13. Commitments and Contingencies

Operating Leases

In August 2010, the Company entered into a five-year, non-cancelable operating lease for office and laboratory space at its headquarters in Lexington, MA. The lease commenced on January 1, 2011, with the Company providing a security deposit of $400,000. In accordance with the operating lease agreement, the Company reduced its security deposit to $240,000 in May 2015, which is recorded as restricted cash in the consolidated balance sheets. In July 2014, the Company amendment the lease to expand the office and laboratory space leased. In May 2015, the Company entered into an amendment to this lease to extend the term from December 31, 2015 to December 31, 2017. In March 2017, the Company entered into an amendment to extend the term from December 31, 2017 to December 31, 2021. The rent expense, inclusive of the escalating rent payments, is recognized on a straight-line basis over the lease term.

In May, 2013, the Company entered into a two-year operating lease for additional office, laboratory and manufacturing space in Wilmington, MA. The Company entered into an amendment in September 2015 to extend this lease term through December 31, 2017.

In November, 2014 the Company entered into an agreement to rent additional office space in Lexington, MA. The term of the agreement is two years, commencing December 2014. In April 2015, the Company entered into an amendment to extend the term of this agreement. The amendment extends the agreement term from December 31, 2016 to December 31, 2017. In connection with this agreement, the Company paid a security deposit totaling $50,000, which is recorded as a component of prepaid assets in the consolidated balance sheets. In May 2015, the Company entered into an amendment to a lease to expand existing manufacturing facilities in Lexington, MA. The lease amendment term is June 1, 2015 to December 31, 2017.

In November, 2014, the Company entered into a lease for additional laboratory space in Lexington, MA. The lease term commenced April 1, 2015 and extends for six years. The rent expense, inclusive of the escalating rent payments, is recognized on a straight-line basis over the lease term. As an incentive to enter into the lease, the landlord paid approximately $1.4 million of the $2.2 million space build-out costs. The incentive is recorded as a component of lease incentives on the consolidated balance sheets and is amortized as a reduction in rent expense on a straight-line basis over the term of the lease. In connection with this lease agreement, the Company paid a security deposit of $281,000, which is recorded as a component of other assets in the consolidated balance sheets.

Future minimum non-cancelable lease payments under the Company’s operating leases as of December 31, 2016 are as follows (in thousands):


Year ending December 31,
2017	$	2,079
2018		404
2019		414
2020		425
2021		107
Thereafter		—
	$	3,429

The future minimum noncancelable lease payments will increase to $2.1 million in 2017, $1.7 million in 2018, $1.8 million in 2019, $1.9 million in 2020 and $1.6 million in 2021 as a result of the lease amendment entered into on March 7, 2017 for office and laboratory space at the Company’s headquarters in Lexington, MA.

Rent expense for the years ended December 31, 2016, 2015, and 2014 was $1.8 million, $1.6 million, and $950,000, respectively.

License Agreement

In 2006, the Company entered into a license agreement with a third party, pursuant to which the third party granted the Company an exclusive, worldwide, sublicenseable license under certain patent rights to make, use, import and commercialize products and processes for diagnostic, industrial and research and development purposes. The Company agreed to pay an annual license fee ranging from $5,000 to $25,000 for the royalty‑bearing license to certain patents. For the years ended December 31, 2016, 2015 and 2014, the Company incurred $31,000, $34,000 and $345,000, respectively, for regulatory milestones, license fees and reimbursed patent costs under the agreement. The Company also issued a total of 84,678 shares of common stock pursuant to the agreement in 2006 and 2007, which were recorded at fair value at the date of issuance. Regulatory milestones totaling $300,000 became due during the year ended December 31, 2014, as the Company received FDA marketing clearance and European CE Mark for the T2Dx and T2Candida. The Company is required to pay royalties on net sales of products and processes that are covered by patent rights licensed under the agreement at a percentage ranging in the low single digits, subject to reductions and offsets in certain circumstances, as well as a royalty on net sales of products that the Company sublicenses at a low double‑digit percentage of specified gross revenue. Royalties that became due under this agreement for the years ended December 31, 2016 and 2015 were immaterial.