Kodiak Sciences Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 118 The 2018 convertible notes would automatically convert into shares of the Company’s common stock at a price equal to (1) 80% of the initial price to public in a qualified initial public offering if such offering was completed prior to February 2, 2019 and (2) 75% of the initial price to public in a qualified initial public offering if such offering was completed on or after February 2, 2019. A qualified initial public offering for the purposes of the 2018 convertible notes was one in which the Company generated aggregate gross proceeds of at least $75.0 million or all of the 2018 convertible notes converted into shares of the Company’s common stock. The Company issued 4,295,677 shares of common stock to the holders of the 2018 convertible notes at the closing of the Company’s IPO on October 9, 2018. The Company accounted for the conversion of the 2018 convertible notes into shares of common stock as a debt extinguishment and recorded $5.5 million loss on such extinguishment in its consolidated statements of operations for the year ended December 31, 2018. The Company recorded the carrying value of the debt including principal and accrued interest of $34.4 million, net of the unamortized debt discount of $5.5 million, into its capital accounts on the consolidated balance sheet on the date of conversion upon the closing of the IPO. 7. Commitments and Contingencies Leases In January 2013, the Company executed a non-cancellable lease agreement for office and laboratory space in Palo Alto, California. The lease began in October 2013 and would expire in October 2018. In March 2016, the Company executed a lease amendment agreement which was effective March 2016 and extended the lease term until October 2023. The Company recognizes rent expense on a straight-line basis over the lease period. Rent expense was $0.6 million and $0.6 million and $0.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. The following table summarizes the Company’s future minimum commitments under non-cancelable contracts (in thousands): As of December 31, Operating Lease 2019 ................................................................................................................................................... $ 564 2020 ................................................................................................................................................... 581 2021 ................................................................................................................................................... 598 2022 ................................................................................................................................................... 616 2023 ................................................................................................................................................... 526 Total payments............................................................................................................................. $ 2,885 Corporate Housing In November 2018, the Company entered into an agreement with our CEO to lease his personal property, located 0.5 miles from Kodiak’s Palo Alto facility, to the Company at fair market value to provide flexible corporate housing for relocating employees. Total expected lease payments under the agreement are $0.1 million. Other Commitments and Contingencies The Company has entered into service agreements with Lonza AG and its affiliates (“Lonza”), pursuant to which Lonza agreed to perform activities in connection with the manufacturing process of certain compounds. Such agreements, and related amendments, state that planned activities that are included in the signed work orders are, in some cases, binding and, hence, obligate the Company to pay the full price of the work order upon satisfactory delivery of products and services. Per the terms of the agreements, the Company has the option to cancel signed orders at any time upon written notice, which may or may not be subject to payment of a cancellation fee. The level of cancellation fees may be dependent on the timing of the written notice in relation to the commencement date of the work, with the maximum cancellation fee equal to the full price of the work order. As of December 31, 2018 and 2017, the total amount of unconditional purchase obligations, including accrued amounts, under these agreements was $3.2 million and $10.9 million, respectively. Purchases under this agreement for the years ended December 31, 2018, 2017 and 2016 were $2.8 million, $13.9 million and $6.1 million, respectively. As of December 31, 2018, the Company had not incurred any cancellation fees for the work performed by Lonza. The Company is also party to a cancellable assignment and license agreement that would require the Company to make milestone payments of up to $33.2 million and royalty payments on net sales of products utilizing KSI-201 and related technology. Such milestones and royalties are dependent on future activity or product sales and are not estimable.