Note 3—Supplemental Financial Information

Inventories

Inventories consisted of the following as of the dates presented:


	July 1,		December 31,
	2017		2016
	(in thousands)
Raw materials	$	1,242	$	884
Work in process		62		47
Finished goods		3,604		2,229
	$	4,908	$	3,160

Warranty Liabilities

The following table summarizes activity related to warranty liabilities in the periods presented:


	Six Months Ended
	July 1,		July 2,
	2017		2016
	(in thousands)
Beginning balance	$	100	$	122
Estimated cost of warranty claims charged to cost of sales		14		22
Cost of actual warranty claims		(1)		(86)
Ending balance		113		58
Less current portion		(68)		(35)
Long-term warranty liability	$	45	$	23

The allowance for warranty liabilities expected to be incurred within one year is included as a component of accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets. The allowance for warranty liability expected to be incurred after one year is classified as long-term warranty liability in the accompanying condensed consolidated balance sheets.

Computation of Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share, including the numerator and denominator used in the calculation of basic and diluted net loss per share, for the periods presented:


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2017		2016		2017		2016
	(in thousands, except per share data)
Basic and diluted net loss per share:
Numerator: Net loss	$	(3,847)	$	(1,494)	$	(7,189)	$	(2,907)
Denominator: Weighted-average common shares outstanding, basic and diluted		61,844		51,080		61,763		50,723
Basic and diluted net loss per share	$	(0.06)	$	(0.03)	$	(0.12)	$	(0.06)

The table below sets forth potentially dilutive common share equivalents, consisting of shares issuable upon the exercise or vesting of outstanding stock options and restricted stock awards, respectively, and the exercise of warrants, computed using the treasury stock method, and shares issuable upon conversion of the SVIC Note (see Note 5) using the “if converted” method. These potential common shares have been excluded from the diluted net loss per share calculations above as their effect would be anti-dilutive for the periods presented:


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2017		2016		2017		2016
	(in thousands)				(in thousands)
Common share equivalents		13,006		12,976		13,155		12,892

The above common share equivalents would have been included in the calculation of diluted net loss per share had the Company reported net income for the periods presented.

Major Customers and Products

The Company’s product revenues have historically been concentrated in a small number of customers. The following table sets forth the percentage of the Company’s net product revenues made to customers that each comprise 10% or more of the Company’s net product revenues in the periods presented:


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2017		2016		2017		2016
Customer:
Customer A	*	%	*	%	*	%	12	%
Customer B	*	%	47	%	*	%	35	%
Customer C	*	%	*	%	11	%	*	%
Customer D	16	%	*	%	*	%	*	%
Customer E	*	%	11	%	*	%	*	%

*less than 10% of net product revenues during the period.

The Company’s accounts receivable are concentrated with one customer at July 1, 2017, representing 33% of aggregate gross receivables. At December 31, 2016, two customers represented 27% and 11% of aggregate gross receivables, respectively. The loss of any of the Company’s significant customers or a reduction in sales to or difficulties collecting payments from any of these customers could significantly reduce the Company’s net product revenues and adversely affect its operating results. The Company tries to mitigate risks associated with foreign receivables by purchasing comprehensive foreign credit insurance.

The Company resells certain Samsung products that it purchases under the terms of the JDLA with Samsung to certain end-customers that are not reached in Samsung’s distribution model, including storage customers, appliance customers, system builders and cloud and datacenter customers. In the three and six months ended July 1, 2017 and July 2, 2016, resales of these products represented approximately 91%, 91%, 34% and 21%, respectively, of the Company’s net product revenues.

Cash Flow Information

The following table sets forth supplemental disclosures of cash flow information and non-cash financing activities for the periods presented:


	Six Months Ended
	July 1,		July 2,
	2017		2016
	(in thousands)
Supplemental disclosure of non-cash financing activities:
Debt financing of insurance	$	220	$	224
Acquisition of equipment through capital lease	$	-	$	179
Issuance of shares for cashless warrant exercise	$	-	$	1