BALANCE SHEET COMPONENTS

Marketable Securities

As of September 30, 2012 and December 31, 2011, our short- and long-term marketable securities balances were zero.

During the nine months ended September 30, 2011, we sold the remaining portion of our long-term equity investment. We determined the cost of the securities sold using specific identification. Net unrealized holding gains of $255 on available-for-sale securities were reclassified out of accumulated other comprehensive income (loss) for the nine months ended September 30, 2011. Unrealized holding gains and losses are recorded in accumulated other comprehensive income (loss), a component of shareholders' equity, in the condensed consolidated balance sheets.

Accounts Receivable, Net

Accounts receivable are recorded at invoiced amount and do not bear interest when recorded or accrue interest when past due. Accounts receivable are stated net of an allowance for doubtful accounts, which is maintained for estimated losses that may result from the inability of our customers to make required payments.

Accounts receivable consists of the following:



	September 30, 2012			December 31, 2011
Accounts receivable, gross	$	4,124		$	4,918
Less: allowance for doubtful accounts	(368		)	(361		)
Accounts receivable, net	$	3,756		$	4,557

The following is the change in our allowance for doubtful accounts:



	Nine Months Ended
	September 30,
	2012		2011
Balance at beginning of period	$	361	$	399
Additions charged (reductions credited)	7		(6		)
Balance at end of period	$	368	$	393

Inventories

Inventories consist of finished goods and work-in-process, and are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market (net realizable value).

Inventories consist of the following:



	September 30, 2012		December 31, 2011
Finished goods	$	1,702	$	1,203
Work-in-process	3,027		2,904
Total	$	4,729	$	4,107

Property and Equipment, Net

Property and equipment consists of the following:



	September 30, 2012			December 31, 2011
Gross carrying amount	$	23,008		$	21,661
Less: accumulated depreciation and amortization	(15,989		)	(14,295		)
Property and equipment, net	$	7,019		$	7,366

Accrued Liabilities and Current Portion of Long-Term Liabilities

Accrued liabilities and current portion of long-term liabilities consist of the following:



	September 30, 2012		December 31, 2011
Accrued payroll and related liabilities	$	2,777	$	2,638
Current portion of accrued liabilities for asset financings	1,898		1,753
Accrued commissions and royalties	1,630		1,407
Accrued interest payable	725		520
Reserve for warranty returns	505		439
Other	1,648		1,490
Total	$	9,183	$	8,247

The following is the change in our reserve for warranty returns:



	Nine Months Ended
	September 30,
	2012			2011
Reserve for warranty returns:
Balance at beginning of period	$	439		$	723
Provision (benefit)	485			(139		)
Charge-offs	(419		)	(194		)
Balance at end of period	$	505		$	390

Short-Term Line of Credit

On December 21, 2010, we entered into a Loan and Security Agreement (the “Revolving Loan Agreement”) with Silicon Valley Bank (the “Bank”). The Revolving Loan Agreement provides for a secured working capital-based revolving line of credit (the “Revolving Line”) in an aggregate amount of up to the lesser of (i) $10,000, or (ii) 80% of eligible domestic accounts receivable and certain foreign accounts receivable. In addition, the Revolving Loan Agreement provides for non-formula advances of up to $10,000 which may be made solely during the last five business days of any fiscal month or quarter and which must be repaid by the Company on or before the fifth business day after the applicable fiscal month or quarter end. Due to their repayment terms, non-formula advances do not provide the Company with usable liquidity.

The Revolving Loan Agreement contains customary affirmative and negative covenants as well as customary events of default. The occurrence of an event of default could result in the acceleration of the Company’s obligations under the Revolving Loan Agreement and an increase to the applicable interest rate, and would permit the Bank to exercise remedies with respect to its security interest. As of September 30, 2012 we were in compliance with all of the terms of the Revolving Loan Agreement.

As of September 30, 2012 and December 31, 2011, we had no outstanding borrowings under the Revolving Line.