RELATED PARTY TRANSACTIONS AND BALANCES

9 Months Ended

Sep. 30, 2012

RELATED PARTY TRANSACTIONS AND BALANCES [Text Block]

8.	RELATED PARTY TRANSACTIONS AND BALANCES
	All the related parties are as follows:

Name of related party	Relationship with the Group
Zhejiang the Fifth Season Investment Co., Ltd. (“Zhejiang Fifth Season”)	Controlled by a Company stockholder
Zhejiang the Fifth Season Industrial Co., Ltd. (Original: Huaren Costume )	Controlled by a Company stockholder
Hangzhou the Fifth Season E-commerce Co., Ltd. (Original: Hangzhou the Fifth Season Costume Co., Ltd.)	Controlled by a Company stockholder
The Fifth Season Hangzhou Real Estate Planning and Services Co., Ltd. (“Hangzhou Real Estate”)	Controlled by a Company stockholder
The Fifth Season Nantong Commercial Investment Management Co., Ltd. (“Nantong Commercial”)	Controlled by a Company stockholder
The Fifth Season Shandong Trade Co., Ltd.	Controlled by a Company stockholder
Hangzhou Yinli Decorative Lighting Co., Ltd. (“Yinli Decorative Lighting”)	Controlled by one of the Company’s key management
Hangzhou Buy Bar	Controlled by a Company stockholder
Shandong Demian Group Co., Ltd. (“Shandong Demian”)	Controlled by a Company stockholder
Hangzhou Yiyue E-commerce Co., Ltd.	Controlled by a Company stockholder
Lianmo Wu	Stockholder and Chairman of Board of Directors
Shaoping Lu	Stockholder and CEO of Group
Hangzhou Hengji Energy Company Ltd. (“Hangzhou Hengji”)	Stockholder
Hongsen Xu	Key management of the Company
Dacheng Rao	Key management of the Company
Huaiqu Wen	Key management of the Company
Dezhou Jinmian Textile Co., Ltd.	Controlled by a Company stockholder
The Fifth Season International Investment Holding Co., Ltd.	Controlled by a Company stockholder

a) Trade and rents receivables from related parties consist of the following:

		September 30,		December 31,
		2012		2011
Shandong Demian Group Co. Ltd.	$	2,749,058	$	2,766,665
The Fifth Season Shandong Trade Co., Ltd.		-		631,666
Zhejiang the Fifth Season Industrial Co., Ltd. (Original: Huaren
Costume)		-		200,262
Dacheng Rao		-		472,401
	$	2,749,058	$	4,070,994

b) Loans receivables from related parties consist of the following:

		September 30,			December 31,
		2012			2011
Nantong Commercial	$	-		$	25,871
Hangzhou E-commerce( Original: Hangzhou Costume)		-			312,839
Yinli Decorative Lighting		1,790,659			-
Hangzhou Yiyue E-commerce		-			15,871
Huaiqu Wen		-			142,204
	$	1,790,659		$	496,785
Doubtful provision		(1,790,659	)		-
	$	-		$	496,785

Loans receivable from related parties were short-term loans for additional working capital purpose of such related parties, which were non-interest bearing and were due on demand. In return, related parties lent non-interest bearing short-term loans to the Group when necessary. Historically, the Group has received more non-interest bearing short-term loans from related parties than loans to them.

The Group has been advised that, despite their potential indirect benefit to the Group, the foregoing loans to related parties contravene the Group's related transactions policies and procedures, as well as Section 402 of the Sarbanes-Oxley Act of 2002 ("SOX"), which prohibits a U.S, public company from granting personal loans to its officers, directors and other control persons, either directly or indirectly.  Since August 17, 2012, the Group has taken steps to settle these loan receivables and only $1.79 million due from Yinli Decorative Lighting (“Yinli”) remained by the end of the third quarter.   Yinli’s financial position is weak and the Group is doubtful whether this amount will be repaid.  The Group has taken steps to collect the loan receivable from Yinli, including the assignment of a financial supervisor over Yinli to monitor its financial performance and negotiating with the owner of Yinli to raise funds to repay the loan.  Management is reviewing the Group's internal controls and procedures with, and educating its financial accounting personnel to ensure that all future transactions are in compliance with the requirements of SOX and the Company’s related transactions policies and procedures.

c) Advance to suppliers, related parties consists of the following:

		September 30,		December 31,
		2012		2011
Yinli Decorative Lighting	$	-	$	5,713,561
Hangzhou Hengji		-		2,856,780
Total	$	-	$	8,570,341

	As the Group’s customer cancelled its purchase order, the Group terminated the purchase contracts with the two above mentioned suppliers, and obtained a refund of its advances to them in the second quarter of 2012.
d)	Short term loans payable to related parties consists of the following:

		September 30,		December 31,
		2012		2011
Fifth Season Industrial	$	2,143,143	$	574,530
Zhejiang Fifth Season		-		1,169,858
Hangzhou Real Estate		98,089		40,471
Hangzhou Buy Bar		-		8,024
The Fifth Season Shandong Trade Co., Ltd		766,107		5,351,384
Hongsen Xu		-		57,070
Yinli Decorative Lighting		-		344,231
Lianmo Wu		1,318,357		929,328
Hangzhou Hengji		1,577,000		1,587,100
Dezhou Jinmian Textile Co., Ltd		172,617		-
The Fifth Season International Investment Holding Co., Ltd		3,444,979		-
	$	9,520,292	$	10,061,996

	Loans payable to related parties were short-term loans from related parties for the Group’s additional working capital purpose, which were non-interest bearing and due on demand.
e)	Current portion of Long-term loans payable to related parties consists of the following

		September 30, 2012		December 31, 2011
Shaoping Lu	$	4,250,000	$	4,250,000

	Current portion of Long-term loans to related party were interest bearing, see Note 5 for the interest rate and guarantee of the loan.
f)	Significant related party transactions other than loans are as follows:

			Nine Months Ended
			September 30,
	Transaction		2012	2011
Dacheng Rao	Leasing	$	468,606 $	-