Note 6. Commitments and Contingencies

Lease commitments

The Company leases its facilities and certain equipment under operating leases that expire at various dates through 2021. Some of the leases contain renewal options, escalation clauses, rent concessions, and leasehold improvement incentives. Rent expense is recognized on a straight-line basis over the lease term. Rent expense was $2,923, $2,111 and $1,293 in financial years ended March 31, 2016, 2015, and 2014, respectively.

The following is a schedule by years of minimum future rentals on non-cancelable operating leases as of March 31, 2016:

2017	$	2,602
2018		2,082
2019		1,589
2020		1,347
2021		5
Thereafter		—
Total minimum future lease payments	$	7,625

The Company has entered into capital leases for the purchase of equipment that has a gross cost and net book value of $2,098 and $1,930, respectively as of March 31, 2016 and $1,024 and $737, respectively as of March 31, 2015.

The following is a schedule of future annual repayments on capital leases as of March 31, 2016:

2017	$	152
2018		1,524
2019		116
2020		74
2021		9
Thereafter		—
Total minimum future lease payments	$	1,875

Purchase obligations

The Company has purchase obligations that are associated with agreements for purchases of goods or services. Management believes that cancellation of these contracts is unlikely and thus the Company expects to make future cash payments according to the contract terms.

The following is a schedule by years of purchase obligations as of March 31, 2016:

2017	$	35,696
2018		12,385
2019		15,429
2020		28,581
2021		7,348
Thereafter		—
Total minimum future purchase obligations	$	99,438

Government Grant

In 2008, the Company was awarded research and development grant funding from Scottish Enterprise amounting to £1,791 for the development of MosaiQ^TM. The total grant claimed to March 31, 2016 is £1,790. Regular meetings are held to update Scottish Enterprise with the status of the project and whilst the terms of the grant award provide for full repayment of the grant in certain circumstances, the Company does not consider that any repayment is likely.

Hedging arrangements

The Company’s subsidiary in the United Kingdom (“UK”) has entered into nine foreign currency forward contracts to sell $500 and purchase pounds sterling at a rate of £1:$1.50 in each calendar month through December 2016. The fair values of these contracts, and similar contracts in place at March 31, 2015, amounted to liabilities of $190 and $199 at March 31 2016 and March 31, 2015, respectively.

The foreign currency forward contracts were entered into to mitigate the foreign exchange risk arising from the fluctuations in the value of U.S. dollar denominated transactions entered into by our UK subsidiary. These foreign currency forward contracts are designated as cash flow hedges and are carried on the Company’s balance sheet at fair value with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income (loss) and subsequently recognized in revenue/expense in the same period the hedged items are recognized.

At inception and at each quarter end, hedges are tested prospectively and retrospectively for effectiveness. Changes in the fair value of foreign currency forward contracts due to changes in time value are excluded from the assessment of effectiveness and are recognized in revenue in the current period. The change in time value related to these contracts was not material for all reported periods. To qualify for hedge accounting, the hedge relationship must meet criteria relating both to the derivative instrument and the hedged item. These criteria include identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s cash flows will be measured. There were no gains or losses during the years ended March 31, 2016, March 31, 2015 or March 31, 2014 associated with ineffectiveness or forecasted transactions that failed to occur.

To receive hedge accounting treatment, hedging relationships are formally documented at the inception of the hedge and the hedges must be tested to demonstrate an expectation of providing highly effective offsetting changes to future cash flows on hedged transactions.