PRSS 2017 Annual Report

66 10. Commitments and Contingencies Leases Lease agreements are accounted for as either operating or capital leases depending on certain defined criteria. We lease certain of our facilities and equipment under capital and operating leases with various expiration dates through 2021. Certain of the operating lease agreements contain rent holidays and rent escalation provisions. Rent holidays and rent escalation provisions are considered in determining straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initial possession of the lease property for purposes of recognizing rent expense on a straight-line basis over the term of the lease. In 2005, we entered into a capital lease agreement for a production facility in Louisville, Kentucky consisting of 126,352 square feet. The lease was amended in May 2007 to lease an additional 20,000 square feet. The capital lease had an interest rate of 6.5% and expired in 2017. InAugust 2012, pursuant to an amendment, we added 184,813 square feet under an operating lease. OnAugust 1, 2014, we further amended our primary facility lease (“Facility Lease Amendment”) to extend the term related only to the 184,813 square feet of leased production and office space from July 31, 2014 to July 31, 2021. In connection with the Facility Lease Amendment, we also entered into an option to terminate the lease in its entirety on or after July 31, 2018. In the case of such early lease termination, we would be required to pay a termination fee dependent upon the effective date of an early lease termination, as follows: (i) For a termination effective as of July 31, 2018: $1,512,679 (ii) For a termination effective as of July 31, 2019: $934,814 (iii) For a termination effective as of July 31, 2020: $429,736. Under the terms of the Facility Lease Amendment, we established an escrow agreement for which we may be liable under the terms of the Facility Lease Amendment. See Note 5 - Escrow Agreement in the accompanying Notes to Consolidated Financial Statements. In July 2015, we entered into an operating lease for office space in Hayward, California. During 2016, we abandoned this office space and recorded restructuring charges of $0.3 million. See Note 8 - Restructuring in the accompanying Notes to Consolidated Financial Statements. On November 5, 2014, in connection with a purchase agreement, Phoenix Online LLC assumed a capital lease associated with our InvitationBox.com business. We provided a corporate guaranty for this capital lease for a period of five years from the effective date of the asset purchase agreement. During 2017, we amended our corporate guaranty with Phoenix Online LLC for an additional five years. Future minimum lease payments under our non-cancelable operating lease as of December 31, 2017 is as follows: Years Ended December 31, Operating lease 2018 $ 719 2019 737 2020 756 2021 447 2022 — Thereafter — Total minimum lease payments $ 2,659 Rent expense for the years ended December 31, 2017 and 2016 was $0.9 million and $1.1 million, respectively. Purchase commitments As of December 31, 2017, our non-cancelable purchase obligations totaled $1.7 million, primarily related to inventory, goods and other services.