Balance Sheet Components

Investments

The Company's short-term and long-term investments as of June 30, 2016 are as follows (in thousands):



Short-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Agency securities	$	750	$	—	$	—	$	750
U.S. Treasury	—		—		—		—
Corporate bonds	3,747		—		—		3,747
Commercial paper	—		—		—		—
Certificates of deposit	—		—		—		—
Total	$	4,497	$	—	$	—	$	4,497

Long-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Agency securities	$	—	$	—	$	—	$	—
Corporate bonds	263		—		—		263
Certificates of deposit	245		—		—		245
Total	$	508	$	—	$	—	$	508

The Company's short-term and long-term investments as of December 31, 2015 are as follows (in thousands):



Short-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	1,551	$	—	$	(2	)	$	1,549
U.S. Treasury	500		—		—			500
Corporate bonds	7,776		—		(13		)	7,763
Commercial paper	500		—		—			500
Certificates of deposit	2,555		—		—			2,555
Total	$	12,882	$	—	$	(15	)	$	12,867

Long-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	499	$	—	$	(2	)	$	497
U.S. Treasury	—		—		—			—
Corporate bonds	878		—		(4		)	874
Certificates of deposit	2,119		—		—			2,119
Total	$	3,496	$	—	$	(6	)	$	3,490

For each of the three and six months ended June 30, 2016 and 2015, gains or losses realized on the sale of investments were insignificant.

The contractual maturities of the Company's short-term and long-term investments as of June 30, 2016, are as follows (in thousands):



	June 30, 2016
	Amortized Cost		Fair Value
Due in one year or less	$	4,497	$	4,497
Due in one year to five years	508		508
	$	5,005	$	5,005

When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below the amortized cost basis, review of current market liquidity, interest rate risk, the financial condition of the issuer, as well as credit rating downgrades. The Company believes that the unrealized losses are not other-than-temporary. The Company does not have a foreseeable need to liquidate the portfolio and anticipates recovering the full cost of the securities either as market conditions improve, or as the securities mature.

Inventory

Inventory is stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market. Inventory that is obsolete or in excess of forecasted usage is written down to its estimated net realizable value based on assumptions about future demand, new production introductions and market conditions.

The components of inventory consist of the following (in thousands):



	June 30, 2016		December 31, 2015
Raw materials	$	8,091	$	9,117
Finished goods	20,012		18,978
Total inventory	$	28,103	$	28,095

Property and equipment, net

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



	June 30, 2016			December 31, 2015
Lab equipment, tooling and molds	$	3,943		$	3,228
Computer software	2,503			2,019
Computer equipment	2,543			2,757
Leasehold improvements	1,929			1,670
Furniture and fixtures	1,134			950
Vehicles	35			35
Construction in progress	1,950			1,945
Total property and equipment	14,037			12,604
Less: Accumulated depreciation and amortization	(6,307		)	(5,635		)
Property and equipment, net	$	7,730		$	6,969

The table above includes property and equipment acquired under capital leases which totaled $0.4 million as of both June 30, 2016 and December 31, 2015.

Depreciation and amortization expense related to property and equipment was $0.6 million and $1.2 million for the three and six months ended June 30, 2016, respectively. Depreciation and amortization expense related to property and equipment was $0.4 million and $0.7 million for the three and six months ended June 30, 2015, respectively.

Accrued and Other Current Liabilities

The following table shows the components of accrued liabilities (in thousands):



	June 30, 2016		December 31, 2015
Accrued payroll and employee related expenses	$	13,408	$	14,887
Accrued marketing expenses	4,995		5,554
Accrued royalty	6,786		5,453
Sales and other taxes payable	3,853		3,703
Advance payments from customers	1,879		1,585
Accrued warranty	1,428		527
Accrued legal expenses	2,987		1,465
Other	2,293		1,517
Total accrued and other current liabilities	$	37,629	$	34,691

Deferred Revenue

The following table shows the components of deferred revenue, including long-term deferred revenue (in thousands):



	June 30, 2016			December 31, 2015
Deferred extended warranty revenue	$	3,072		$	2,902
Deferred training revenue	3,793			3,115
Deferred product revenue	13,316		*	1,891
Total deferred revenue	$	20,181		$	7,908

* A portion of the total balance consists of undelivered CoolAdvantage applicators that total $8.2 million as of June 30, 2016 and other deferrals that have not met the Company's revenue recognition policy.

Deferred Extended Warranty Revenue

The Company offers standard extended warranties which allows customers to receive service and support which extend beyond the contractual term of the product warranty. The Company recognizes these contracts over the life of the service period. Changes in the Company's deferred revenue, including long-term deferred revenue, related to extended warranties were as follows (in thousands):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Balance at the beginning of the period	$	2,901		$	3,215		$	2,902		$	3,272
Extended warranties issued	1,215			1,073			2,219			1,806
Amortization	(1,044		)	(903		)	(2,049		)	(1,693		)
Balance at the end of the period	$	3,072		$	3,385		$	3,072		$	3,385

Product Warranties

The Company provides a standard limited warranty on its products of generally one year for both control units and applicators for its direct customers. For indirect customers in international markets, the Company provides a standard limited warranty on its products of generally 3.2 years for control units and 1.2 years for applicators.

The Company accrues for the estimated future costs of repair or replacement upon shipment. The warranty accrual is recorded to cost of revenue and is based upon historical trends in the volume of product failures during the warranty period and the cost to repair or replace the equipment. The Company bases product warranty costs on related freight, material, technical support labor and overhead costs. The estimated product warranty costs are assessed by considering historical costs and applying the experienced failure rates to the outstanding warranty period for products sold. The Company exercises judgment in estimating the expected product warranty costs, using data such as the actual product failure rates, and average repair costs, including freight, material, technical support labor, and overhead costs, for products returned under warranty.

Changes in the Company's product warranty accrual was as follows (in thousands):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Balance at the beginning of the period	$	1,052		$	440		$	527		$	569
Settlements of warranties	(248		)	33			(473		)	(67		)
Provision	624			(134		)	1,374			(163		)
Balance at the end of the period	$	1,428		$	339		$	1,428		$	339