11. Commitments and contingencies

12 Months Ended

Dec. 31, 2014

Commitments And Contingencies Disclosure Footnote

Commitments and contingencies - Note 11

11. Commitments and contingencies

Litigation

On March 31, 2014, Asia Optical Co., Inc., a supplier pursuant to an agreement entered into in 2008, filed a complaint for arbitration with the American Arbitration Association claiming that we ordered products from them and failed to take delivery of and pay for such products. The relief sought in the complaint is $3.6 million plus attorneys' fees, interest and arbitration costs. We contest the claim and are defending against it. An adverse outcome of these proceedings could materially and adversely affect our financial condition. At this stage, we cannot predict the likelihood of an unfavorable outcome or the range of potential loss.

We are also 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.

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

		Operating
		leases
2015	$	430,000
2016		442,000
2017		439,000
2018		446,000
2019		38,000
Thereafter		-
Total minimum lease payments	$	1,795,000

Net rent expense was $542,000 and $636,000 for 2014 and 2013, 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. We continuously assess our outstanding commitments and recognize a loss on purchase commitments when required if such commitments are in excess of our product needs or the costs are not expected to be recoverable. As of December 31, 2014 we have $500,000 accrued for commitments to purchase materials for the SHOWWX that were in excess of our estimated future proceeds from sale of the SHOWWX.