11. Commitments and contingencies

12 Months Ended

Dec. 31, 2013

Commitments And Contingencies Disclosure Footnote

Commitments and contingencies - Note 11

11. 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 65 month facility lease amendment that commenced in September 2013. The lease includes extension and rent escalation provisions over the 65 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
2014	$	15,000	$	254,000
2015		-		430,000
2016		-		442,000
2017		-		434,000
2018		-		446,000
Thereafter		-		38,000
Total minimum lease payments		15,000	$	2,044,000
Less: Amount representing interest		-
Present value of capital lease obligations		15,000
Less: Current portion		(15,000)
Long-term obligation at December 31, 2013	$	-

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 $704,000 and $704,000, respectively, at December 31, 2013 and $987,000 and $961,000, respectively, at December 31, 2012.

Net rent expense was $636,000 and $708,000 for 2013 and 2012, respectively.

Adverse purchase commitments

We have periodically entered into noncancelable purchase contracts in order to ensure the availability of materials to support production of our products and bar code scanners. We periodically assess the need to provide for impairment on these purchase contracts and record 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 2013, no losses on purchase commitments were recorded.