5.COMMITMENTS AND CONTINGENCIES 

 

Leases  

The Company leases various facilities and equipment in the U.S. and overseas under non-cancelable operating leases which expire through 2016. The lease agreements generally provide for the payment of minimum annual rentals, pro-rata share of taxes, and maintenance expenses. Rental expense for all operating leases was $454,000  $352,000 and $301,000 for the years ended September 30, 2012,  2011 and 2010, respectively. Certain of the Company’s facility leases include options to renew. 

 

As of September 30, 2012, minimum rental commitments under non-cancelable operating leases are as follows (in thousands): 

 

 

  

Royalties 

Prior to the acquisition of intellectual property disclosed in Note 2 to the consolidated financial statements, the Company was obligated to pay royalties ranging from 7% to 50% on revenue generated by the sale of certain licensed software products. Royalty expense included in cost of software licenses was approximately $1,161,000,  $1,630,000 and $1,436,000 for the years ended September 30, 2012,  2011 and 2010, respectively. Minimum royalty obligations were insignificant for fiscal years 2012, 2011 and 2010. As a result of the acquisition of the intellectual property, the Company is no longer required to pay royalties related to its Monarch Professional and Datawatch Data Pump products.

 

Contingencies 

From time to time, the Company is subject to claims and may be party to actions that arise in the normal course of business. The Company is not party to any litigation that management believes will have a material adverse effect on the Company’s consolidated financial condition or results of operations.