NOTE

11–

COMMITMENTS AND CONTINGENCIES

LEASES

The Company is a party to certain operating and finance leases for vehicles, office space and storages facilities. The Company’s material operating leases consist of office space, as well as storage facilities and finance leases are made up automobiles. The Company’s leases generally have remaining terms of

years, some of which include options to renew the leases for up to

years. The Company leases space for operations in the United States, Japan, Belgium, France and Spain. In addition to the above facility leases, the Company also routinely leases automobiles for certain sales and field service employees under finance leases.

The Company determines if a contract contains a lease at inception. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments

not

yet paid. Operating lease assets represent the right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments

not

yet paid, the Company estimates the incremental secured borrowing rates corresponding to the maturities of the leases. The Company based the rate estimates on prevailing financial market conditions, credit analysis, and management judgment.

The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the Company’s right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term.

Below is supplemental balance sheet information related to leases (in thousands):

Assets	Classification	Dece mber 3 1 , 2019
Right-of-use assets	Operating lease right-of-use assets	$	7,702
Finance lease	Property and equipment, net *		1,008
Total leased assets		$	8,710

*Finance lease assets included in Property and equipment, net.

Liabilities	Classification	December 3 1 , 2019
Operating lease liabilities
Operating lease liabilities, current	Operating lease liabilities	$	2,800
Operating lease liabilities , non-current	Operating lease liabilities, net of current portion		5,112
Total operating lease liabilities		$	7,912

Finance lease liabilities
Finance lease liabilities, current	Accrued liabilities	$	541
Finance lease liabilities, non-current	Other long-term liabilities		578
Total finance lease liabilities		$	1,119

Lease costs during the

twelve

months ended

December

2019:

Finance lease cost	Amortization expense	$	704
Finance lease cost	Interest for finance lease		88
Operating lease cost	Operating lease expense		2,892

Cash paid for amounts included in the measurement of lease liabilities during the

twelve

months ended

December 31

2019

were as follows:

Operating cash flow	Finance lease	$	88
Financing cash flow	Finance lease		649
Operating cash flow	Operating lease		2,820

Maturities of lease liabilities

Maturities of lease liabilities were as follows as of

December 31,

2019

(in thousands):

	Operating leases
2020	$	2,868
2021		2,613
2022		2,821
2023		326
2024		26
Total lease payments		8,654
Less: imputed interest		742
Present value of lease liabilities	$	7,912

Vehicle Leases

As of

December 31, 2019,

the Company was committed to minimum lease payments for vehicles leased under long-term non-cancelable finance leases as follows (in thousands):

	Operating leases
2020	$	543
2021		412
2022		253
2023		4
Total lease payments		1,212
Less: imputed interest		93
Present value of lease liabilities	$	1,119

As previously disclosed in the Company’s

2018

Annual Report on Form

-K and under the previous lease accounting, maturities of lease liabilities were as follows as of

December 31, 2018:

Facility Leases

As of

December 31, 2018,

the Company was committed to minimum lease payments for facilities and other leased assets under long-term non-cancelable operating leases as follows (in thousands):

	Operating leases
2019	$	3,011
2020		2,939
2021		2,564
2022		2,495
2023 and thereafter		214
Future minimum rental payments	$	11,223

Vehicle Leases –

U.S.

As of

December 31, 2018,

the Company was committed to minimum lease payments for vehicles leased under long-term non-cancelable capital leases as follows (in thousands):

	Operating leases
2019	$	576
2020		287
2021		152
Future minimum lease payments	$	1,015

Weighted-average remaining lease term and discount rate, as of

December 31, 2019,

were as follows:

Lease Term and Discount Rate
Weighted-average remaining lease term (years)
Operating leases	3.0
Finance leases	2.5
Weighted-average discount rate
Operating leases	4.4	%
Finance leases	5.6	%

Purchase Commitments

The Company maintains certain open inventory purchase commitments with its suppliers to ensure a smooth and continuous supply for key components. The Company’s liability in these purchase commitments is generally restricted to an agreed-upon period. These periods can vary among different suppliers. Although open purchase orders are considered enforceable and legally binding, the terms generally allow the Company the option to cancel, reschedule, and adjust their requirements based on the Company's business needs prior to the delivery of goods or performance of services.

Indemnifications

In the normal course of the Company’s business, the Company enters into agreements that contain a variety of representations, warranties, and indemnification obligations. For example, the Company has entered into indemnification agreements with each of its directors and executive officers and certain key employees. The Company’s exposure under its various indemnification obligations is unknown and

not

reasonably estimable as they involve future claims that

may

be made against the Company. As such, the Company has

not

accrued any amounts for such obligations.

Contingencies

The Company is named from time to time as a party to other legal proceedings, product liability, commercial disputes, employee disputes, and contractual lawsuits in the ordinary course of the Company’s business. These matters are subject to many uncertainties and outcomes that are

not

predictable and that

may

not

be known for extended periods of time. A liability and related charge are recorded to earnings in the Company’s consolidated financial statements for legal contingencies when the loss is considered probable and the amount can be reasonably estimated. The assessment is re-evaluated each accounting period and is based on all available information, including discussion with outside legal counsel. If a reasonable estimate of a known or probable loss cannot be made, but a range of probable losses can be estimated, the low-end of the range of losses is recognized if

amount within the range is a better estimate than any other. If a material loss is reasonably possible, but

not

probable and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. The Company expenses legal fees as incurred.

November 2019,

the Company’s former Executive Vice President and CFO Sandra A. Gardiner announced her resignation from the Company. On

November 7, 2019,

Ms. Gardiner filed an arbitration demand against the Company in connection with the terms of her employment and resignation. The Company intends to defend the matter vigorously. At this time, the Company has

not

determined that an award to Ms. Gardiner is probable and does

not

expect any settlement to be material.

As of

December 31, 2019

and

December 31, 2018,

the Company had accrued

Nil

and

$171,000,

respectively related to various pending commercial and product liability lawsuits. The Company does

not

believe that a material loss in excess of accrued amounts is reasonably possible.