Commitments and Contingencies

Operating Leases

The Company has entered into operating leases for certain office space and equipment, some of which contain renewal options and escalation clauses. Estimated future lease payments under all non-cancellable operating leases with terms in excess of one year, including taxes and service fees, are as follows (in thousands):



	Operating Leases
Year ending December 31:
2018 (remainder of the year)	$	1,053
2019	4,088
2020	2,998
2021	2,590
2022	2,664
Thereafter	8,423
Total minimum lease payments	$	21,816

Warranties

The Company accrues warranty costs based on historical trends for the expected material and labor costs to provide warranty services. Warranty periods are generally one to five years from the date of shipment. The following table reconciles changes in the Company’s accrued warranties and related costs for the nine months ended September 30, 2018 and 2017 (in thousands):



	Nine Months Ended September 30,
	2018			2017
Beginning balance	$	931		$	878
Charged to cost of revenue	1,022			126
Claims and settlements	(598		)	(195		)
Foreign exchange impact	6			14
Ending balance	$	1,361		$	823

Performance Bonds

In the normal course of operations, from time to time, the Company arranges for the issuance of various types of surety bonds, such as bid and performance bonds, which are agreements under which the surety company guarantees that the Company will perform in accordance with contractual or legal obligations. As of September 30, 2018, and 2017, the Company had $2.9 million and $1.0 million of surety bonds guaranteed by third parties, respectively.

Purchase Commitments

The Company has agreements with various contract manufacturers which include non-cancellable inventory purchase commitments. The Company’s inventory purchase commitments typically allow for cancellation of orders 30 days in advance of the required inventory availability date as set by the Company at time of order. The amount of non-cancellable purchase commitments outstanding, net of reserve, was $2.4 million as of September 30, 2018.

Payment Guarantees provided by Third Parties and DNI

The following table sets forth payment guarantees of the Company's indebtedness and other obligations as of September 30, 2018 (in thousands) that have been provided by third parties and DNI. DNI owns approximately 57.3% of the outstanding shares of the Company's common stock:



Guarantor	Amount Guaranteed (in thousands)		Description of Obligations Guaranteed
DNI	$	3,451	Borrowings from Shinhan Bank
DNI	1,726		Purchasing Card from Shinhan Bank
DNI	10,730		LC from Industrial Bank of Korea
DNI	2,157		Purchasing Card from Industrial Bank of Korea
DNI	6,000		LC from NongHyup Bank
DNI	6,170		Borrowings from Export-Import Bank of Korea
DNI	6,000		LC from KookMin Bank
DNI	5,392		Borrowings from Korea Development Bank
DNI	8,400		LC from Korea Development Bank
Industrial Bank of Korea	6,486		Borrowings and letter of credit
NongHyup Bank	3,497		Borrowings and letter of credit
Kookmin Bank	304		Letter of credit
Korea Development Bank	894		Letter of credit
Shinhan Bank	933		Purchasing Card
Industrial Bank of Korea	4,075		Performance bonds
State Bank of India	34		Performance bonds
Seoul Guarantee Insurance Co.	4,232		Performance payment guarantee*
	$	70,481

_{*The Company is responsible for the warranty liabilities generally for the period of}_two_{years on major product sales and has contracted surety insurance to cover part of the warranty liabilities.}

Royalties

The Company has certain royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally based on a dollar amount per unit shipped or a percentage of the underlying revenue and is recorded in cost of revenue.

Legal Proceedings

The Company is subject to various legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, the Company records an accrual for legal contingencies that it has determined to be probable to the extent the amount of the loss can be reasonably estimated. The Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on its consolidated financial position or results of operations. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the results of operations of the period in which the ruling occurs, or future periods.