Co., Ltd.		-		11
Cathaya Operations Management Ltd.		127		193
	$	11,771	$	13,978

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 Auto and gave guarantees on Jonway Auto short term bank facilities from China-based banks. Jonway Auto made such purchases from Jonway Group for a total of $260,000 and $1,666,000 for the nine months ended September 30, 2016 and 2015, respectively. Jonway Auto made such purchases from Jonway Group for a total of $111,000 and $362,000 for the three months ended September 30, 2016 and 2015, respectively.

Jonway Auto Agreement with Zhejiang UFO

Based on a contract by and among the Zhejiang UFO, Jonway Group and Jonway Auto dated as of January 1, 2006, Zhejiang UFO has authorized Jonway Auto to operate its Sanmen Branch to assemble and sell UFO branded SUVs for a period of 10 years starting from January 1, 2006. The agreement has not been officially renewed, but all involved parties are still following the original terms stated in the contract.

According to the contract, Jonway Auto shall pay Zhejiang UFO a variable contractual fee which is calculated based on the number of SUVs that Jonway Auto 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 Auto, has certain non-controlling equity interests in Zhejiang UFO. For the nine months ended September 30, 2016 and 2015, $22,000 and $Nil were recorded as assembling fees, respectively. For the three months ended September 30, 2016 and 2015, $Nil and $Nil were recorded as assembling fees, respectively.

Other Related Party Transactions

For the nine months ended September 30, 2016, Jonway Auto purchased parts in amount of $468,000 and $260,000 from Taizhou Huadu and Jonway Group, respectively. For the nine months ended September 30, 2015, Jonway Auto purchased $Nil and $1,299,000 spare parts from Taizhou Huadu and Jonway Group, respectively.