Note 5 - Leases and Gain On Disposal of Building Assets

12 Months Ended

Dec. 31, 2016

Notes

Note 5 - Leases and Gain On Disposal of Building Assets

Note 5 – Leases and deferred gain on disposal of building assets

The Company occupies real property and uses certain equipment under lease arrangements that are accounted for as operating leases.  The Company's real property leases contain escalation clauses.  Rental expense for all operating leases for 2016 and 2015 was $194 and $216, respectively.

In November 2014, the Company agreed to an extension of its lease for its corporate office buildings and its interest in the lease for the land occupied by the buildings for a term of 5 years. Base annual rent for the extended 5-year term is $549. The new lease obligation is recorded as an operating lease for a term of five years which commenced November 1, 2014.  The accounting for the lease extension resulted in a $620 gain on the disposition of leased assets under the prior lease which was deferred and is being amortized over the five-year term of the new operating lease. There was also a $1,526 gain from the extinguishment of a deferred rent credit related to the underlying land lease which is being amortized over the five-year term of the new operating lease. The amortization of the deferred gain and deferred rent credit reduces the rent expense attributable to the cash rent payments.

Future minimum rent expense payments under the new operating lease and the remaining deferred gain from the disposal of the building assets and deferred rent credit to be recognized are as follows:

Years Ending December 31,	Rent Expense	Gain on Building	Deferred Rent Credit	Net Rent Expense
2017	$549	$(124)	$(305)	$120
2018	565	(124)	(305)	136
2019	475	(108)	(265)	102
Total	$1,589	$(356)	$(875)	$358

There are no other lease obligations that have initial or remaining non-cancelable lease terms in excess of one year.