Balance Sheet Components

9 Months Ended

Sep. 30, 2020

Inventories


(in thousands)	September 30, 2020		December 31, 2019
Raw materials	$	620	$	831
Finished goods	9,831		3,745
Total inventories	$	10,451	$	4,576

Property and equipment, net


(in thousands)	September 30, 2020		December 31, 2019
Computer equipment and software	$	15,087	$	13,596
Furniture, fixtures and equipment	2,569		2,430
Leasehold improvements	5,295		5,283
Manufacturing tools and equipment	2,460		2,435
Construction in process	617		582
Property and equipment, at cost	26,028		24,326
Less: Accumulated depreciation	(17,958)		(15,665)
Property and equipment, net	$	8,070	$	8,661

Depreciation and amortization expense for property and equipment was $1.1 million and $0.9 million for the three months ended September 30, 2020 and 2019, respectively. Depreciation and amortization expense for property and equipment was $3.3 million and $2.7 million for the nine months ended September 30, 2020 and 2019, respectively.

Net investment in sales-type leases

The Company has sales-type leases with terms of 3 to 4 years. Sales-type lease receivables are collateralized by the underlying equipment. The components of the Company’s net investment in sales-type leases are as follows:


(in thousands)	September 30, 2020		December 31, 2019
Minimum payments to be received on sales-type leases	$	1,518	$	2,078
Less: Unearned interest income and executory revenue portion	(779)		(1,190)
Net investment in sales-type leases	739		888
Less: Current portion	(392)		(452)
Non-current net investment in sales-type leases	$	347	$	436

Sales-type lease activity recognized in the condensed consolidated statement of operations are as follows:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2020		2019		2020		2019
Lease revenue	$	1,140	$	2,228	$	2,693	$	5,592
Less: Cost of lease shipments	(211)		(676)		(386)		(1,533)
Gross profit	$	929	$	1,552	$	2,307	$	4,059

Interest expense, net on lease receivable	$	(5)	$	(5)	$	(17)	$	(5)
Initial direct cost incurred	$	63	$	89	$	146	$	229

There were no allowances for doubtful accounts on these leases as of September 30, 2020 and December 31, 2019. There is no guaranteed or unguaranteed residual value on the leased equipment. The current and non-current net investments in sales-type leases are reported as components of the condensed consolidated balance sheet captions “other receivables” and “other long-term assets,” respectively.

The minimum payments expected to be received for future years under sales-type leases as of September 30, 2020 were as follows:


(in thousands)	Future lease payments
2020 (remaining three months)	$	199
2021	705
2022	476
2023	138


Total	$	1,518

Accrued payroll and other current liabilities


(in thousands)	September 30, 2020		December 31, 2019
Payroll and related expenses	$	7,835	$	6,053
Accrued payables	2,359		2,674
Operating lease liabilities, current portion	2,433		2,323
Lease financing, current portion	901		1,033
Product warranty	406		420
Customer prepayments	1,000		631
Sales and use tax payable	435		599
Other	1,843		1,024
Total accrued payroll and other current liabilities	$	17,212	$	14,757

The changes in the Company’s product warranty reserve are as follows:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2020		2019		2020		2019
Warranty balance at the beginning of the period	$	521	$	355	$	420	$	376
Warranty expense accrued for shipments during the period	98		138		320		307
Changes in estimate related to pre-existing warranties	(161)		(45)		(151)		(131)
Warranty settlements made	(52)		(47)		(183)		(151)
Total product warranty	$	406	$	401	$	406	$	401

Leases

The Company has operating leases for office space at its headquarters and subsidiaries under non-cancelable operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these leases is recognized on a straight-line basis over the lease term. The Company’s leases have remaining lease terms of approximately four months to approximately five years. Operating lease cost, including short-term operating leases was $0.8 million and $0.6 million for the three months ended September 30, 2020 and 2019, respectively and $2.2 million and $1.7 million for the nine months ended September 30, 2020 and 2019, respectively.

Supplemental balance sheet information related to leases was as follows:


(in thousands)	September 30, 2020
Other long-term assets	$	4,716

Accrued payroll and other current liabilities	2,433
Other long-term liabilities	2,922
Total operating lease liabilities	$	5,355

Other information related to leases was as follows:


	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2020			2019			2020			2019
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities	$	740		$	645		$	2,184		1,909
Right-of-use assets obtained in exchange for lease obligations	$	17		$	—		$	139		1,018
Weighted average remaining lease term	2.26 years			2.62 years			2.26 years			2.62 years
Weighted average discount rate	8		%	8		%	8		%	8	%

Maturities of lease liabilities as of September 30, 2020 are as follows:


(in thousands)	Operating leases
2020 (remaining three months)	$	693
2021	3,021
2022	1,376
2023	443
2024	319


Total maturities of lease liabilities	5,852
Less imputed interest	(497)
Total	$	5,355