NOTE 7 - OPERATING LEASE COMMITMENTS

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

NOTE 7 - OPERATING LEASE COMMITMENTS

We have commitments under non-cancelable operating leases and other agreements, primarily for factory and office space, with initial or remaining terms of one year or more as follows:

For the years ending December 31:

		Operating Leases
(in thousands)
	2016	$	757
	2017		828
	2018		813
	2019		846
	2020		843
	Thereafter		436
	Total	$	4,523

Lease and rental expense was $955,000 and $1,041,000 in 2015 and 2014, respectively.  Rent expense is recorded on a straight line basis, over the term of the lease, for leases that contain fixed escalation clauses, and excludes the portion that was charged to restructure expense.  During the second quarter of 2015, we amended our lease agreement for the Redmond, Washington headquarters facility effective July 8, 2015. The amended lease resulted in our headquarters relocating to a nearby building, extending the term through April 2021, lowering the square footage to approximately 20,460, providing lease inducement incentives and lowering the rental rate. The new lease commitment of approximately $1.7 million will be paid over the term of the lease. As a result of this lease amendment, the remaining balance of the restructure liability of approximately $120,000 was incorporated into our deferred rent liability in July, 2015.  The lease base annual rental payments during 2015, 2014, and 2013 were approximately $296,000, $531,000, and $501,000, respectively.

In addition to the Redmond facility, approximately 14,000 square feet is leased at two foreign locations, including our German sales, service and engineering operations located in Munich, Germany, and a sales, service, operations and engineering office located in Shanghai, China.

During the first quarter of 2014, we renewed our lease agreement for our Munich, Germany facility effective February 1, 2015 and extending the term through January 2018 and lowering the square footage to approximately 4,306 square feet.  Effective June 1, 2014, the landlord was able to lease the excess space abandoned as part of Q2 2013 restructure actions to another tenant and the lease was revised to end May 31, 2017.

During the second quarter of 2015, we renewed our lease agreement for our Shanghai, China facility, effective June 15, 2015, extending the term through December 31, 2015. Operations were arranged to continue in this facility through January 31, 2016.

In October 2015, we signed a lease agreement for a new facility located in Shanghai, China which was effective November 1, 2015 and extends through October 31, 2021.  The new lease will approximately double our space to 19,400 square feet at approximately 54% of the current lease rate.