8. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 8: COMMITMENTS AND CONTINGENCIES

Operating Leases

We lease certain offices, facilities, equipment and vehicles under non-cancellable operating and capital leases expiring at various dates through 2023.

At December 31, 2018, future minimum contractual lease obligations were as follows:

Years ending December 31,:	Operating Leases
2019		1,372
2020		1,357
2021		1,350
2022		1,350
2023		571
Thereafter		–
Total minimum lease payments	$	6,000

Rent expense for the years ended December 31, 2018 and 2017 was $1,373 and $1,445, respectively.

See discussion about our expected adoption of ASC 842 in Note 1.

Letters of Credit

Certain customers could require us to issue standby letters of credit in the normal course of business to ensure performance under terms of contracts or as a form of product warranty. The beneficiary of a letter of credit could demand payment from the issuing bank for the amount of the outstanding letter of credit. We had no outstanding letters of credit at December 31, 2018 or 2017.

Employment Agreements

Our Chief Executive Officer and Chief Financial Officer (“Executives”) are employed under employment agreements containing severance provisions. In the event of termination of the Executives’ employment for any reason, the Executives will be entitled to receive all accrued, unpaid salary and vacation time through the date of termination and all benefits to which the Executives are entitled or vested under the terms of all employee benefit and compensation plans, agreements and arrangements in which the Executives are participants as of the date of termination.

In addition, subject to executing a general release in favor of the Company, the Executives will be entitled to receive certain severance payments in the event their employment is terminated by the Company “other than for cause” or by the Executives with “good reason.” These severance payments include: (i) a lump sum in cash equal to one to three times the Executives’ annual base salary; (ii) a lump sum in cash equal to one to two times the average annual bonus paid to the Executives for the prior two full fiscal years preceding the date of termination; (iii) a lump sum in cash equal to a pro rata portion of the annual bonus payable for the period in which the date of termination occurs based on the actual performance under the Company’s annual incentive bonus arrangement, but no less than fifty percent of Executives’ annual base salary; and (iv) if the Executives’ termination occurs prior to the date that is twelve months following a change of control, then each and every share option, restricted share award and other equity-based award that is outstanding and held by the Executives shall immediately vest and become exercisable.

Litigation

From time to time, the Company is party to various legal proceedings arising in the ordinary course of business. The Company expenses or accrues legal costs as incurred. A summary of the Company’s material legal proceedings is as follows:

On August 6, 2018, GE Oil and Gas UK Ltd (“GE”) requested that the Company mediate a dispute between the parties in the ICC International Centre for ADR (“ICC”). The dispute involves alleged delays and defects in products manufactured by the Company for GE dating back to 2013. The Company disputes GE’s allegations and intends to vigorously defend itself against these allegations. Mediation took place on November 28, 2018, but no resolution was found. On February 22, 2019, GE initiated arbitration proceedings with the ICC. The total amount in dispute was originally $2,630, but as of GE’s latest filing with the ICC, the amount in dispute has been reduced to $2,252. The parties are in the process of filing preliminary submissions, and the arbitration date has not yet been set. At this point in the legal process, we do not believe a loss to us is probable therefore we have not recorded a liability related to this matter.

In November 2011, the Company delivered equipment to Aker Solutions, Inc. (“Aker”), but Aker declined to pay the final invoice in the aggregate amount of $270 alleging some warranty items needed to be repaired. The Company made repairs, but Aker continued to claim further work was required. The Company repeatedly attempted to collect on the receivable, and ultimately filed suit on November 16, 2012, in the Harris County District Court. Aker subsequently filed a counter-claim on March 20, 2013 in the aggregate amount of $1,000, for reimbursement of insurance payments allegedly made for repairs. Trial is scheduled for the week of April 22, 2019. At this point in the legal process, we do not believe a loss to us is probable therefore we have not recorded a liability related to this matter.