Related Party Transactions

3 Months Ended

Mar. 31, 2014

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 9 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-term in nature and are expected to be settled in cash.

Other income from Related Parties

Included in other income for the three months ended March 31, 2014 and 2013 is rent revenue from entities controlled by Mr. Kang under operating lease agreements as follows:

	2014		2013
EsCeLav	$	-	$	2,983
Nanjing Eight-One-Five Hi-Tech (M&E) Co.,Ltd.		-		3,980
Total	$	-	$	6,963

Other expenses due to Related Parties

Included in other expenses for the months ended March 31, 2014 and 2013 are rent costs due to entities controlled by Mr. Kang under operating lease agreements as follows:

	2014		2013
Jiangsu Ever-Glory	$	12,827	$	12,670
Kunshan Enjin		10,569		10,439
Total	$	23,396	$	23,109

The Company leases Jiangsu Ever-Glory's factory as the factory is in a location where there is a good supply of experienced workers. The Company leases Kunshan Enjin's warehouse space because the location is convenient for transportation and distribution.

Purchases from and Sub-contracts with Related Parties

The Company purchased raw materials from Nanjing Knitting totaling $433,450 and $83,238 during the three months ended March 31, 2014 and 2013, respectively.

In addition, the Company sub-contracted certain manufacturing work to related companies totaling $5,910,121 and $3,985,507 for the three months ended March 31, 2014 and 2013, 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 months ended March 31, 2014 and 2013 are as follows:

	March 31, 2014		March 31, 2013
Nanjing High-Tech	$	-	$	21,306
Nanjing Ever-Kyowa		435,519		267,985
Ever-Glory Vietnam		3,188,264		1,919,106
Ever-Glory Cambodia		2,261,054		1,774,527
EsC'eLav		-		2,583
Jiangsu Ever-Glory		25,284		-
Total	$	5,910,121	$	3,985,507

Accounts Payable – Related Parties

The accounts payable to related parties at March 31, 2014 and December 31, 2013 are as follows:

	2014		2013
Ever-Glory Vietnam	$	1,663,908	$	2,473,271
Nanjing Knitting		-		784,777
Ever-Glory Cambodia		447,831		582,453
Nanjing Ever-Kyowa		428,002		261,955
Total	$	2,539,741	$	4,102,456

Amounts Due From Related Parties current assets

The amounts due from related parties at March 31, 2014 and December 31, 2013 are as follows:

	March 31,  2014		December 31, 2013
EsC'eLav	$	24,235	$	12,291
Nanjing Eight-One-Five Hi-tech (M&E) Co., Ltd.		20,520		145,206
Nanjing Knitting		239,387		-
Jiangsu Ever-Glory		1,574,177		1,738,879
Total	$	1,858,319	$	1,896,376

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 from 2005 through 2011. Import transactions primarily consisted of purchases of raw materials and accessories designated by the Company’s customers for use in garment manufacture. Export transactions consisted of the Company’s sales to foreign markets such as Japan, Europe and the United States. These transactions ceased at end of 2011.  During three months ended March 31, 2014 and 2013, the Company and Jiangsu Ever-Glory purchased raw materials on behalf of each other in order to obtain cheaper purchase prices.  The Company purchased raw materials on Jiangsu Ever-Glory’s behalf and sold to Jiangsu Ever-Glory at cost for $0 and $72,548 during the three month period ended March 31, 2014 and 2013, respectively.  Jiangsu Ever-Glory purchased raw materials on the Company’s behalf and sold to the Company at cost for $19,221 and $0 during the three months ended March 31, 2014 and 2013, respectively.  

Amounts Due From Related Party under Counter Guarantee Agreement

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 March 31, 2014 and December 31, 2013, Jiangsu Ever-Glory has provided guarantees for approximately $46.87 million (RMB 289 million) and $44.01 million (RMB 269 million) of lines of credit obtained by the Company. Jiangsu Ever-Glory and 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 $16.71 million (RMB 103 million) as of March 31, 2014 and December 31, 2013.  Mr. Kang has also provided a personal guarantee for $20.6 million (RMB 127 million).

During the three months ended March 31, 2013, US$4.82 million (RMB30.25 million) was provided to Jiangsu Ever-Glory under the counter-guarantee. US$16.79 million (RMB103 million) was outstanding at December 31, 2013. During three months ended March 31, 2014, an additional $5.07 million (RMB 31 million) was provided and approximately $1.30 million (RMB 8 million) of interest income was received under the counter-guarantee agreement. As of March 31, 2014, the amount of the counter-guarantee was $21.7 million (RMB 134 million) (the difference represents currency exchange adjustment of $0.16 million), which was 46.4% of the aggregate amount of lines of credit. This amount plus accrued interest of $1.20 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G. At March 31, 2014 and 2013, the amount classified as a reduction of equity was $22.87 million and $22.88 million, respectively. Interest of 0.5% is charged on net amounts due from Jiangsu Ever-Glory at each month end. Interest income for the three months ended March 31, 2014 and 2013 was approximately $0.2 million and $0.3 million, respectively.