NOTE 3 - LEASE COMMITMENTS

Operating Leases:

The Company leased a portion of its Louisville, Kentucky facility from a related party (see Note 8 - Related Party Transactions) under an operating lease that was due to expire December 31, 2017 (the "7100 Prior Lease"). The lease amount was $53.8 thousand per month. Effective October 1, 2017, the Company entered into a new lease agreement with a related party for the same property (the "7100 Lease") that terminated and replaced the 7100 Prior Lease. The lease is for a period of seven years with rent payments of $37.5 thousand per month for the first five years. For each of the following one year periods, the annual rent increases the lesser of (a) the percentage change in the CPI over the preceding twelve months, or (b) 2% of the previous year's annual rent. The Company has the option to extend the lease for two additional consecutive terms, each such extended term to be for a period of five years. In addition, the Company is responsible for real estate taxes, insurance, utilities and maintenance expense.

The Company signed a lease, effective December 1, 2014, to lease a facility in the Seymour, Indiana area. This lease was for an initial period of three years, with the option to extend the lease for three (3) additional three (3) year periods. Rent is $8.2 thousand per month and increases each year by $0.2 thousand per month. The Company exercised the first option to extend the lease. Because ISA exercised the option to renew the lease for a second three year term, at the end of the second three year term, ISA has the option to purchase the property.

The Company leased a lot in Louisville, Kentucky for a term that commenced in March 2012 and ended in February 2016. The monthly payment amount from March 2012 through February 2014 was $3.5 thousand. Beginning March 2014, the monthly payment amount increased to $3.8 thousand for the remaining term. As of August 31, 2015, the Company entered into a settlement to abandon the leased property and pay the remaining balance of scheduled payments over a 19 month period, ending March 31, 2017. This amount was fully repaid in 2017.

On April 30, 2015, the Company entered into a lease agreement with LK Property (see Note 8 - Related Party Transactions), for a portion of the 4.4 acre parcel of real estate located at 6709 Grade Lane, Louisville, Kentucky in the amount of $3.0 thousand per month. The lease terminates on April 14, 2019, but the Company has the right to terminate the lease and vacate the leased premises upon 90 days notice. The Company is required to reimburse the lessor for 40% of the property taxes on the parcel during the term.

On March 3, 2018, the Company entered into a lease agreement to lease a piece of equipment for $0.6 thousand per month. The lease is for a period of five years.

Future minimum lease payments for operating leases for the next five years ending December 31 of each year, in thousands, as of December 31, 2018 are as follows:

	Related Party		Other			Total
2019	$	461	$	103	$	564
2020		450		103	553
2021		450		7	457
2022		450		7	457
2023		450		1	451
2024		338		—	338
Future minimum lease payments	$	2,599	$	221	$	2,820

Total rent expense for the years ended December 31, 2018 and 2017 was $648.5 thousand and $770.7 thousand, respectively.

Capital Leases:

On May 1, 2016, the Company entered into an amended agreement to lease three cranes (the "Crane Lease"). The Crane Lease expires April 30, 2021. Payments were $14.5 thousand per month for the first twelve months following the amendment date, followed by monthly payments of $31.3 thousand thereafter for the reminder of the lease term. There is no bargain purchase option associated with the Crane Lease. Based on the new lease terms, the Company classified the Crane Lease as a capital lease. At inception, the Company recorded a capital lease obligation of $1.3 million. The Company used a weighted average cost of capital of 9.3% to calculate the capital lease obligation.

The Company entered into a capital lease, effective June 2017, to lease two pieces of equipment for use in the Company's operations. The lease is for a period of six years and the payments are $1.4 thousand per month. The Company has the option to purchase the equipment for a purchase price of $1.00 per item of equipment upon the expiration of the lease. At inception, the Company recorded a capital lease obligation of $75.2 thousand. The Company used a weighted average cost of capital of 10.0% to calculate the capital lease obligation.

The Company entered into a capital lease, effective May 2018, to lease a piece of equipment for use in the Company's operations. The lease is for a period of four years and the payments are $0.6 thousand per month with an interest rate of 5.8% per year. At inception, the Company recorded a capital lease obligation of $24.7 thousand.

The Company entered into a capital lease, effective June 2018, to lease a piece of equipment for use in the Company's operations. The lease is for a period of four years and the payments are $0.7 thousand per month with an interest rate of 5.8% per year. At inception, the Company recorded a capital lease obligation of $29.0 thousand.

The Company entered into a capital lease, effective July 2018, to lease two pieces of equipment for use in the Company's operations. The lease is for a period of 6 years and 4 months and the payments are $1.4 thousand per month. The Company has the option to purchase the equipment for a purchase price of $1.00 per item of equipment upon the expiration of the lease. At inception, the Company recorded a capital lease obligation of $79.9 thousand. The Company used a weighted average cost of capital of 10.0% to calculate the capital lease obligation.

Depreciation and interest expense for capital leases, in thousands, are as follows:

	For year ended
	December 31,
		2018		2017
Depreciation expense	$	284	$	264
Interest expense		98		114

Accumulated depreciation and net book value for capital leases, in thousands, are as follows:

	For year ended
	December 31,
		2018		2017
Accumulated depreciation	$	719	$	436
Net book value		774		924

Future minimum lease payments for the capital lease for the next five years ending December 31 of each year, in thousands, as of December 31, 2018 are as follows:


	Total		Principal		Interest
2019	$	424	$	352	$	72
2020		424	386		38
2021		143	133		10
2022		39	34		5
2023		24	22		2
2024		15	14		1
Total	$	1,069	$	941	$	128