NOTE

—BALANCE SHEET DETAIL

Inventories

Inventories consist of the following (in thousands):

	December 31,
	201 8		201 7
Raw materials	$	16,991	$	19,160
Work in process		2,306		2,744
Finished goods		8,717		6,878
Total	$	28,014	$	28,782

Property and Equipment, net

Property and equipment, net, consists of the following (in thousands):

	December 31,
	201 8		201 7
Leasehold improvements	$	660	$	640
Office equipment and furniture		2,835		2,370
Machinery and equipment		7,304		6,277
		10,799		9,287
Less: Accumulated depreciation		(8,127)		(7,191)
Property and equipment, net	$	2,672	$	2,096

Included in machinery and equipment are financed vehicles used by the Company’s North American sales employees. As of

December 31, 2018

and

2017,

the gross capitalized value of the leased vehicles was

$1.9

million and

$1.6

million and the related accumulated depreciation was

$1.1

million and

$0.7

million, respectively. Included in Property and equipment is construction in progress of

$0.4

million that is yet to be depreciated.

Goodwill and Other

Intangible Assets

Goodwill and other intangible assets comprise a patent sublicense acquired from Palomar in

2006,

intangible assets and goodwill related to the acquisition of Iridex’s aesthetic business unit, and, customer relationships in the Benelux countries acquired from a former distributor in

2013.

The components of intangible assets at

December 31, 2018

and

2017

were as follows (in thousands):

	Gross Carrying Amount		Accumulated Amortization & Impairment Amount		Net Amount
December 31, 201 8
Patent sublicense	$	1,218	$	1,218	$	—
Customer relationship intangible related to acquisition		2,510		2,510		—
Other identified intangible assets related to acquisition		780		780		—
Other intangible		155		155		—
Goodwill		1,339		—		1,339
Total	$	6,002	$	4,663	$	1,339
December 31, 201 7
Patent sublicense	$	1,218	$	1,218	$	—
Customer relationship intangible related to acquisition		2,510		2,510		—
Other identified intangible assets related to acquisition		780		780		—
Other intangible		155		155		—
Goodwill		1,339		—		1,339
Total	$	6,002	$	4,663	$	1,339

The Company did

not

incur any amortization expense for intangible assets in

2018.

Amortization expense in the

2017

and

2016

fiscal years for intangible assets was

$2,000

and

$141,000,

respectively. Intangible assets were fully amortized and there were

additions as of

December 31, 2018.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	December 31,
	201 8		201 7
Accrued payroll and related expenses	$	9,377	$	12,567
Sales and marketing accruals		2,379		3,710
Accrued sales tax		2,935		2,920
Warranty liability		4,666		3,508
Other accrued liabilities		3,943		4,143
Total	$	23,300	$	26,848

Product Remediation Liability

During the

fourth

quarter of

2018,

the Company recognized a liability for a product remediation plan related to of

one

of its legacy systems. This was related to a voluntary action initiated by the Company to replace a component in

one

of the Company’s legacy products. The developed remediation plan consists primarily of replacement of a component in the system. The accrued liability consisted of cost of materials and labor costs to replace the component in all units that are under the Company's standard warranty or are covered under the existing extended warranty contracts. . The Company recorded approximately

$5.0

million related to this remediation, of which

$1.1

million was utilized in the

fourth

quarter. Approximately

$0.8

million out of the

$5.0

million is included in accrued liabilities and

$3.2

million is separately recorded as extended warranties.