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Commitments and Contingencies
 9 Months Ended
Sep. 30, 2014
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

(18) Commitments and Contingencies

 

Operating Lease

 

Orient Paper leases 32.95 acres of land from a local government in Xushui County, Baoding City, Hebei, China through a real estate lease with a 30-year term, which expires on December 31, 2031. The lease requires an annual rental payment of approximately $19,532 (RMB 120,000). This operating lease is renewable at the end of the 30-year term.

 

On November 27, 2012, Orient Paper entered into a 49.4 acres land lease with an investment company in the Economic Development Zone in Wei County, Hebei, China. The lease term of the Wei County land lease commences on the date of the lease and lasts for 15 years. The lease requires an annual rental payment of $585,947 (RMB 3,600,000). The Company will be building two new tissue paper production lines and future production facilities in the leased Wei County land.

 

As mentioned in Note (10) Related Party Transactions, in connection with the sale of Industrial Buildings to Hebei Fangsheng, Hebei Fangsheng agrees to lease the Industrial Buildings back to Orient Paper at an annual rental of $162,763 (RMB 1,000,000), for a term of up to three years. The Company will continue its operations in the current location for a maximum of three years while looking for a new location to relocate its offices and the digital photo paper operations currently located in the headquarters compound.

 

The rental expenses for the three months ended September 30, 2014 and 2013 were $191,504 and $177,898, respectively. The rental expenses for the nine months ended September 30, 2014 and 2013 were $575,675 and $475,999, respectively.

 

Future minimum lease payments of all operating leases are as follows:

 

September 30,  Amount 
 2015  $807,802 
 2016   767,168 
 2017   604,632 
 2018   604,632 
 2019   604,632 
 Thereafter   4,915,075 
    $8,303,941 

 

Capital commitment

 

As of September 30, 2014, the Company has signed several contracts for construction of equipment and facilities, including a new tissue paper production line PM8. Total outstanding commitments under these contracts were $37,696,398 and $51,673,158 as of September 30, 2014 and December 31, 2013, respectively. With the exception of a 5%-10% performance holdback on the construction of equipment and facilities is payable in late 2015, the Company expected to pay off all the balances within 1 year.