In September 2017, the Company entered into an arrangement with certain of its non-executive officer employees to provide for retention bonus payments to those eligible employees providing continuing service to the Company through July 31, 2018 and December 31, 2018, with one half of the retention bonus commitment payable at each of these dates. For the years ended December 31, 2018 and 2017, compensation expense of $881,336 and $358,744 has been included in the accompanying consolidated statements of operations. No forfeiture rate was estimated for this accrued liability. Instead, forfeitures were recognized as they occurred during the period. $635,377 and $358,744 of accrued retention bonus was included in accrued liabilities in the accompanying consolidated balance sheets as of December 31, 2018 and 2017, respectively. The remaining payment was made to eligible employees in January 2019.

The Company’s industry is characterized by frequent claims and litigation, including claims regarding intellectual property and product liability. As a result, the Company may be subject to various legal proceedings from time to time. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Any current litigation is considered immaterial and counter claims have been assessed as remote.

The Company has entered into employment agreements or other arrangements with certain named executive officers, which provides salary continuation payments, bonuses and, in certain instances, the acceleration of the vesting of certain equity awards to individuals in the event that the individual is terminated other than for cause, as defined in the applicable agreement.

In the course of operating its business, the Company has entered into, and continues to enter into, separate indemnification agreements with the Company’s directors and executive officers, in addition to the indemnification provided for in the Company’s amended and restated bylaws. These agreements may require the Company to indemnify its directors and executive officers for certain expenses incurred in any action or proceeding arising out of their services as one of the Company’s directors or executive officers.

The Company leases office and laboratory space under two non-cancelable operating leases in Tucson, Arizona. The Company amended its facilities leases in August 2015 to extend the terms for approximately five years and to receive lessor approval for and establish lessee oversight of leasehold improvements by the Company and the lessor, respectively, which improvements expanded and improved the Company’s existing research, development, operations and administrative office facilities. The lease amendments included an increase of $804,000 in total monthly rent over the remaining term of the leases. The landlord constructed certain of the leasehold improvements as an incentive to extend the leases. The total cost of the improvements constructed by the landlord of $710,000 was capitalized when the construction was completed in February 2016, and is being depreciated over the remaining term of the lease agreement. The incentive of $710,000 has been recognized as deferred rent within other current liabilities and other liabilities on the consolidated balance sheets, and is being accreted at $11,833 per month over the lease term as a reduction of rent expense.

In December 2018, HTG France signed a commercial lease for office and laboratory space in Sausheim, France effective January 1, 2019. The term of the lease is nine years, extending through December 31, 2028. However, HTG France maintains the right under this agreement to terminate the lease once every three years, subject to a prior notice period to the landlord of six months. Annual fixed lease payments under this agreement are 8,200 Euro plus service charges of 1,200 Euro, to be paid to the landlord on a monthly basis.

The Company’s annual minimum lease payments relating to its Tucson and Sausheim facilities leases before common area maintenance charges are as follows as of December 31, 2018:

2019	$	525,745
2020		528,225
2021		53,907
2022		10,768
2023		10,768
2024 and beyond		43,073
	$	1,172,486

Rent expense, including common area maintenance costs for the Company’s facilities leases was $583,182, including $142,000 of depreciation for capitalized leasehold improvements for the year ended December 31, 2018. Rent expense, including common area maintenance costs for the Company’s facility leases was $570,979, including $142,000 of depreciation for capitalized leasehold improvements for the year ended December 31, 2017.

As of December 31, 2018, the Company also has capital lease commitments consisting of approximately $92,445 under leases for computer equipment varying in length from 36-48 months that have not been included in the minimum lease payments schedule above.

The following is a summary of the Company’s general product warranty liability, which is included in accrued liabilities in the accompanying consolidated balance sheets for the years ended December 31, 2018 and 2017:

	Years Ended December 31.
	2018			2017
Beginning balance	$	37,156		$	50,426
Cost of warranty claims		(2,596	)		(9,814	)
Increase in warranty reserve		28,901			(3,456	)
Ending balance	$	63,461		$	37,156

In January 2003, the Company established a defined contribution plan (“401(k) Plan”) under section 401(k) of the IRC. All employees who are over the age of 21 and who are expected to work at least 1,000 hours in a calendar year are eligible for participation in the 401(k) Plan upon commencement of employment with the Company. The Company may make discretionary contributions to the 401(k) Plan, but has not done so during the years ended December 31, 2018 and 2017.