NOTE 13 COMMITMENTS AND CONTINGENCIES

Economic and Political Risks

The majority of the Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. The Company's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

Operating Lease Commitment

The Company has entered into the operating lease agreement with Jiangsu Ever-Glory since the inception of the Company. The leased factory is located in Nanjing Shangfang Town. The lease term is one year and can be renewed once a year. On January 1, 2017, the Company renewed the lease which expires on December 31, 2017, at an annual rental of $45,000 (RMB 0.3 million). For the years ended December 31, 2016 and 2015, the Company recognized rental expense in the amounts of approximately $47,257 and $50,334, respectively.

The Company has entered into the operating lease agreement with Chuzhou Huarui as LA GO GO’s logistics warehouse in 2017. The leased warehouse is located in Chuzhou City in Anhui Province. The lease term is one year and which expires on December 31, 2017, at an annual rental of $0.2 million (RMB 1.5 million). For the years ended December 31, 2016 and 2015, the Company recognized rental expense in the amounts of approximately $225,750 and $240,450, respectively.

The Company has entered the operating lease agreement with Kunshan Enjin as LA GO GO’s Logistics warehouse since inception of the Company. The leased warehouse is located in Suzhou Kunshan. The lease term is one year and can be renewed once a year. On January 1, 2017, the Company renewed the lease which expires on December 31, 2017, at an annual rental of $43,000 (RMB 0.3 million). For the years ended December 31, 2016 and 2015, the Company recognized rental expense in the amounts of approximately $44,978 and $47,907, respectively.

The Company has entered the operating lease agreement with Shahe Village for approximately 10 Mu of land in Shahe Village, Shanghai. The term of the lease is 40 years starting from January 1, 2013, with an annual rent of $0.4 million (RMB 2.6 million) for the first 5 years. The rent will increase by $15,000 (RMB 0.1 million) every five years. For the years ended December 31, 2016 and 2015 total rental expense was $0.5 million and $0.5 million, respectively.

The Company leases retail space, warehouses and office facilities under operating leases expiring on various dates through 2017. The majority of the Company’s retail leases is for twelve-month periods and provide for contingent rents, which are determined as a percentage of gross sales in excess of specified levels. The Company records a rent liability in the consolidated balance sheets and the corresponding rent expense when management determines that achieving the specified levels during the fiscal year is probable. Total rent expense was $50.3 million and $61.9 million for the years ended December 31, 2016 and 2015, respectively. Future minimum lease payments for leases with initial or remaining noncancelable lease terms in excess of one year are as follows:

Year ending December 31, (In thousands of U.S. Dollars)
2017		374
2018		389
2019		389
2020		389
2021		389
Thereafter		13,629
	$	15,559

Legal Proceedings

There is no material pending legal proceeding to which the Company is a party.