5. Commitments and Contingencies

Operating Leases

We lease our offices and production facility under a non-cancelable operating lease in Austin, Texas that expires in April 2020. The lease contains minimum rent escalation clauses that require additional rental amounts after the first year. Rent expense for these leases is recognized on a straight line basis over the minimum lease term. This lease also requires us to pay utilities, insurance, taxes and other operating expenses and contains one five-year renewal option.

For the three and six months ended July 1, 2017 rent expense was $74,000 and $199,000, respectively, and for the three and six months ended July 2, 2016 rent expense was $167,000 and $319,000, respectively.

Patents and Licenses

We have entered into various licensing agreements requiring royalty payments ranging from 0.13% to 2.5% of specified product sales. Certain of these agreements contain provisions for the payment of guaranteed or minimum royalty amounts. In the event that we fail to pay minimum annual royalties, these licenses may automatically become non-exclusive or be terminated. These royalty obligations terminate at various times from 2017 to 2020. For the three and six months ended July 1, 2017 and July 2, 2016, royalty expense totaled $11,000 and $23,000, respectively. Under the terms of certain royalty agreements, royalty payments made may be subject to audit. There have been no audits to date and we do not expect future audit adjustments to be significant.

The minimum lease payments under operating leases and license obligations as of July 1, 2017 are as follows:


Years ending December 31,	Licenses		Operating Leases

Remainder of 2017	$	—	$	440,000
2018		45,000		895,000
2019		—		904,000
2020		—		221,000
2021		—		—
Thereafter		—		—

Total payments	$	45,000	$	2,460,000