NOTE 5. BALANCE SHEET COMPONENTS

Inventory

As of September 30, 2017 and December 31, 2016, our inventory consisted of the following components:



	September 30,		December 31,
(in thousands)	2017		2016
Purchased materials	$	7,042	$	4,817
Work in process		7,040		7,287
Finished goods		4,119		3,530
Inventory	$	18,201	$	15,634

Prepaid Expenses and Other Current Assets

As of September 30, 2017 and December 31, 2016, our prepaid expenses and other current assets consisted of the following components:


	September 30,		December 31,
(in thousands)	2017		2016
Receivable from Prior Landlord	$	755	$	5,000
Rent deposits for O'Brien building		—		2,160
Prepaid expenses		1,092		2,342
Other current assets		701		476
Prepaid expenses and other current assets	$	2,548	$	9,978

On July 23, 2015, we entered into a Lease Amendment Agreement (the “Lease Amendment Agreement”) with Peninsula Innovation Partners, LLC (the “Prior Landlord”), which amended the terms and conditions of certain of our then existing Menlo Park facility real property leases. As consideration for our agreement to amend the existing leases pursuant to the Lease Amendment Agreement, and subject to the terms and conditions contained therein, we became eligible to receive up to $20.0 million from the Prior Landlord over time (the “Landlord Payments”), and rent abatement for the remainder of the lease. As of December 31, 2016, $5.0 million of the Landlord Payments were outstanding.

In January 2017, we entered into a Third Lease Amendment Agreement with the Prior Landlord that increased the amount of the Landlord Payments by $65,000. During the first quarter of 2017, we received Landlord Payments totaling $2,628,000.

In May 2017, we entered into a Fourth Lease Amendment Agreement with the Prior Landlord, based on which we turned over the 940 Hamilton and 1010 Hamilton buildings to the Prior Landlord. Accordingly, in June 2017 we received $1,682,000 in Landlord Payments, resulting in a remaining balance of $755,000 in “Prepaid Expenses and Other Current Assets” in the condensed consolidated balance sheets at September 30, 2017. Refer to “Note 7. Commitments and Contingencies” for additional details.

Other Long-term Assets

As of September 30, 2017 and December 31, 2016, our other long-term assets consisted of the following components:


	September 30,		December 31,
(in thousands)	2017		2016
Rent deposits and tenant improvements for O'Brien building	$	—	$	9,641
Other		188		172
Other long-term assets	$	188	$	9,813

In January 2017 we moved into the O’Brien building, and accordingly, the $9.6 million tenant improvements balance recorded in “Other Long-term Assets” at December 31, 2016 was transferred into leasehold improvements under “Property and Equipment” in the three-month period ended March 31, 2017.

Property and Equipment, Net

As of September 30, 2017 and December 31, 2016, our property and equipment, net, consisted of the following components:


	September 30,		December 31,
(in thousands)	2017		2016
Building	$	—	$	1,160
Laboratory equipment and machinery		24,296		23,337
Leasehold improvements		31,194		8,138
Computer equipment		9,050		7,170
Software		4,615		5,189
Furniture and fixtures		2,429		823
Construction in progress		1,073		5,772
		72,657		51,589
Less: Accumulated depreciation		(33,052)		(37,029)
Property and equipment, net	$	39,605	$	14,560

In May 2017, we entered into a Fourth Lease Amendment Agreement with the Prior Landlord, based on which we turned over the 940 Hamilton and 1010 Hamilton buildings to the Prior Landlord. The 940 Hamilton building was a capital lease with a long-term facility financing obligation associated with this lease included in “Other liabilities, non-current” and the corresponding building and related leasehold improvements were included in “Property and equipment, net” in the condensed consolidated balance sheets. Upon turning over the building to the Prior Landlord, the capital lease was terminated, resulting in the extinguishment of the facility financing obligation.

By the end of the first quarter of 2017, improvements associated with our O’Brien premises were substantially completed. As a result, during the first quarter of 2017 we capitalized $28.9 million of tenant improvements. As the premises were completed in phases during the first nine months of 2017, tenant improvements were placed into service in phases once construction was substantially complete and the related asset was ready for its intended use. Refer to “Note 7. Commitments and Contingencies” for additional details.