Balance Sheet Account Detail

(a) Property and Equipment

Property and equipment consisted of the following:



	September 30, 2014			December 31, 2013
Production equipment, molds, and office furniture	$	11,540		$	8,033
Computer hardware and software	5,061			3,290
Leasehold improvements	15,093			3,058
Construction in progress (software and related implementation, production equipment, and leasehold improvements)	2,548			2,594
Property and equipment, at cost	$	34,242		$	16,975
Accumulated depreciation	(11,179		)	(9,637		)
Property and equipment, net	$	23,063		$	7,338

Depreciation expense for property and equipment for the three months ended September 30, 2014, and 2013 was $0.6 million, and $0.5 million, respectively. For the nine months ended September 30, 2014, and 2013 depreciation expense for property and equipment was $1.6 million, and $1.6 million, respectively.

(b) Inventories

Inventories consisted of the following:



	September 30, 2014		December 31, 2013
Raw materials	$	5,572	$	3,793
Work-in-process	6,589		4,539
Finished goods	15,585		11,226
Inventories	$	27,746	$	19,558

The following table presents goodwill, indefinite lived intangible assets, finite lived intangible assets, and related accumulated amortization:



	September 30, 2014			December 31, 2013
Goodwill (1)	$	28,944		$	29,103

Intangible assets:
Indefinite lived intangibles
Trademarks and trade names	$	2,708		$	2,708

Finite lived intangibles
Developed technology (2)	$	40,100		$	40,100
Accumulated amortization	(231		)	(48		)
Developed technology, net	$	39,869		$	40,052

Patent	$	100		$	100
Accumulated amortization	(100		)	(95		)
Patent, net	$	—		$	5

License	$	100		$	100
Accumulated amortization	(63		)	(41		)
License, net	$	37		$	59

Customer relationships (1)	$	501		$	544
Accumulated amortization	(376		)	(272		)
Customer relationships, net	$	125		$	272

Intangible assets (excluding goodwill), net	$	42,739		$	43,096

(1) Difference in the value between these dates is solely due to a foreign currency translation adjustment.

(2) Was reclassified in the first quarter of 2013 from in-process research and development to finite lived intangibles, which coincided with the European commercial launch of the product (Nellix EVAS System) associated with this intangible asset. A significant portion of this intangible asset will not begin amortization until the U.S. launch of this product, currently scheduled for 2016.

Amortization expense for intangible assets for the three months ended September 30, 2014, and 2013 was $0.1 million, and $0.1 million respectively. For the nine months ended September 30, 2014, and 2013 amortization expense for intangible assets was $0.3 million, and $0.2 million, respectively.

Estimated amortization expense for the five succeeding years and thereafter (which includes amortization of intangible assets which commenced in February 2013 with the commercial launch of the Nellix System in Europe) is as follows:



	Amortization Expense
Remainder of 2014	$	110
2015	567
2016	946
2017	2,206
2018	3,682
2019	4,735
2020 & Thereafter	27,785
Total	$	40,031

(d) Marketable securities

Investments in held-to-maturity marketable securities consist of the following at September 30, 2014 and December 31, 2014:



	September 30, 2014
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value

Asset backed securities	$	5,181	$	1	$	—		$	5,182
Corporate bonds	20,425		2		(11		)	20,416
Commercial paper	48,174		6		(2		)	48,178
Total	$	73,780	$	9	$	(13	)	$	73,776


	December 31, 2013
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value

Asset backed securities	$	1,405	$	—	$	—		$	1,405
Commercial paper	29,908		3		(3		)	29,908
Total	$	31,313	$	3	$	(3	)	$	31,313

At September 30, 2014, the Company’s investments included 15 held-to-maturity debt securities in unrealized loss positions with a total unrealized loss of approximately $13 thousand and a total fair market value of approximately $73.8 million. All investments with gross unrealized losses have been in unrealized loss positions for less than 8 months. The unrealized losses were caused by interest rate fluctuations. There was no change in the credit risk of the securities. The Company does not intend to sell the securities and it is not likely that the Company will be required to sell the securities before the expected recovery of their amortized cost bases. There were no realized gains or losses on the investments for the three and nine months ended September 30, 2014.

(e) Fair Value Measurements

The following fair value hierarchy table presents information about each major category of the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013:



	Fair value measurement at reporting date using:
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
At September 30, 2014
Cash and cash equivalents	$	27,537	$	—	$	—	$	27,537
Contingently issuable common stock	—		—		14,300		14,300
At December 31, 2013
Cash and cash equivalents	$	95,152	$	—	$	—	$	95,152
Contingently issuable common stock	$	—	$	—	60,900		60,900

There were no re-measurements to fair value during the nine months ended September 30, 2014 of financial assets and liabilities that are not measured at fair value on a recurring basis. There were no transfers between Level 1, Level 2, or Level 3 securities during the nine months ended September 30, 2014.

(f) Instruments Not Recorded at Fair Value on a Recurring Basis

We measure the fair value of our Senior Notes carried at amortized cost quarterly for disclosure purposes. The estimated fair value of the Senior Notes is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar issues. Based on the market prices, the fair value of our long-term debt was $77.1 million as of September 30, 2014 and $84.9 million as of December 31, 2013.

We measure the fair value of our held-to-maturity marketable securities carried at amortized cost quarterly for disclosure purposes. The fair value of certain marketable securities is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar instruments.