Annual report pursuant to Section 13 and 15(d)

Contingencies and Commitments

v3.3.1.900
Contingencies and Commitments
12 Months Ended
Dec. 31, 2015
Leases [Abstract]  
Lease Commitments
Commitments and Contingencies
Leases and Other Financing Obligations
During the year ended December 31, 2015, the Company acquired computer and network equipment and furniture through capital leases. Balances for assets acquired under capital lease obligations and included in property and equipment were as follows (in thousands):
 
December 31,
 
2015
 
2014
Computer and network equipment
$
511

 
$

Furniture
287

 

Assets acquired under capital lease obligations
798

 

Accumulated depreciation
(123
)
 

Assets acquired under capital lease obligations, net
$
675

 
$


The current and long-term portions of capital leases and other financing obligations were as follows (in thousands):
 
December 31,
 
2015
 
2014
Capital leases and other financing obligations, current
$
502

 
$

Capital leases and other financing obligations, noncurrent
519

 

Total capital leases and other financing obligations
$
1,021

 
$


The Company leases certain of its facilities and some of its equipment under non-cancelable operating lease arrangements. The rental payments under these leases are charged to expense on a straight-line basis over the non-cancelable term of the lease.
Future minimum payments under capital lease obligations, other financing obligations, and non-cancelable operating leases, excluding property taxes and other operating expenses as of December 31, 2015 are as follows (in thousands):
 
Capital leases and other financing obligations
 
Operating leases
 
Total
Years ending December 31,
 
 
 
 
 
2016
$
561

 
$
1,218

 
$
1,779

2017
375

 
1,268

 
1,643

2018
179

 
1,062

 
1,241

2019

 
571

 
571

2020

 
309

 
309

Thereafter

 
658

 
658

Total minimum lease payments
1,115

 
$
5,086

 
$
6,201

Less amount representing interest
(94
)
 
 
 
 
Present value of net minimum lease payments
$
1,021

 

 


On March 5, 2015, the Company entered into an office facility lease agreement for space that will serve as its corporate headquarters. The eighty-nine month lease commenced on September 1, 2015, provides the Company approximately 17,216 square feet in Minneapolis, Minnesota, with the initial term expiring January 31, 2023. Total base rent payable over the lease period is $1,822,000. The Company has one option to extend the term of the lease for an additional five year period with respect to the leased premises. The lease agreement allowed the Company to construct leasehold improvements to the new space prior to the effective date of the lease. As the leasehold improvements are the property of the Company, the associated costs, amounting to approximately $713,000, were capitalized in property and equipment as of September 30, 2015 and will be depreciated over the term of the lease. As an incentive to enter into the lease agreement, the lessor provided the Company a one-time tenant improvement allowance of $689,000 to apply against the cost of the leasehold improvements. The one-time tenant improvement allowance is included in deferred rent and will be amortized as a reduction of rent expense over the term of the lease.
During the third quarter 2015, the Company recognized an equipment operating lease loss of $1.0 million relating to equipment the Company no longer plans to utilize as part of it managed services offerings. Under this obligation, there are six remaining lease payments of $71,000 payable through the first quarter of 2017.
Rent expense under operating leases amounted to approximately $1.0 million, $0.7 million and $0.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Contingencies
The Company is exposed to a number of asserted and unasserted legal claims encountered in the ordinary course of its business. Although the outcome of any such legal actions cannot be predicted, management believes that there are no pending legal proceedings against or involving the Company for which the outcome is likely to have a material adverse effect upon its financial position or results of operations.
The Company’s standard arrangements include provisions indemnifying customers against liabilities if the Company's products infringe a third-party’s intellectual property rights. The Company has not incurred any costs in its continuing operations as a result of such indemnifications and has not accrued any liabilities related to such contingent obligations in the accompanying condensed consolidated financial statements.