NOTE 9 RELATED PARTY TRANSACTIONS

Mr. Kang is the Company’s Chairman and Chief Executive Officer. Ever-Glory Enterprises (HK) Ltd. (Ever-Glory Enterprises) is the Company’s major shareholder. Mr. Xiaodong Yan was Ever-Glory Enterprises’ sole shareholder and sole director. Mr. Huake Kang, Mr. Kang’s son, acquired 83% interest of Ever-Glory Enterprises and became its sole director in 2014. All transactions associated with the following companies controlled by Mr. Kang or his son 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

JiangsuWubijia trading company limited (“JiangsuWubijia”) is an entity engaged in high-grade home goods sales and is controlled by Mr. Kang. JiangsuWubijia has sold their home goods on consignment in some Company’s retail stores since the third quarter of 2014. During the three and six months ended June 30, 2015, the Company received other income $2,026 and $9,786 from the customers and paid $2,480 and $9,100 to Wubijia through the consignment, respectively. The net (loss) profit of ($454) and $686 was recorded as other income during three and six months ended June 30, 2015, respectively.

Other expenses due to Related Parties

Included in other expenses for the three and six months ended June 30, 2015 and 2014 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,
	2015		2014		2015		2014
Jiangsu Ever-Glory	$	12,819	$	12,733	$	25,575	$	25,560
Kunshan Enjin		12,201		10,491		24,342		21,060
Total	$	25,020	$	23,224	$	49,917	$	46,620

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

For the three and six months ended June 30, 2015 and 2014, the Company purchased raw materials of $506,904, $685,843, $450,620, $884,070, respectively, from Nanjing Knitting.

In addition, 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, 2015 and 2014 are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Chuzhou huarui	$	1,461,299	$	-	$	2,492,911	$	-
Fengyang huarui		327,129		-		735,835		-
Nanjing Ever-Kyowa		313,883		426,451		586,583		861,970
Ever-Glory Vietnam		3,852,460		1,776,620		4,887,750		4,964,884
Ever-Glory Cambodia		68,228		696,136		372,061		2,957,190
EsCeLav		-		-		2,009		-
Shanghai Weiwen		-		1,502,785		-		1,502,785
Shanghai Sea to Sky		158		377,793		258,741		377,793
Jiangsu Ever-Glory		25,576		-		25,911		25,284
	$	6,048,733	$	4,779,785	$	9,361,801	$	10,689,906

Accounts Payable – Related Parties

Accounts payable to related parties at June 30, 2015 and December 31, 2014 are as follows:

	June 30, 2015		December 31, 2014
Fengyang huarui	$	-		622,060
Ever-Glory Vietnam		2,024,905		1,883,556
Nanjing Ever-Kyowa		552,521		479,032
Chuzhou huarui		455,300		414,583
Nanjing Knitting		150,685		199,766
JiangsuWubijia		5,877		5,460
Kunshan Enjin		4,065		-
Ever-Glory Cambodia		-		291,121
Total	$	3,193,353	$	3,895,578

Amounts Due From Related Parties

The amounts due from related parties at June 30, 2015 and December 31, 2014 are as follows:

	June 30, 2015		December 31, 2014
Nanjing Eight-One-Five Hi-tech (M&E) Co., Ltd.	$	20,647	$	20,558
Ever-Glory Cambodia		958,957		-
EsCeLav		9,114		-
Fengyang huarui		53,895		-
Sea to sky		-		48,750
Jiangsu Ever-Glory		325,384		1,582,679
Total	$	1,367,997	$	1,651,987

The Company had prepaid $958,957 and $53,895 to the sub-contractors, Ever-Glory Cambodia and Fengyang huarui, respectively, for the next period’s subcontracting fees.

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. During six months ended June 30, 2015 and 2014, 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 $3,026,053 and $0 during the six month period ended June 30, 2015 and 2014, respectively. Jiangsu Ever-Glory purchased raw materials on the Company’s behalf and sold to the Company at cost for $25,911 and $19,221 during the six months ended June 30, 2015 and 2014, 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 June 30, 2015 and December 31, 2014, Jiangsu Ever-Glory has provided guarantees for approximately $38.19 million (RMB 234 million) and $40.62 million (RMB 250 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 $10.0 million (RMB 61 million) and $22.3 million (RMB 136 million) as of June 30, 2015 and December 31, 2014. Mr. Kang has also provided a personal guarantee for $41.4 million (RMB 254 million).

At December 31, 2014, $17.36 million (RMB 107 million) was outstanding due from Jiangsu Ever-Glory under the counter guarantee agreement. During the six months ended June 30, 2015, an additional US$0.82 million (RMB5 million) was provided to and repayment of $2.45 million (RMB 15 million) was received from Jiangsu Ever-Glory under the counter-guarantee. As of June 30, 2015, the amount of the counter-guarantee was $15.8 million (RMB 96.8 million) (the difference represents currency exchange adjustment of $0.07 million), which was 41.4% of the aggregate amount of lines of credit. This amount plus accrued interest of $2.54 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G. At June 30, 2015 and December 31, 2014, the amount classified as a reduction of equity was $18.34 million and $19.42 million, respectively. Interest of 0.5% is charged on net amounts due from Jiangsu Ever-Glory at each month end. From April 1, 2015, interest rate change to 0.41% as the bank benchmark interest rate decreased. Interest income for the three and six months ended June 30, 2015 and 2014 was approximately $0.2 million, $0.5 million, $0.3 million and $0.5 million, respectively.