Note 10. Commitments

Leases

We lease office space and equipment under noncancelable operating and capital leases with various expiration dates, some of which contain renewal options.

On March 1, 1996, we entered into a 20-year capital lease for a building in Ashburn, Virginia, that serves as our corporate headquarters. We had accounted for this transaction as a capital lease and had accordingly recorded assets and a corresponding liability of approximately $12.3 million. Effective November 1, 2013, we entered into a 13-year lease ("the 2013 lease") that would have expired in October 31, 2026. The 2013 lease was treated as a modification in accordance with ASC 840, "Leases". As a result of the 2013 lease, the corresponding capital asset and liability increased by $11.7 million, resulting in a net book value of the capital asset of $13.1 million, and capital obligation of $15.5 million. The 2013 lease included an option to purchase, assign to, or designate a purchaser on June 1, 2014, which required notice of intent to exercise the option by not later than March 31, 2014.

On March 28, 2014, we entered into a definitive agreement with an unrelated third party to assign the purchase option to that third party in return for cash consideration of $1.7 million, payable upon the closing of the purchase transaction, and certain obligations under the agreement, including entering into a new 15-year lease with the third party upon the third party's exercise of the purchase option and purchase of the building from the prior landlord. On March 28, 2014, we provided the prior landlord notice of our assignment and exercise of the purchase option. On May 28, 2014 the third party completed the purchase transaction and the 2013 lease was terminated, with no ongoing obligations, by mutual agreement between us and the prior landlord. On the same day we entered into a new lease ("the 2014 lease") with the third party that expires on May 31, 2029. The 2014 lease was treated as a modification of the prior lease on the property in accordance with ASC 840, and determined to be a capital lease. As a result of the new lease, the corresponding capital asset increased by $5.7 million, resulting in a net book value of the capital asset of $18.3 million and the liability increased by $6.7 million, resulting in a capital obligation of $22.0 million. As part of this treatment, the net cash consideration received in connection with the definitive agreement was treated as a lease incentive that will be amortized over the life of the lease.

The following is a schedule by years of future minimum payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2014 (in thousands):

	Property			Equipment			Total
2015	$	1,808			30			1,838
2016		1,853			1			1,854
2017		1,899			1			1,900
2018		1,947			--			1,947
2019		1,995			--			1,995
Remainder		21,408			--			21,408

Total minimum obligations		30,910			32			30,942
Less amounts representing interest (ranging from 5.0 % to 18.8 %)		(9,435	)		--			(9,435	)

Net present value of minimum obligations		21,475			32			21,507
Less current portion		(742	)		(30	)		(772	)

Long-term capital lease obligations at December 31, 2014	$	20,733		$	2		$	20,735

Future minimum lease payments for all noncancelable operating leases at December 31, 2014 are as follows (in thousands):

2015	$	622
2016		410
2017		295
2018		289
2019		283
Remainder		1,248
Total minimum lease payments	$	3,147

In accordance with the new 2014 Lease, the basic rent increases by a fixed 2.5% escalation annually. Rent expense charged to operations totaled $1.1 million for 2014, 2013, and 2012.

Accumulated amortization for property and equipment under capital leases at December 31, 2014 and 2013 is $13.2 million and $12.1 million, respectively.

Warranties

We provide product warranties for products sold through certain U.S. Government contract vehicles. We accrue a warranty liability at the time that we recognize revenue for the estimated costs that may be incurred in connection with providing warranty coverage. Warranties are valued using historical warranty usage trends; however, if actual product failure rates or service delivery costs differ from estimates, revisions to the estimated warranty liability may be required. Accrued warranties are reported as other current liabilities on the consolidated balance sheets.

	Balance Beginning of Year		Accruals			Warranty Expenses			Balance End of Year
	(amount in thousands)

Year Ended December 31, 2014	$	113	$	140		$	(64	)	$	189
Year Ended December 31, 2013	$	226	$	70		$	(183	)	$	113
Year Ended December 31, 2012	$	953	$	(393	)	$	(334	)	$	226