Commitments and Contingencies

Lease Commitments

The Company leases office space under non-cancelable operating leases. Certain of the Company’s operating leases contain renewal options and rent acceleration clauses. Future minimum payments under the non-cancelable operating leases consisted of the following as of June 29, 2019 (in thousands):



Period	Minimum Future Lease Payments
Remainder of 2019	$	1,687
2020	3,661
2021	3,447
2022	3,298
2023	3,362
Thereafter	6,100
Total future minimum lease payments	21,555
Less imputed interest	(4,129		)
	$	17,426

Operating lease liability consisted of the following (in thousands):



	June 29, 2019
Accrued liabilities - current portion of operating leases	$	2,381
Operating leases	15,045
	$	17,426

The Company leases its headquarters office space in San Jose, California under a lease agreement that expires in December 2025. The future minimum lease payments under the lease are $15.1 million and are included in the table above. The above table also includes future minimum lease payments for the Company's other office facilities, which expire at various dates through 2025.

In August 2018, the Company entered into a new office lease agreement for 22,000 square feet in Petaluma, California. The lease commenced in February 2019 for a term of 64 months. The future minimum lease payments of $2.7 million are included in the table above. The Company recorded a right-of-use operating lease asset and operating lease liability of $2.2 million in the first quarter of 2019. The Company’s previous lease in Petaluma, California expired in March 2019.

In July 2019, the Company entered into a new office lease agreement for 9,000 square feet in Plymouth, Minnesota. The lease will commence in December 2019 for a term of 64 months. The aggregate lease commitment is $0.8 million and is not included in the table above.

The weighted average discount rate for the Company's operating leases as of June 29, 2019 was 7.0%. The weighted average remaining lease term as of June 29, 2019 was 5.5 years.

For the three and six months ended June 29, 2019, total rent expense of the Company was $1.3 million and $2.5 million, respectively. For the three and six months ended June 30, 2018, total rent expense of the Company was $0.7 million and $1.5 million, respectively. Cash paid within operating cash flows for operating leases was $1.2 million and $2.0 million for three and six months ended June 29, 2019, respectively.

Purchase Commitments

The Company’s contract manufacturers (“CMs”) and original design manufacturers (“ODMs”) place orders for certain component inventory in advance based upon the Company’s build forecasts in order to reduce manufacturing lead times and ensure adequate component supply. The components are used by the CMs and ODMs to build the products included in the build forecasts. The Company generally does not take ownership of the components held by CMs and ODMs. The Company places purchase orders with its CMs and ODMs in order to fulfill its monthly finished product inventory requirements. The Company incurs a liability when the CMs and ODMs convert the component inventory to a finished product and takes ownership of the inventory when transferred to the designated shipping warehouse. In the event of termination of services with a manufacturing partner, the Company has purchased, and may be required to purchase in the future, certain of the remaining components inventory held by the CM or ODM as well as any outstanding orders pursuant to the contractual provisions with such CM or ODM. As of June 29, 2019, the Company had approximately $51.7 million of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within one year.

The Company has from time to time, and subject to certain conditions, reimbursed its suppliers for component inventory purchases when this inventory has been rendered excess or obsolete, for example due to manufacturing and engineering change orders resulting from design changes, manufacturing discontinuation of parts by its suppliers, or in cases where inventory levels greatly exceed projected demand. The estimated excess and obsolete inventory liabilities related to such manufacturing and engineering change orders and other factors, which are included in accrued liabilities in the accompanying balance sheets, were $0.7 million and $2.7 million as of June 29, 2019 and December 31, 2018, respectively. The Company records the related charges in cost of systems revenue in its Condensed Consolidated Statements of Comprehensive Loss.

In March 2018, the Company entered into an agreement with a vendor for engineering services pursuant to which the Company will be obligated to make future minimum payments of $15.8 million through 2022. Payments are expected to begin in 2020.

Litigation

From time to time, the Company is involved in various legal proceedings arising from the normal course of business activities.

The Company is not currently a party to any legal proceedings that, if determined adversely to the Company, in management’s opinion, are currently expected to individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition taken as a whole.