11. Commitments and Contingencies

 

Office Lease Obligations –

 

The Company currently leases office space in Addison, a suburb of Dallas, Texas that expires on March 31, 2025. The Company received a tenant improvement allowance of $1.3 million which was recorded as an increase in leasehold improvements and deferred rent to be amortized over the life of the lease.  The Company also received a one-year rent abatement, but the rent expense is being recorded on a straight-line basis. The Company also leases office space in Pittsford, New York.

 

In addition, the Company leases office spaces in Luton, England under a lease agreement that expires in June 2021 with an option to extend through June 2026; in London, England under a lease agreement that expires in January 2020; in Dubai, UAE under a lease agreement that expires in August 2017; and in Manila, Philippines under a lease that expires in March 2017.

 

The Company also leases office space associated with its legacy Media business, which was sold on July 1, 2015. These office leases are located in New York City and San Francisco and expire from 2017 to 2021. The Company has subleased some of these locations.

 

Future minimum rental payments under these leases are as follows:

 

 

Total rent expense under all operating leases for the year ended December 31, 2016 and 2015 were $1.5 million and $2.8 million, respectively and inclusive of discontinued operations and lease impairment charge of $0.5 million in 2015. As part of the discontinued operations of the Media business unit, the Company abandoned the related Media properties and accrued a lease impairment charge using a cease-use date of July 1, 2015. The lease impairment charge was calculated at July 1, 2015 based on netting the future lease commitments of $0.8 million less the future sublease income of $0.3 million.

 

The Company is currently subleasing three facilities and received payments totaling $0.6 million during 2016, which was less than the Company’s monthly lease obligations. The leases expire in August 2017, February 2018, and February  2021.

 

Future minimum sublease receipts under these subleases are as follows:

 

 

Capital Lease Commitments -

 

The Company has entered into capital lease agreements with leasing companies for the financing of equipment and furniture purchases. The capital lease payments and amortization expire at various dates through June 2017. Any current portion of the capital leases is included in accrued liabilities on the Consolidated Balance Sheets. Future minimum lease payments under non-cancelable capital lease agreements consist of the following amounts for the year ending December 31:

 

 

Legal proceedings -

 

The Company is subject to legal proceedings and claims that arise in the ordinary course of business. Management is not aware of any claims that would have a material effect on the Company’s financial position, results of operations or cash flows.

 

As previously disclosed, on March 5, 2015, T-Rex Property AB (“T-Rex”) filed a complaint against the Company in the United States District Court for the North District of Texas, Civil Action Number 3:15-cv-00738-P. T-Rex alleged that the Company was infringing on three United States patents. The complaint sought unspecified monetary relief, injunctive relief for the payment of royalties and reimbursement for attorneys’ fees. The Company denied the allegations set forth in the complaint. On October 5, 2015, the parties entered into a negotiated settlement agreement under which the Company made one payment in 2015 and a final payment in January 2016 to T-Rex and in exchange received a worldwide license to import, make, use and sell all inventions covered by patents owned or managed by T-Rex, with certain exclusions due to limitations on T-Rex’s legal ability to grant licenses. The case was subsequently dismissed.