14. COMMITMENTS AND CONTINGENCIES

The following table summarizes our contractual obligations as of December 31, 2017 (in thousands):

Lease Arrangements

We have an operating lease agreement for office space being used in Vancouver, Canada, which expires in September 2018. Pursuant to the operating lease agreement, we have the option to terminate the lease early without penalty at any time after January 1, 2017 so long as we provide three months prior written notice to the landlord.

The future minimum annual lease payments under the Vancouver lease is $71,000 in 2018.

In February 2015, we entered into an office lease with Grosvenor International (Atlantic Freeholds) Limited, or Landlord, pursuant to which we leased approximately 11,526 square feet located at 19820 North Creek Parkway, Bothell, Washington, 98011, commencing on February 15, 2015. The initial term of this lease will expire on April 30, 2018, with an option to extend the term for one approximately three-year period. Our monthly base rent for the premises will start at approximately $18,000 commencing on May 1, 2015 and will increase on an annual basis up to approximately $20,000. We received a construction allowance, for leasehold improvements that we made, of approximately $0.1 million. We will be responsible for 17% of taxes levied upon the building during each calendar year of the term. We delivered to the Landlord a letter of credit in the amount of $0.2 million, in accordance with the terms if the lease, which the Landlord may draw upon for base rent or other damages in the event of our default under this lease. In August 2015 we exercised our expansion option for an additional 2,245 square feet of office space, which commenced on August 1, 2015. We did not exercise our renewal option under the lease agreement and the lease will expire on April 30, 2018.

The remaining future minimum annual lease payments under the Bothell lease are as follows (in thousands):

Consolidated rent and operating expense relating to both the Vancouver, Canada and Bothell, Washington offices for years ended December 31, 2017, 2016 and 2015 was $0.6 million, $0.9 million and $2.8 million, respectively.

On December 11, 2017, we entered into a lease, or New Lease, with 520 Pike Street, Inc., or Pike, pursuant to which we will lease approximately 3,187 square feet located at Suite 2250 at 520 Pike Tower, Seattle, Washington, 98101, commencing on March 1, 2018, or such later date on which Pike delivers exclusive possession of the premises to us; and further provided, that if such delivery does not occur by May 1, 2018, we have the right to terminate the agreement upon provision of notice. The initial term of the New Lease will expire at the end of the month on the third anniversary of the New Lease.

Our monthly base rent for the premises will start at approximately $11,685 commencing on March 1, 2018 and will increase on an annual basis up to approximately $12,397. In addition, we will also be obligated to pay a security deposit to Pike in the amount of $37,192, subject to periodic reductions in the amount of $12,397 after each of the first and second anniversaries of the New Lease, which Pike may retain for base rent or other damages, in the event of our default under the New Lease.

We may not assign or sublet all or any portion of the premises without the consent of Pike, and Pike shall be entitled to 50% of any profit which we may receive above and beyond the rental price of the New Lease. Upon receipt of notice of our intent to assign or sublease any portion of the leased premises, Pike may terminate that portion of the premises within 30 days, and provided, that if such portion constitutes 50% or more of the total square footage of the premises, Pike may terminate the New Lease in its entirety.

The future minimum annual lease payments under the New Lease are as follows (in thousands):

Guarantees and Indemnifications

We indemnify our officers, directors and certain consultants for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at its request in such capacity. The term of the indemnification period is equal to the officer’s or director’s lifetime.

The maximum amount of potential future indemnification is unlimited; however, we have obtained director and officer insurance that limits our exposure and may enable us to recover a portion of any future amounts paid. We believe that the fair value of these indemnification obligations is minimal. Accordingly, we have not recognized any liabilities relating to these obligations as of December 31, 2017.

We have certain agreements with certain organizations with which it does business that contain indemnification provisions pursuant to which it typically agrees to indemnify the party against certain types of third-party claims. We accrue for known indemnification issues when a loss is probable and can be reasonably estimated. There were no accruals for or expenses related to indemnification issues for any period presented.

Material Changes in Financial Condition

The increase in assets as at December 31, 2017 as compared to December 31, 2016 primarily relates to increase in cash and cash equivalents following the Arrangement. The decrease in liabilities as at December 31, 2017 compared to December 31, 2016 was primarily due to lower stockholder loans with related parties and lower accrued compensation