As of April 30, 2020, the federal tax returns for the fiscal years ended 2017 through 2019 remain subject to examination and assessment. Fiscal years ending before 2017 remain open solely for purposes of examination of our loss and credit carryforwards. As of April 30, 2020, the Company has no federal or state examinations ongoing.
We recognize accrued interest and penalties related to unrecognized tax benefits, as well as interest received from favorable tax settlements, within income tax expense. As of April 30, 2020 and 2019, we recorded no accrued interest or penalties related to uncertain tax positions. We expect no significant change in the amount of unrecognized tax benefit, accrued interest or penalties within the next twelve months.
NOTE 7—COMMITMENTS AND CONTINGENCIES
As part of our ongoing operations, we enter into arrangements that obligate us to make future payments to various parties. Some of these contractual obligations are not reflected on the accompanying consolidated balance sheets due to the nature of the obligations. Such obligations include operating leases for production space and for equipment.
On July 10, 2014, we entered into a real estate lease agreement in Hatfield, Pennsylvania to lease approximately 5,000 square feet for manufacturing electromechanical assemblies and other transformers. This agreement commenced on August 1, 2014 and continues through July 31, 2019. During fiscal year 2019, the lease was automatically extended, as stated within the original lease agreement, for an additional one year period to July 31, 2020. On June 17, 2020, Torotel entered into a new lease agreement adjusting the leased space to approximately 7,000 square feet and the monthly base rent to $4,241.
On October 31, 2016, Torotel entered into the Second Amendment (“Second Amendment”) to the lease for its Rogers Road facility located in Olathe, Kansas. The Second Amendment became effective as of April 1, 2017, and served to extend the lease term through December 31, 2026 and expand the leased space from approximately 14,137 square feet to approximately 72,388 square feet. The Second Amendment provides that through December 31, 2018, the monthly base rate is $26,844, and subsequently through December 31, 2019 and 2020, the monthly base rate is $29,257 and $32,876, respectively, escalating annually thereafter as previously disclosed in our other public filings. The Second Amendment required Torotel to increase its security deposit from $12,750 to $55,000 and provide a letter of credit as additional security. Additionally, the Second Amendment addressed other terms and conditions by which Torotel is leasing the facility or may terminate the lease, and provided Torotel two separate options to extend the lease term for additional five year periods.
The gross amount of assets recorded under capital leases amounted to $225,000 of equipment.
Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods free of rent. Total rent expense for all operating leases for the fiscal years ended April 30, 2020 and 2019 was $532,000 and $650,000, respectively.
Torotel is subject to legal proceedings and claims that arise in the normal course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the financial position or results of operations of Torotel.
NOTE 8—EMPLOYEE INCENTIVE PLANS
Short-term Cash Incentive Plan
The Short-term Cash Incentive Plan ("STIP") became effective for fiscal year 2008. The purpose of the STIP is to promote the long-term financial performance of Torotel by providing key employees with the opportunity to earn cash awards for accomplishing annual goals for Return on Capital Employed ("ROCE") as defined in the STIP. For the years ended April 30, 2020 and 2019 there were no short-term cash incentive plan expenses.