Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

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 Chuzhou Huarui as LA GO GO's logistics warehouse in 2018. The leased warehouse is located in Chuzhou City in Anhui Province. The lease term is one year and expires on December 31, 2018, at an annual rental of $0.2 million (RMB 1.5 million). For the years ended December 31, 2018 and 2017, the Company recognized rental expense in the amounts of approximately $216,890 and $222,000, 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, 2018, the Company renewed the lease which expires on December 31, 2018, at an annual rental of $43,000 (RMB 0.3 million). For the years ended December 31, 2018 and 2017, the Company recognized rental expense in the amounts of approximately $93,948 and $44,231, 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, 2018 and 2017 total rental expense was $0.4 million and $0.4 million, respectively.

The Company leases retail space, warehouses and office facilities under operating leases expiring on various dates through 2018. 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 lease liability in the consolidated balance sheets and the corresponding rental expense when management determines that achieving the specified levels during the fiscal year is probable. Total rental expense was $48.03 million and $51.04 million for the years ended December 31, 2018 and 2017, 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)
2019		409
2020		409
2021		409
2022		409
2023		423
Thereafter		13,487
	$	15,546

Under the new Leases guidance, the Company will record right-of-use assets and lease liabilities in the consolidated balance sheets. In 2019, the right-of-use assets and lease liabilities will approximately be $56.5 million (RMB 373.3 million) and the annual amortization expenses will be booked in consolidated statement of operations and allocating between cost of sales and operating expenses.

Legal Proceedings

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