LEASE OBLIGATIONS

12 Months Ended

Dec. 31, 2015

Note 10.

LEASE OBLIGATIONS

On March 25, 2015, the Company entered into a commercial lease agreement, for approximately 534,000 square feet of manufacturing and warehouse space located in Jefferson City, Missouri. The initial rental term of the lease is for one hundred and thirty two (132) months, commencing on January 1, 2016 and ending on December 31, 2026. The Company has the right and option to renew the lease for all or a portion of the premises for two (2) renewal periods of five (5) years each on the terms and conditions set forth in the lease. Commencing on January 1, 2016, the Company shall pay rent in the amount of $138,395. The lease includes rent escalators whereby the maximum rental amount is $156,195 during the final eleven months of the lease. The company took possession of the facility on June 1, 2015 and will straight line the rent expense over a term of one hundred and thirty nine (139) months, commencing on June 1, 2015 and ending on December 31, 2026.

On April 7, 2015, the Company entered into a lease agreement for approximately 96,000 square feet of industrial and office space in Tiffin, Ohio. The initial rental term of the lease is for one five (5) year period, commencing on April 7, 2015 and ending on March 15, 2020. The Company has the right and option to renew the lease for one (1) renewal period of five (5) years on the terms and conditions set forth in the lease. The initial monthly rent is $18,000.

On October 14, 2015 the Company entered into a lease agreement for approximately 11,000 square feet of office space in Maryland Heights, Missouri. The initial rental term of the lease is for ninety (90) months, commencing on January 1, 2016 and ending on June 30, 2023. The Company has the right and option to renew the lease for one (1) renewal period of five (5) years on the terms and conditions set forth in the lease. The lease commences on January 1, 2016 and the Company shall pay rent in the amount of $15,111 starting July 1, 2016. The lease includes rent escalators where by the maximum rental amount is $16,027 during the final twenty four (24) months of the lease. The company took possession of the facility on November 1, 2015 and will straight line the rent expense over a term of ninety two (92) months, commencing on November 1, 2015 and ending on June 30, 2023.

In addition to the above leases, the Company has entered into non-cancelable operating leases for real property with original lease terms of up to ten years. In addition to the real property leases, the Company leases manufacturing and office equipment under operating leases expiring during the next three years.

The Company has certain operating leases that contain fixed rent escalation clauses. Rent expense for leases has been calculated on the straight-line basis over the term of the leases, resulting in deferred rent of approximately $1.0 million and $0.7 million as the years ended December 31, 2015 and 2014 and will be amortized to rent expense over the life of the leases.

Further, the Company has received certain lease incentives related to Jefferson City, Missouri and Maryland Heights, Missouri leases resulting in a current and noncurrent deferred rent liability of $0.3 million and $2.9 million, respectively, at December 31, 2015. The Company had current and noncurrent deferred rent liabilities of $0.1 million and $0.2 million as of December 31, 2014. Lease improvements are recorded as leasehold improvements and are depreciated over the term of the related leases or the useful life of the assets, whichever is shorter.

In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases. Future minimum lease payments as of December 31, 2015 are as follows (amounts in thousands):

2016	$	2,215
2017		2,462
2018		2,225
2019		2,164
2020		2,031
Thereafter		11,148
	$	22,245

Rental expense for 2015 and 2014 for operating leases was $4.3 million and $3.3 million, respectively.