Commitments and contingencies - Note 13

12 Months Ended

Dec. 31, 2012

Commitments and contingencies - Note 13

13. Commitments and contingencies

Litigation

We are subject to various claims and pending or threatened lawsuits in the normal course of business. We are not currently party to any legal proceedings that management believes are reasonably possible to have a material adverse effect on the Company's financial position, results of operations or cash flows.

Lease commitments

We lease our office space and certain equipment under noncancelable capital and operating leases with initial or remaining terms in excess of one year.

We entered into a 90 month facility lease that commenced in February 2006. The lease includes extension and rent escalation provisions over the 90 month term of the lease. Rent expense will be recognized on a straight-line basis over the lease term.

Future minimum rental commitments under capital and operating leases for years ending December 31 are as follows:

		Capital		Operating
		leases		leases
2013	$	62,000	$	642,000
2014		21,000		-
2015		-		-
2016		-		-
2017		-		-
Thereafter		-		-
Total minimum lease payments		83,000	$	642,000
Less: Amount representing interest		(15,000)
Present value of capital lease obligations		68,000
Less: Current portion		(48,000)
Long-term obligation at December 31, 2012	$	20,000

The capital leases are collateralized by the related assets financed and by security deposits held by the lessors under the lease agreements. The cost and accumulated depreciation of equipment under capital leases was $987,000 and $961,000, respectively, at December 31, 2012 and $987,000 and $942,000, respectively, at December 31, 2011.

Net rent expense was $708,000 and $1,156,000 for 2012 and 2011, respectively.

Long-term debt

During 2006, we entered into a loan agreement with the lessor of our corporate headquarters in Redmond to finance $536,000 in tenant improvements. The loan carries a fixed interest rate of 9% per annum, is repayable over the initial term of the lease, which expires in 2013, and is secured by a letter of credit. The balance of the loan was $67,000 at December 31, 2012.

Adverse purchase commitments

We have periodically entered into noncancelable purchase contracts in order to ensure the availability of materials to support production of our PicoP based products and bar code scanners. We periodically assess the need to provide for impairment on these purchase contracts and records a loss on purchase commitments when required. During 2012, we recorded losses of $500,000 to cost of product revenue as a result of commitments to purchase materials for the SHOWWX that were in excess of our estimated future proceeds from sale of the SHOWWX. During 2011, no losses on purchase commitments were recorded.