Related Party Transactions

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 8   RELATED PARTY TRANSACTIONS

Mr. Kang is the Company’s Chairman and Chief Executive Officer.  Ever-Glory Enterprises (H.K.) Ltd. (“Ever-Glory Enterprises”) is the Company’s major shareholder.  Mr. Xiaodong Yan is Ever-Glory Enterprises’ sole shareholder. All transactions associated with the following companies controlled by Mr. Kang or Mr. Yan are considered to be related party transactions, and it is possible that the terms of these transactions may not be the same as those that would result from transactions between unrelated parties. All related party outstanding balances are short-tem in nature and are expected to be settled in cash.

Other income from Related Parties

Included in other income for the three and six months ended June 30, 2012 and 2011 is rent revenue from entities controlled by Mr. Kang under operating lease agreements with various terms though 2015 as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2012		2011		2012		2011
EsCeLav	$	2,969	$	2,872	$	5,933	$	5,726
Nanjing Eight-One-Five Hi-Tech (M&E) Co.,Ltd.	$	3,952	$	3,830	$	7,905	$	7,635
Jiangsu Heng-Rui	$	-	$	5,400	$	-	$	10,765
Total	$	6,921	$	12,102	$	13,838	$	24,126

Purchases from, and Sub-contracts with Related Parties

In connection with the Company’s tax planning strategies relating to value-added taxes, raw materials are sourced by the Company in the PRC and shipped to related party contract manufacturers in Vietnam and Cambodia. The raw materials were originally purchased by the Company, and, through a series of transactions, were sold at cost to, and repurchased at cost from, Jiangsu Ever-Glory. These transactions amounted to approximately $1.1 million (RMB7.5 million) during the six months ended June 30, 2011, and have been netted against each other for financial reporting purposes.  There were no such transactions in 2012.

For the three and six months ended June 30 2012 and 2011, the Company purchased raw materials of $79,413, $714,022, $948,146, $1,059,091, respectively, from Nanjing Knitting.

In addition, the Company sub-contracted certain manufacturing work to related parties totaling $2,597,793, $5,423,363, $2,458,327, $3,988,745 for the three and six months ended June 30, 2012 and 2011, respectively. The Company provided raw materials to the sub-contractors and was charged a fixed fee for labor provided by the sub-contractors.

Sub-contracts with related parties included in cost of sales for the three and six months ended June 30, 2012 and 2011 are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Nanjing Knitting	$	119,159	$	11,855	$	753,768	$	35,565
Nanjing Ever-Kyowa		246,417		297,973		411,634		535,613
Ever-Glory Vietnam		625,667		1,494,180		1,455,136		2,392,433
Ever-Glory Cambodia		1,594,778		653,436		2,781,291		1,023,255
EsC'Lav		6,616		883		12,564		11,879
Jiangsu Ever-Glory		5,156		-		8,970		-
	$	2,597,793	$	2,458,327	$	5,423,363	$	3,998,745

Accounts Payable – Related Parties

The Company purchases raw materials from and subcontracts some of its production to related parties. Accounts payable to related parties at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012		December 31, 2011
Nanjing Knitting	$	1,105,915	$	661,139
Nanjing Ever-Kyowa		288,720		436,030
Ever-Glory Vietnam		632,342		1,305,696
Ever-Glory Cambodia		633,285		330,047
Kunshan Enjin		-		26,091
Total	$	2,660,262	$	2,759,003

Amounts Due From Related Party

The amounts due from related parties at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012		December 31, 2011
EsC'eLav	$	5,932	$	23,565
Nanjing Eight-One-Five Hi-tech (M&E) Co.,Ltd.		7,910		-
Jiangsu Ever-Glory		18,658,578		17,600,147
Total	$	18,724,420	$	17,623,712

Jiangsu Ever-Glory engages in importing/exporting, apparel-manufacture, real-estate development, car sales and other activities. Jiangsu Ever-Glory is controlled by the Company’s Chief Executive Officer. Because of restrictions on its ability to directly import and export products, the Company utilizes Jiangsu Ever-Glory as its agent to assist the Company with its import and export transactions and its international transportation projects. Import transactions primarily consist of purchases of raw materials and accessories designated by the Company’s customers for use in garment manufacture. Export transactions consist of the Company’s sales to foreign markets such as Japan, Europe and the United States. As the Company’s agent, Jiangsu Ever-Glory’s responsibilities include managing customs, inspection, transportation, insurance and collections on behalf of the Company. Jiangsu Ever-Glory also manages transactions denominated in currencies other than the Chinese RMB at rates of exchange agreed between the Company and Jiangsu Ever-Glory and based upon rates of exchange quoted by the People’s Bank of China. In return for these services, Jiangsu Ever-Glory charged the Company a fee of approximately 3% of export sales manufactured in China and 1% of export sales manufactured overseas. For import transactions, the Company may make advance payments, through Jiangsu Ever-Glory, for the raw material purchases, or Jiangsu Ever-Glory may make advance payments on the Company’s behalf. For export transactions, accounts receivable for export sales are remitted by the Company’s customers through Jiangsu Ever-Glory, who forwards the payments to the Company. The Company and Jiangsu Ever-Glory have agreed that balances from import and export transactions may be offset. Amounts due to (from) Jiangsu Ever-Glory are typically settled within 60-90 days. Interest of 0.5% is charged on net amounts due at each month end. Interest income for the three and six months ended June 30, 2012 and 2011 was $290,559, $563,295, $120,379 and $139,495, respectively. Following is a summary of import and export transactions for the six months ended June 30, 2012:

	Accounts Receivable		Accounts Payable		Net
As of January 1, 2012	$	19,999,373	$	2,399,226	$	17,600,147
Sales	$	3,448,685		5,297,030		-
Payments Received/Made	$	822,392	$	3,729,168		-
As of June 30,2012	$	22,625,666	$	3,967,088	$	18,658,578

Approximately  20.8 % of the receivable balance at June 30, 2012 was settled by August 7, 2012.

Loan from Related Party

As of January 1, 2010 the Company owed $1.0 million to Blue Power Holdings Limited, a company controlled by the Company’s Chief Executive Officer. Interest was charged at 6% per annum on the amounts due. The loans were paid in full in April 2011.