5. Balance Sheet Components

Allowance for Doubtful Accounts

The following table presents a reconciliation of the allowance for doubtful accounts:


	December 31,		December 31,		December 31,
	2017		2016		2015
	(in thousands)
Beginning balance	$	1,890	$	971	$	527
Provision for estimated bad debts		143		984		529
Write offs		(33)		(65)		(85)
Ending balance	$	2,000	$	1,890	$	971

Property and Equipment, net

The Company’s property and equipment consisted of the following:


		December 31,		December 31,
	Useful Life	2017		2016
		(in thousands)
Machinery and equipment	3-5 years	$	31,825	$	27,303
Furniture and fixtures	3 years		1,216		1,087
Computer equipment	3 years		1,958		861
Capitalized software held for internal use	3 years		4,465		2,172
Leasehold improvements	Life of lease		10,691		10,444
Construction-in-process			6,497		9,759
			56,652		51,626
Less: Accumulated depreciation and amortization			(26,985)		(19,337)
Total Property and Equipment, net		$	29,667	$	32,289

All of the Company’s long-lived assets are located in the United States.

During the year ended December 31, 2017, the Company recorded asset impairment charges totaling $0.6 million in cost of product revenues in the statements of operations and comprehensive loss. This charge was recorded after certain sequencing and automation equipment were fully decommissioned in January 2017.

During the year ended December 31, 2016, the Company recorded asset impairment charges totaling $2.1 million in the statements of operations and comprehensive loss, of which $1.9 million was recorded in cost of product revenues and $0.2 million was included in general and administrative expenses, following its impairment analysis on certain sequencing and automation equipment whose service lives were determined to be significantly shorter than initially expected. These charges also included the write-off of $0.3 million unamortized maintenance service contract prepayments related to the impaired equipment described above. The Company expected to phase out the equipment in the first quarter of 2017 as the Company began its transition to the next generation of sequencing and automation equipment to help streamline its production workflows.

The Company recorded an asset impairment charge of $1.0 million against a specific group of machinery and equipment during the year ended December 31, 2015. The Company no longer uses this specific group of machinery and equipment because of outsourcing to its partners. The impairment charge was recorded to reflect reductions in the estimated realizable value of the machinery and equipment as a result of planning for its sale in the secondary market. The Company recorded the total impairment charge of $1.0 million in cost of product revenues. The Company sold some of the impaired machinery and equipment during the fourth quarter of 2015 for $0.5 million and classified the remaining impaired machinery and equipment as held for sale at the estimated realizable value of $0.2 million. The remaining impaired machinery was sold in January 2016 for $0.2 million.

Other Assets

In April 2016, the Company entered into a four-year agreement with an insurance carrier whereby in return for partial exclusivity and the right to pricing benefits the Company paid total consideration of $3.2 million. The total consideration was paid in the third quarter of 2016. As of December 31, 2017 and 2016, $1.8 million and $2.6 million in deferred costs were included in other noncurrent assets. The deferred costs are being amortized ratably over the four-year term of the agreement. During the years ended December 31, 2017 and 2016, the Company has amortized $0.8 million and $0.6 million of such costs, respectively, which was recorded as a reduction of product revenues in the statements of operations and comprehensive loss.

In August 2017, the Company entered into the 2017 Term Loan agreement with OrbiMed and issued 300,000 shares of its common stock in exchange for OrbiMed’s initial and remaining funding commitments (as described in Note 8). The Company also paid legal fees totaling $0.3 million in connection with this term loan. Total debt issuance costs of $2.7 million is accounted for as a debt discount. For financial statement presentation purposes, the Company has classified $2.0 million of the debt discount as a direct reduction from the outstanding debt balance, while $0.7 million of such remains in other noncurrent assets for the unused borrowing capacity of $25.0 million. The debt discount is being amortized on a straight-line basis over the term of the loan. For the year ended December 31, 2017, amortization of debt discount related to the unused borrowing capacity was insignificant. As of December 31, 2017, the unamortized portion of the debt discount remained at $0.6 million.

Accrued Compensation

The Company’s accrued compensation consisted of the following:


	December 31,		December 31,
	2017		2016
	(in thousands)
Accrued paid time off	$	1,806	$	1,892
Accrued commissions		3,558		3,868
Accrued bonuses		2,063		2,387
Other accrued compensation		2,172		2,920
Total accrued compensation	$	9,599	$	11,067


	December 31,		December 31,
	2017		2016
	(in thousands)
Settlement accrued for reimbursement related claims	$	10,062	$	—
Reserves for refunds to insurance carriers		6,794		7,535
Accrued charges for outsourced testing		6,566		3,261
Testing and laboratory materials from suppliers		1,367		543
Marketing and corporate affairs		1,456		202
Legal, audit and consulting fees		206		180
Accrued shipping charges		198		467
Sales tax payable		504		459
Accrued specimen service fees		683		469
Accrued rent		856		195
Clinical trials and studies		483		388
Leasehold improvement projects in progress		—		1,659
Other accrued expenses		4,032		4,521
Total other accrued liabilities	$	33,207	$	19,879

As of December 31, 2017, the Company accrued a total of $11.4 million for amounts due under a settlement agreement as further described under the Legal Proceedings section in Note 6, of which $10.1 million was the current portion of it and $1.3 million was recorded in other long-term liabilities.

During the year ended December 31, 2017, the Company reserved an additional $4.2 million for refunds to insurance carriers. Amounts totaling $4.9 million previously held in reserves from payers were released and recognized as product revenues in the statements of operations and comprehensive loss.