7. Maintenance and Warranty

 

Sales of devices generally include an initial warranty for parts and services for one year in the U.S. and two years in Europe, the Middle East and Africa. During the quarter ended March 31, 2016, the Company determined it had sufficient historical experience of warranty costs to estimate future costs for devices sold. As a result, and beginning during the quarter ended March 31, 2016, a liability for the estimated cost of product warranty is established at the time revenue is recognized based on the historical experience of known product failure rates and expected material and labor costs to provide warranty services. From time to time, specific additional warranty accruals may be made if unforeseen technical problems arise. Alternatively, if estimates are determined to be greater than the actual amounts necessary, a portion of the liability may be reversed in future periods. Warranty costs are reflected in the condensed consolidated statement of operations as a component of costs of revenue.

 

In addition, for the quarter ended March 31, 2016, the Company recorded a one-time charge of $911 for a preventative maintenance and improvement program for devices sold prior to 2016 to bring the devices to second generation GT-level of functionality.

 

A reconciliation of the changes in the maintenance and warranty liabilities for the periods ended March 31, 2016 and 2015 are as follows:

 

		2016
		Maintenance			Warranty			Total
Balance at December 31, 2015		$	-		$	-		$	-
Additions for estimated future expense			911			255			1,166
Incurred costs			-			-			-
Other			-			-			-
Balance at March 31, 2016		$	911		$	255		$	1,166
Current portion			911			216			1,127
Long-term portion			-			39			39
Total		$	911		$	255		$	1,166

 

		2015
		Maintenance			Warranty			Total
Balance at December 31, 2014		$	-		$	126		$	126
Additions for estimated future expense			-			-			-
Incurred costs			-			(17)			(17)
Other			-			-			-
Balance at March 31, 2015		$	-		$	109		$	109
Current portion			-			109			109
Long-term portion			-			-			-
Total		$	-		$	109		$	109

 

The long-term portion of warranty accrual is included as a component of Other long-term liabilities in the condensed consolidated balance sheets.