Note 5 - Leases and deferred gain on disposal of building assets

12 Months Ended

Dec. 31, 2017

Notes

Note 5 - Leases and deferred gain on disposal of building assets

Note 5 – Leases and deferred gain on disposal of building assets

The Company occupies real property and uses certain equipment under lease arrangements that are accounted for as operating leases.  The Company’s real property leases contain escalation clauses.  Rental expense for all operating leases for 2017 and 2016 was $148 and $194, respectively.

In November 2014, the Company agreed to an extension of its lease for its corporate office buildings and its interest in the lease for the land occupied by the buildings for a term of 5 years. Base annual rent is $549 until April 1, 2018 when the base annual rent increases to $570. The annual rent expense on a straight-line basis is $555. The new lease obligation is recorded as an operating lease for a term of five years which commenced November 1, 2014.  The accounting for the lease extension resulted in a $620 gain on the disposition of leased assets under the prior lease which was deferred and is being amortized over the five-year term of the new operating lease. There was also a $1,526 gain from the extinguishment of a deferred rent credit related to the underlying land lease which is being amortized over the five-year term of the new operating lease. The amortization of the deferred gain and deferred rent credit reduces the rent expense attributable to the cash rent payments.

Future minimum rent expense payments under the new operating lease and the remaining deferred gain from the disposal of the building assets and deferred rent credit to be recognized are as follows:

Years Ending	Minimum Lease	Gain on	Deferred	Net Rent
December 31,	Payments	Building	Rent Credit	Expense
2018	$ 565	$  (124)	$  (314)	$ 127
2019	475	(106)	(264)	105
Total	$ 1,040	$ (230)	$ (578)	$ 232

There are no other lease obligations that have initial or remaining non-cancelable lease terms in excess of one year.