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, 2013 and 2012 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,
	2013		2012		2013		2012
EsCeLav	$	3,056	$	2,969	$	6,038	$	5,933
Nanjing Eight-One-Five Hi-tech (M&E) Co.,Ltd.		4,070		3,952		8,050		7,905
Total	$	7,126	$	6,921	$	14,088	$	13,838

Other expenses due to Related Parties

Included in other expenses for the three and six months ended June 30, 2013 and 2012 are rent costs due to entities controlled by Mr. Kang under operating lease agreements as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Jiangsu Ever-Glory	$	12,788	$	12,403	$	25,277	$	24,822
Kunshan Enjin		8,517		6,569		16,774		13,137
Total	$	21,305	$	18,972	$	42,051	$	37,959

Purchases from, and Sub-contracts with Related Parties

For the three and six months ended June 30, 2013 and 2012, the Company purchased raw materials of $101,370, $184,608, $79,413, $714,022, respectively, from Nanjing Knitting.

In addition, the Company sub-contracted certain manufacturing work to related parties totaling $5,102,919, $9,088,426, $2,597,793, $5,423,363 for the three and six months ended June 30, 2013 and 2012, 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, 2013 and 2012 are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Nanjing Knitting	$	211,296	$	119,159	$	232,602	$	753,768
Nanjing Ever-Kyowa		255,893		246,417		523,878		411,634
Ever-Glory Vietnam		3,175,681		625,667		5,094,787		1,455,136
Ever-Glory Cambodia		1,446,661		1,594,778		3,221,188		2,781,291
EsCeLav		1,775		6,616		4,358		12,564
Jiangsu Ever-Glory		11,613		5,156		11,613		8,970
	$	5,102,919	$	2,597,793	$	9,088,426	$	5,423,363

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, 2013 and December 31, 2012 are as follows:

	June 30, 2013		December 31, 2012
Nanjing Knitting	$	747,004	$	756,842
Nanjing Ever-Kyowa		78,272		128,505
Ever-Glory Vietnam		1,117,607		2,183,039
Ever-Glory Cambodia		1,414,613		90,428
Kunshan Enjin		16,774		-
Total	$	3,374,270	$	3,158,814

Amounts Due From Related Party

The amounts due from related parties at June 30, 2013 and December 31, 2012 are as follows:

	June 30, 2013		December 31, 2012
EsCeLav	$	12,473	$	8,680
Nanjing Eight-One-Five Hi-tech (M&E) Co.,Ltd.		61,702		-
Jiangsu Ever-Glory		25,450,229		33,573,977
Total	$	25,524,404	$	33,582,657

Jiangsu Ever-Glory is an entity engaged in importing/exporting, apparel-manufacture, real-estate development, car sales and other activities. Jiangsu Ever-Glory is controlled by Mr. Kang. Because of restrictions on its ability to directly import and export products, the Company had utilized Jiangsu Ever-Glory as its agent to assist the Company with its import and export transactions and its international transportation projects since 2005. 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. These transactions ceased at end of 2011.

In March 2012, in consideration of the guarantees and collateral provided by Jiangsu Ever-Glory and Nanjing Knitting, the Company agreed to provide Jiangsu Ever-Glory a counter guarantee in the form of cash of not less than 70% of the maximum aggregate lines of credit obtained by the Company. Jiangsu Ever-Glory is obligated to return the full amount of the counter-guarantee funds provided upon expiration or termination of the underlying lines of credit and is to pay annual interest at the rate of 6.0% of amounts provided. As of June 30, 2013, Jiangsu Ever-Glory has provided guarantees for approximately $45.4 million (RMB 281 million) of lines of credit obtained by the Company. Jiangsu Ever-Glory, and its 20.31% owned equity investee, Nanjing Knitting, have also provided their assets as collateral for certain of these lines of credit. The value of the collateral, as per appraisals obtained by the banks in connection with these lines of credit is approximately $21.33 million (RMB 132 million). Mr. Kang has also provided a personal guarantee for $22.46 million (RMB 139 million). During the six months ended June 30, 2013, $7.27 million (RMB45 million) was provided to Jiangsu Ever-Glory under the counter-guarantee. As of June 30, 2013, the amount of the counter-guarantee had been reduced to $21.24 million (RMB131 million), which was 46.7% of the aggregate amount of lines of credit. This amount plus accrued interest of $1.88 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G.

Interest of 0.5% is charged on net amounts due from Jiangsu Ever-Glory at each month end. Interest income for the three and six months ended June 30, 2013 and 2012 was approximately $0.34 million, $0.64 million, $0.33 million and $0.61 million, respectively.

Following is a summary of balances at June 30, 2013 and December 31, 2012:

Related Party	Type of transaction	June 30, 2013		December 31, 2012
Jiangsu Ever-glory	Accounts receivable	$	1,059,477	$	214,226
Jiangsu Ever-glory	Advance/(Accounts payable)		1,271,387		(53,680	)
Jiangsu Ever-glory	Interest income		1,878,066		1,262,701
Jiangsu Ever-glory	Counter guarantee deposit		21,241,299		32,150,730
Total		$	25,450,229	$	33,573,977