0001558370-18-001091 | 10-K | XBRL Viewer | Tactile Systems Technology INC

Document and Entity Information - USD ($)	12 Months Ended
Dec. 31, 2017	Feb. 20, 2018	Jun. 30, 2017
Document and Entity Information
Entity Registrant Name	TACTILE SYSTEMS TECHNOLOGY INC
Entity Central Index Key	0001027838
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2017
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		17,998,219
Entity Public Float			$ 311,203,304

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 23,968	$ 30,701
Marketable securities	19,944	10,994
Accounts receivable, net	17,623	15,003
Inventories	11,040	6,554
Income taxes receivable	2,119
Prepaid expenses and other current assets	2,178	981
Total current assets	76,872	64,233
Property and equipment, net	3,776	1,563
Other assets
Patent costs, net	2,218	2,394
Medicare accounts receivable, long-term	2,718	2,823
Deferred income taxes	2,662	2,785
Other non-current assets	201	137
Total other assets	7,799	8,139
Total assets	88,447	73,935
Current liabilities
Accounts payable	4,253	3,776
Accrued payroll and related taxes	6,706	6,692
Accrued expenses	2,598	1,193
Future product royalties	17	67
Income taxes payable		823
Other current liabilities	945	1,242
Total current liabilities	14,519	13,793
Long-term liabilities
Accrued warranty reserve, long-term	1,141	503
Total liabilities	15,660	14,296
Commitments and Contingencies (see Note 8)
Stockholders’ equity
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of December 31, 2017 and December 31, 2016
Common stock, $0.001 par value, 300,000,000 shares authorized; 17,872,465 shares issued and 17,846,379 shares outstanding as of December 31, 2017; 16,833,737 shares issued and outstanding as of December 31, 2016	18	17
Additional paid-in capital	70,224	62,406
Retained earnings (accumulated deficit)	3,082	(2,773)
Accumulated other comprehensive loss	(44)	(11)
Less: treasury stock, at cost - 26,086 shares as of December 31, 2017	(493)
Total stockholders’ equity	72,787	59,639
Total liabilities and stockholders’ equity	$ 88,447	$ 73,935

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements of Operations
Revenues, net	$ 109,283	$ 84,542	$ 62,872
Cost of goods sold	29,015	22,940	16,908
Gross profit	80,268	61,602	45,964
Operating expenses
Sales and marketing	44,396	33,794	24,485
Research and development	5,060	4,476	4,312
Reimbursement, general and administrative	26,914	19,060	13,716
Total operating expenses	76,370	57,330	42,513
Income from operations	3,898	4,272	3,451
Other income (expense)	292	38	(194)
Income before income taxes	4,190	4,310	3,257
Income tax (benefit) expense	(1,665)	1,431	1,864
Net income	5,855	2,879	1,393
Convertible preferred stock dividends		1,247	1,845
Net income (loss) attributable to common stockholders	$ 5,855	$ 1,632	$ (452)
Net income (loss) per common share attributable to common stockholders
Basic (in dollars per share)	$ 0.34	$ 0.18	$ (0.15)
Diluted (in dollars per share)	$ 0.31	$ 0.15	$ (0.15)
Weighted-average common shares used to compute net income (loss) per common share attributable to common stockholders
Basic (in shares)	17,355,175	8,913,042	2,929,438
Diluted (in shares)	18,877,863	10,758,684	2,929,438

Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) $ in Thousands	Common Stock Series B Preferred Stock	Common Stock Series A Preferred Stock	Common Stock	Additional Paid In Capital. Series B Preferred Stock	Additional Paid In Capital. Series A Preferred Stock	Additional Paid In Capital.	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive Loss	Treasury Stock	Series B Preferred Stock	Series A Preferred Stock	Total
Temporary equity, balance at the beginning at Dec. 31, 2014										$ 11,894	$ 19,188
Balance at the beginning (in shares) at Dec. 31, 2014										2,733,468	3,061,488
Balances at the beginning at Dec. 31, 2014			$ 3			$ 442	$ (6,872)					$ (6,427)
Balances at the beginning (in shares) at Dec. 31, 2014			2,626,619
Increase (Decrease) in Stockholders' Equity
Stock-based compensation						316						316
Exercise of common stock options and warrants and vesting of restricted stock units						914						914
Exercise of common stock options and warrants and vesting of restricted stock units (in shares)			596,283
Preferred stock dividends										$ 705	$ 1,140
Preferred stock dividends						(1,672)	(173)					(1,845)
Comprehensive income for the period							1,393					1,393
Balance at the end (in shares) at Dec. 31, 2015										2,733,468	3,061,488
Balances at the end (in shares) at Dec. 31, 2015			3,222,902
Temporary equity, balance at the end at Dec. 31, 2015										$ 12,599	$ 20,328
Balances at the end at Dec. 31, 2015			$ 3				(5,652)					(5,649)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation						2,082						2,082
Exercise of common stock options and warrants and vesting of restricted stock units			$ 1			235						236
Exercise of common stock options and warrants and vesting of restricted stock units (in shares)			255,217
Preferred stock dividends										436	811
Preferred stock dividends						(1,247)						(1,247)
Sale of common stock from initial public offering, net of offering expenses			$ 4			35,378						35,382
Sale of common stock from initial public offering, net of offering expenses (in shares)			4,120,000
Preferred stock dividends paid in cash											(8,207)
Common stock issued in lieu of series B preferred stock dividend			$ 1			(1)
Common stock issued in lieu of series B preferred stock dividend (in shares)			956,842
Conversion of preferred stock to common stock										$ (13,035)	$ (12,932)
Conversion of preferred stock to common stock (in shares)										(2,733,468)	(3,061,488)
Conversion of preferred stock to common stock issuances	$ 3	$ 3		$ 13,032	$ 12,929					$ 13,035	$ 12,932
Conversion of preferred stock to common stock issuances (in shares)	2,733,468	3,190,985
Common stock issued for series A & B preferred stock liquidation preference			$ 2			(2)
Common stock issued for series A & B preferred stock liquidation preference (in shares)			2,354,323
Comprehensive income for the period							2,879	$ (11)				2,868
Balances at the end (in shares) at Dec. 31, 2016			16,833,737
Balances at the end at Dec. 31, 2016			$ 17			62,406	(2,773)	(11)				59,639
Increase (Decrease) in Stockholders' Equity
Stock-based compensation						4,235						4,235
Exercise of common stock options and warrants and vesting of restricted stock units			$ 1			833						834
Exercise of common stock options and warrants and vesting of restricted stock units (in shares)			731,596
Taxes paid for net share settlement of restricted stock units						(387)						(387)
Common shares issued for employee stock purchase plan						3,137						3,137
Common shares issued for employee stock purchase plan (in shares)			307,132
Shares repurchased to cover taxes from restricted stock award vesting									$ (493)			(493)
Shares repurchased to cover taxes from restricted stock award vesting (in shares)			(26,086)
Comprehensive income for the period							5,855	(33)				5,822
Balances at the end (in shares) at Dec. 31, 2017			17,846,379
Balances at the end at Dec. 31, 2017			$ 18			$ 70,224	$ 3,082	$ (44)	$ (493)			$ 72,787

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities
Net income	$ 5,855	$ 2,879	$ 1,393
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	1,849	799	827
Deferred income taxes	143	(611)	852
Stock-based compensation expense	4,235	1,889	316
Deferred compensation			(6)
Change in allowance for doubtful accounts	301	568	100
Changes in assets and liabilities:
Accounts receivable	(3,692)	(1,090)	403
Inventories	(4,486)	(773)	(2,260)
Income taxes	(2,942)	(81)	804
Prepaid expenses and other assets	146	(407)	(452)
Medicare accounts receivable – long-term	105	(784)	(737)
Accounts payable	462	1,407	(83)
Accrued payroll and related taxes	14	3,337	1,352
Accrued expenses	2,252	824	269
Future product royalties	(50)	(924)	(379)
Net cash provided by operating activities	4,192	7,033	2,399
Cash flows from investing activities
Proceeds from sales and maturities of marketable securities	2,000
Purchases of marketable securities	(12,051)	(11,011)
Purchases of property and equipment	(3,746)	(775)	(592)
Patent costs	(74)	(58)	(23)
Other investments	(145)
Net cash used in investing activities	(14,016)	(11,844)	(615)
Cash flows from financing activities
Payments on notes payable			(13)
Taxes paid for net share settlement of restricted stock units	(387)
Proceeds from exercise of common stock options and warrants	834	236	914
Proceeds from the issuance of common stock from the employee stock purchase plan	3,137
Shares repurchased to cover taxes from restricted stock award vesting	(493)
Dividends paid on preferred stock		(8,207)
Proceeds from IPO		41,200
Fees paid for IPO		(4,777)	(1,041)
Net cash provided by (used in) financing activities	3,091	28,452	(140)
Net change in cash and cash equivalents	(6,733)	23,641	1,644
Cash and cash equivalents – beginning of period	30,701	7,060	5,416
Cash and cash equivalents – end of period	23,968	30,701	7,060
Supplemental cash flow disclosure
Cash paid for interest			1
Cash paid for taxes	923	2,158	$ 240
Non-cash investing activities:
Acquisition of assets included in accounts payable	$ 15	$ 174

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents consist of all cash on hand, deposits and funds invested in available for sale securities with original maturities of three months or less at the time of purchase. At December 31, 2017 and 2016, our cash was held primarily in checking and money market accounts.

Accounts Receivable

The majority of our accounts receivable and revenues are from commercial insurance payers and government payers, such as Medicare, the Veterans Administration and Medicaid.

Accounts receivable are carried net of allowances for estimated non-receipt of patient copayment and deductible obligations and allowances for uncollectible accounts. The allowance for estimated non-receipt of copayment reimbursements and for uncollectible accounts was $2.9 million and $2.6 million as of December 31, 2017 and 2016, respectively. We believe all accounts receivable in excess of the allowance are fully collectible. We do not accrue interest on a majority of the past due accounts receivable. We determine when accounts become past due on a customer by customer basis. If accounts receivables in excess of the provided allowance are determined uncollectible, the allowance for uncollectible accounts is adjusted as appropriate in the quarter that determination is made, and accounts receivable are written off after all collection efforts have failed. A portion of our claims to Medicare are initially denied, and enter the appeals process, where many are ultimately reviewed by an Administrative Law Judge. After final adjudication of all claims, approximately 90% of the claims submitted are approved (this is on a number of claims, not a dollars claimed, basis across all our products). The appeals process can be lengthy, lasting more than a year in most cases. Accordingly, we classify a portion of our Medicare accounts receivable as non-current based on our experience with Medicare collections.

We had accounts receivable from two insurance companies representing approximately 32% and 15% of accounts receivable as of December 31, 2017. We had accounts receivable from two insurance companies representing approximately 27% and 16% of accounts receivable as of December 31, 2016. Revenues from these insurance companies accounted for 31% and 8% of our total revenues for the year ended December 31, 2017 and 28% and 12% for the year ended December 31, 2016.

Accounts receivable include amounts due from Medicare totaling $4.4 million and $3.8 million relating to Flexitouch system sales to patients as of December 31, 2017 and 2016, respectively, that are waiting insurance approval. We estimate the portion of these accounts receivable for which we expect to receive authorization and payment based on our reimbursement history from Medicare.

We classified $2.7 million and $2.8 million of this receivable as of December 31, 2017 and 2016, respectively, as non-current as we do not expect these claims will be paid within the next twelve months due to the anticipated timing of the Administrative Law Judge appeal process.

On September 3, 2015, we entered into a settlement agreement with the Centers for Medicare and Medicaid Services for 247 claims, representing approximately $1.5 million of original claims based on the Medicare allowable rates, for which we had submitted a request for an Administrative Law Judge hearing in 2013. The settlement entitled us to receive a payment of approximately $0.9 million. We received this full amount during the fourth quarter of 2015. The settlement resulted in a reduction in the fourth quarter of 2015 of $0.8 million in accounts receivable of products to patients covered by Medicare. The settlement was facilitated by the Office of Medicare Hearings and Appeals to address a backlog of overdue claims awaiting Administrative Law Judge adjudication. We cannot predict whether we will be able to conclude future settlements with Medicare or achieve settlements on similar terms. Any future settlement of claims for amounts less than the corresponding amounts receivable, net of allowances, would result in a write-off.

The reserves for uncollectible copayment reimbursements and doubtful accounts were as follows:


	Year Ended
	December 31,
(In thousands)	2017		2016
Beginning balance	$	2,568	$	2,000
Accounts receivable provision		6,492		7,087
Write-offs		(6,191)		(6,519)
Ending balance	$	2,869	$	2,568

Advertising

Advertising costs are charged to operations when incurred. Advertising expense was $119,000, $57,000 and $52,000 for the years ended December 31, 2017, 2016 and 2015, respectively.

Research and Development Costs

We expense research and development costs as incurred, including expenses associated with clinical research studies and development.

Shipping and Handling Costs

We do not charge any shipping and handling costs to our customers. Shipping and handling costs incurred are included in cost of goods sold.

Product Warranty

We provide a warranty for our products against defects in material and workmanship for a period of one to five years on garments and one to two years on controllers. We record a liability for future warranty claims at the time of sale for the warranty period offered to a customer. If the assumptions used in calculating the provision were to materially change, resulting in more defects than anticipated, an additional provision may be required.

The warranty reserve was as follows:


	Year Ended
	December 31,
(In thousands)	2017		2016
Beginning balance	$	793	$	360
Warranty provision		1,487		766
Processed warranty claims		(608)		(333)
Ending balance	$	1,672	$	793

Accrued warranty reserve, current	$	531	$	290
Accrued warranty reserve, long-term		1,141		503
Total accrued warranty reserve	$	1,672	$	793

Inventories

Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value, and consisted of the following:


	As of
	December 31,
(In thousands)	2017		2016
Finished goods	$	4,267	$	2,884
Component parts and work-in-process		6,773		3,670
Total inventories	$	11,040	$	6,554

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of three to seven years. Leasehold improvements are depreciated over the remaining life of the respective building lease agreement. Patient rental equipment is depreciated over the multiple month rental period. Property and equipment consisted of the following:


	As of
	December 31,
(In thousands)	2017		2016
Equipment	$	3,235	$	2,322
Tooling		1,932		1,216
Furniture and fixtures		427		323
Demonstration equipment		460		—
Leasehold improvements		938		501
Patient rental equipment		1,131		—
Subtotal		8,123		4,362
Less: accumulated depreciation		(4,347)		(2,799)
Property and equipment, net	$	3,776	$	1,563

Major expenditures for property and equipment are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income. Depreciation expense was $1.5 million, $0.6 million and $0.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. The value of equipment for patients who obtain our products through a multiple month rental arrangement is capitalized and depreciated over the term of the rental period, after which time title to this equipment passes to the patient. The value of demonstration equipment in the possession of our field sales representatives is capitalized and depreciated over the estimated useful life of the equipment.

Deferred Offering Costs

Deferred offering costs, primarily consisting of legal, accounting and other direct fees and costs relating to the initial public offering, were initially capitalized and then reclassified to stockholders’ equity at the conclusion of our initial public offering on August 2, 2016. There was $1.3 million in deferred offering costs capitalized as of December 31, 2015 in other non-current assets on the consolidated balance sheet. There were no deferred offering costs capitalized as of December 31, 2017 and 2016.

Impairment of Long-Lived Assets

We review long-lived assets, including property and equipment and patents, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. We will assess long-lived assets used in operations for impairment indicators, including when undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. To date, we have recorded no such losses other than the write-off of various assets acquired in the purchase of our Actitouch assets.

Revenue Recognition

We recognize revenue when persuasive evidence of a sales arrangement exists, delivery of product has occurred through the transfer of title and risks of reward of ownership, the selling price is fixed or determinable and collectability is reasonably assured.

We distribute our products directly to patients. For any of our products sold to patients covered by private payers, such as commercial insurance companies, we recognize revenues from such sales upon shipment of our products. A product is not shipped until we have received a prescription from a physician for our products and, as applicable, receipt of prior authorization from payers. At shipment, we invoice the payer for the total product price and we recognize revenue as a percentage of the invoice based on the policies and payment history of the applicable payer, net of estimated uncollectible patient copayments. The payment history of the applicable payer is drawn from our actual payment experience over the past year. Any differences in payments received as compared to our estimates are recognized in the period in which we actually receive payment for the product. Over time, we adjust the ultimate collection estimates to reflect these differences. After the insurance payer has remitted payment, we separately invoice the patient for their portion of the payment obligation, such as copayments and deductibles.

For our products sold to Medicare patients, we recognize revenues from such sales upon shipment of our products, which can occur only after we have received a prescription from a physician and all applicable Medicare documentation is obtained. For Flexitouch system sales, we estimate the revenue on each shipment to a Medicare patient as a percentage of the total invoice based on collection history. While we have contracted rates with Medicare, to the extent any claims for reimbursement are denied, we will recognize any necessary adjustments in the period for which the adjustment is made or can be estimated.

A portion of our revenues are derived from patients who obtain our products under multiple month rental arrangements. We bill these patients’ insurance payers monthly over the duration of the rental term. Title to these products passes to the patients at the end of the rental period. Patients may return the product before the end of the rental period, and thus these arrangements are deemed to be month-to-month cancelable leases in accordance with ASC 840, “Leases,” and accordingly, we recognize the related revenue for these rental arrangements monthly, on a pro rata basis, over the lesser of the duration of the rental period or the period during which the patient possesses the product.

Net Income (Loss) per Share Attributable to Common Stockholders

For the reporting periods prior to our initial public offering, we used the two-class method to compute net income (loss) per common share attributable to common stockholders because we had issued securities, other than common stock, that contractually entitled the holders to participate in our dividends and earnings prior to our initial public offering. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. All series of our convertible preferred stock were considered participating securities.

Under the two-class method, for periods with net income, basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current year earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the year’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

Income Taxes

Income taxes are accounted for under the liability method. Deferred income taxes are provided for temporary differences between the financial reporting and the tax bases of assets and liabilities. If we determine in the future that it is more likely than not that we will not realize all or a portion of the deferred tax assets, we will record a valuation allowance in the period the determination is made (see Note 10). Changes in tax rates are reflected in the tax provision as they occur.

Stock-Based Compensation

The valuation of stock options involves the use of the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions. The assumptions include the expected term of the option, the expected volatility of the price of our common stock, expected dividend yield and the risk-free interest rate. These estimates involve inherent uncertainties and the significant application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. We recognize compensation expense for these options on a straight-line basis over the requisite service period (see Note 9).

Marketable Securities

We determine the appropriate classification of our marketable securities as available-for-sale or held-to-maturity at the time of purchase and periodically reevaluate such classification. Debt securities are classified as held-to-maturity when we have the positive intent and ability to hold the securities to maturity. Debt securities for which we do not have the intent or ability to hold to maturity are classified as available-for-sale.

Debt securities not classified as held-to-maturity and all equity securities are classified as available-for-sale and are reported at fair value, with unrealized gains and losses included in the determination of comprehensive income, a component of shareholders' equity. We review our available-for-sale securities for impairment to determine if the impairment is temporary or other-than-temporary. A temporary impairment charge results in an unrealized loss being recorded in other comprehensive income. Other-than-temporary impairments are recorded in net income in the period the impairment is determined to be other-than-temporary. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method.

Recent Accounting Pronouncements

We are an “emerging growth company” as defined by the Jumpstart Our Business Startups (“JOBS”) Act of 2012. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, as a result, our financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers.” The new section will replace Section 605, “Revenue Recognition,” and creates modifications to various other revenue accounting standards for specialized transactions and industries. The section is intended to conform revenue accounting principles with a concurrently issued International Financial Reporting Standards to reconcile previously differing treatment between U.S. practices and those of the rest of the world and to enhance disclosures related to disaggregated revenue information. The updated guidance is effective for interim and annual reporting periods beginning on or after December 15, 2018 for private companies; this effective date is applicable for us due to the JOBS Act exemption described above. Therefore, we plan to further evaluate the anticipated impact of the adoption of this updated guidance on our consolidated financial statements in future periods.

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842), which supersedes the existing guidance for lease accounting, “Leases” (Topic 840). ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting remains largely unchanged. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2019 for private companies; this effective date is applicable to us due to the JOBS Act exemption described above. Early adoption is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial adoption, with an option to elect to use certain transition relief. We plan to further evaluate the anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses,” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The ASU is effective for interim and annual periods beginning after December 15, 2020 for private companies; this effective date is applicable to us due to the JOBS Act exemption described above. Therefore, we plan to further evaluate the anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments,” to provide clarity on how certain cash receipt and cash payment transactions are presented and classified within the statement of cash flows. The ASU is effective for interim and annual periods beginning after December 15, 2018 for private companies; this effective date is applicable for us due to the JOBS Act exemption described above. We do not anticipated any material impact on our consolidated financial statements in future periods as a result of the adoption of this ASU.

Marketable Securities

12 Months Ended

Dec. 31, 2017

Marketable Securities.

Marketable Securities

Note 4. Marketable Securities

Our investments in marketable securities are classified as available-for-sale and consist of the following:


	As of
	December 31, 2017
			Unrealized				Fair
(In thousands)	Cost		Gains		Losses		Value
U.S. government and agency obligations	$	11,997	$	—	$	56	$	11,941
Corporate debt securities and certificates of deposit		8,017		—		14		8,003
Marketable securities	$	20,014	$	—	$	70	$	19,944


	As of
	December 31, 2016
			Unrealized				Fair
(In thousands)	Cost		Gains		Losses		Value
U.S. government and agency obligations	$	9,011	$	2	$	17	$	8,996
Corporate debt securities and certificates of deposit		2,000		—		2		1,998
Marketable securities	$	11,011	$	2	$	19	$	10,994

Our investments in marketable securities all have contractual maturities of 12 to 25 months from December 31, 2017. Unrealized losses and fair value of securities available for sale aggregated by investment category and the length of time the securities were in a continuous loss position were as follows:


	As of
	December 31, 2017
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. government and agency obligations	$	5,974	$	25	$	5,967	$	31	$	11,941	$	56
Corporate debt securities and certificates of deposit		7,005		13		998		1		8,003		14
Marketable securities	$	12,979	$	38	$	6,965	$	32	$	19,944	$	70


	As of
	December 31, 2016
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. government and agency obligations	$	5,978	$	17	$	—	$	—	$	5,978	$	17
Corporate debt securities and certificates of deposit		995		2		—		—		995		2
Marketable securities	$	6,973	$	19	$	—	$	—	$	6,973	$	19

Net pre-tax unrealized losses for marketable securities of $0.1 million at December 31, 2017 were recorded as a component of accumulated other comprehensive loss in stockholders' equity. Marketable securities valued at $1.0 million were sold during the year ended December 31, 2017, with no resulting gain or loss.

Stockholders' Equity

12 Months Ended

Dec. 31, 2017

Stockholders' Equity

Stockholders' Equity

Note 9. Stockholders' Equity

We completed an initial public offering of our common stock on August 2, 2016, in which we sold 4,120,000 shares of our common stock at a public offering price of $10.00 per share. Immediately prior to the completion of the initial public offering, all then-outstanding shares of our Series A and Series B preferred stock were converted into 5,924,453 shares of our common stock. Our Series A preferred stock converted to common stock at a ratio of 1-for-1.03 and our Series B preferred stock converted to common stock at a ratio of 1-for-1. In addition, immediately prior to the completion of the initial public offering, we issued 2,354,323 additional shares of our common stock that our Series A and Series B preferred stockholders were entitled to receive in connection with the conversion of the preferred stock, and we issued 956,842 shares of our common stock to pay accrued dividends on our Series B preferred stock. We also paid $8.2 million in cumulative accrued dividends to our Series A convertible preferred stockholders in connection with the initial public offering, including $0.1 million of dividends paid to the holders of the common restricted shares.

Stock-Based Compensation

Our 2016 Equity Incentive Plan (the “2016 Plan”) authorizes us to grant stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to employees, non-employee directors and certain consultants and advisors. There were up to 4,800,000 shares of our common stock initially reserved for issuance pursuant to the 2016 Plan. The 2016 Plan provides that the number of shares reserved and available for issuance under the 2016 Plan will automatically increase annually on January 1 of each calendar year, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the lesser of: (a) 5% of the number of common shares of stock outstanding as of December 31 of the immediately preceding calendar year, or (b) 2,500,000 shares; provided, however, that our Board of Directors may determine that any annual increase be a lesser number. In addition, all awards granted under our 2007 Omnibus Stock Plan and our 2003 Stock Option Plan that were outstanding when the 2016 Plan became effective and that are forfeited, expire, are cancelled, are settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan. Effective January 1, 2017, 841,686 shares were added to the 2016 Plan, as available for issuance thereunder, pursuant to the automatic increase feature of the 2016 Plan. As of December 31, 2017, 4,545,251 shares were available for future grant pursuant to the 2016 Plan. Effective January 1, 2018, 892,318 shares were added to the 2016 Plan, as available for issuance thereunder, pursuant to the automatic increase feature of the 2016 Plan.

Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continue to vest in accordance with the original vesting schedules and will expire at the end of their original terms. We recorded stock-based compensation expense of $4.2 million, $1.9 million and $0.3 million for the years ended December 31, 2017, 2016, 2015, respectively. This expense was allocated as follows:


	Year Ended
	December 31,
(In thousands)	2017		2016		2015
Cost of goods sold	$	117	$	112	$	73
Sales and marketing expenses		1,521		514		178
Research and development expenses		140		36		—
Reimbursement, general and administrative expenses		2,457		1,227		65
Total stock-based compensation expense	$	4,235	$	1,889	$	316

Stock Options

Stock options issued to participants other than non-employees vest over four years and typically have a contractual term of ten years. The stock options granted on July 27, 2016 to our non-employee directors vested in full on May 9, 2017, the date of our 2017 annual meeting of stockholders. New stock options were granted to our non-employee directors on that date. These options vest on the earlier of May 9, 2018 or the date of our 2018 annual meeting of stockholders. These options have a contractual term of seven years.

Stock-based compensation expense included in our Consolidated Statements of Operations for stock options was $1.0 million, $1.5 million and $0.1 million for the years ended December 31, 2017, 2016 and 2015, respectively. The total grant date fair value of options vested during the year was $0.8 million, $0.2 million and $0.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

As of December 31, 2017, there was approximately $4.2 million of total unrecognized pre-tax compensation expense related to non-vested stock option awards that are expected to be recognized over a weighted average period of 3.5 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Annually, we make predictive assumptions regarding future stock price volatility, dividend yield, expected term and forfeiture rate. The dividend yield assumption is based on expected annual dividend yield on the grant date. To date, no dividend on common stock has been paid by us. Expected volatility was estimated using the average historical volatility of public companies of similar size and industry over the similar period as the expected term assumption used for our options. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group. We use the “simplified method” to determine the expected term of the stock option grants. We utilize this method because we do not have sufficient public company exercise data in which to make a reasonable estimate.

The following table sets forth the estimated weighted-average fair values of our stock options granted in each of the years indicated, and the assumptions on which the fair values were determined:


	Year Ended
	December 31,
	2017		2016		2015
Expected term		6 years		6 years		6 years
Expected volatility		44%		43%		60%
Risk-free interest rate		2%		1%		2%
Expected dividend yield		0%		0%		0%
Weighted-average fair value on the date of grant	$	11.81	$	4.43	$	1.91

Stock option activity for the three years ended December 31, 2017 is summarized as follows:


		Weighted-		Weighted-
		Average		Average	Aggregate
	Options	Exercise Price		Remaining	Intrinsic
(In thousands except share, per share and years data)	Outstanding	Per Share1		Contractual Life	Value2
Balance at December 31, 2014	2,157,298	$	0.87	6.2 years	$	5,912
Granted	169,501	$	4.23
Exercised	(428,856)	$	0.65		$	4,569
Forfeited	(57,495)	$	2.26
Balance at December 31, 2015	1,840,448	$	1.18	5.8 years	$	18,573
Granted	305,236	$	10.60
Exercised	(253,138)	$	0.93		$	2,447
Forfeited	(36,247)	$	5.34
Balance at December 31, 2016	1,856,299	$	2.69	5.5 years	$	25,467
Granted	345,995	$	25.26
Exercised	(657,916)	$	1.23		$	15,927
Forfeited	(56,658)	$	7.22
Balance at December 31, 2017	1,487,720	$	8.41	6.2 years	$	29,611

Options exercisable at December 31, 2017	998,269	$	2.45	4.8 years	$	26,488

(1)

The exercise price of each option granted during the periods shown was equal to the market price of the underlying stock on the date of grant.

(2)

The aggregate intrinsic value of options exercised represents the difference between the exercise price of the option and the closing stock price of our common stock on the date of exercise. The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

Options exercisable of 1,359,302 at December 31, 2016 and 1,368,047 at December 31, 2015 had weighted average exercise prices of $1.06 and $1.18, respectively.

The following summarizes additional information about our stock options:


	As of
	December 31,
Number of:	2017		2016
Non-vested options beginning of the year		496,997		472,401
Non-vested options end of the year		489,451		496,997
Vested options		315,082		251,968


	As of
	December 31,
Weighted-average grant date fair value of:	2017		2016
Non-vested options beginning of the year	$	2.99	$	2.85
Non-vested options end of the year		9.57		2.99
Vested options		2.45		0.76
Forfeited options		3.25		2.71

Stock-Settled Restricted Stock Units

Stock-settled restricted stock units granted under the 2016 Plan vest over one to three years. These awards are stock-settled with common shares. Stock-based compensation expense included in our Consolidated Statements of Operations for stock-settled restricted stock units was $2.5 million and $0.7 million for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, there was approximately $5.1 million of total unrecognized pre-tax compensation expense related to outstanding stock-settled restricted stock units that is expected to be recognized over a weighted-average period of 2.1 years. Our stock-settled restricted stock unit activity for the year ended December 31, 2017 was as follows:


		Weighted-
		Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except share and per share data)	Outstanding	Per Share		Value(1)
Balance at December 31, 2016	324,863	$	10.39	$	5,331
Granted	240,070	$	22.28
Vested	(87,539)	$	11.81
Cancelled	(35,887)	$	15.17
Balance at December 31, 2017	441,507	$	16.38	$	12,795

Deferred and unissued at December 31, 2017 (2)	2,213	$	22.53	$	64

(1)

Intrinsic value of stock-settled restricted stock units vested was based on our closing stock price on the last trading day of the year.

(2)

For the year ended December 31, 2017, there were 1,981 restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments. These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock, per unit, upon the earlier of the director’s termination of service as a director of ours or the occurrence of a change of control of us. These restricted stock units are included in the “Granted” line in the table above and are also included in the “Vested” line in the table above due to their being fully vested upon grant. On May 9, 2017, upon his departure from our board of directors, we issued 1,494 shares of common stock to Mr. Shroff, which represented the settlement of restricted stock units that had been previously granted to him in lieu of his quarterly director retainer payments. As of December 31, 2017, there were 2,213 outstanding restricted stock units that had been previously granted to non-employee directors in lieu of their quarterly director retainer payments. These restricted stock units are not included in the “Balance at December 31, 2017” line in the table above because they are fully vested.

Restricted Stock Awards

Restricted stock awards were granted in 2009 in lieu of cash bonuses to certain members of management. The awards vested in May 2017, at which time we repurchased 26,086 shares to satisfy the tax withholding obligations of the holders of the restricted stock. We do not have a publicly announced share repurchase plan or program.

Employee Stock Purchase Plan

Our employee stock purchase plan (“ESPP”), which was approved by our Board of Directors on April 27, 2016 and by our stockholders on June 20, 2016, allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The plan is available to all of our employees and employees of participating subsidiaries. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price equal to 85% of the lower of the closing market price per share of our common stock on the first or last trading day of each stock purchase period. The plan ordinarily consists of six-month purchase periods, beginning on May 16 and November 16 of each calendar year, but the initial purchase period began on July 27, 2016 and ended on May 15, 2017. On May 15, 2017, 259,981 shares were purchased, utilizing $2.2 million of employee contributions in the initial purchase period. On November 15, 2017, 47,151 shares were purchased, utilizing $0.9 million of employee contributions in the May 16, 2017 to November 15, 2017 purchase period. No purchases were made under the plan during the year ended December 31, 2016.

A total of 1.6 million shares of common stock were initially reserved for issuance under the plan, and this share reserve will automatically be supplemented each January 1, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the least of (1) 1% of the shares of our common stock outstanding on the immediately preceding December 31, (2) 500,000 shares or (3) such lesser amount as our Board of Directors may determine. Effective January 1, 2017, 168,337 shares were added to the ESPP, as available for issuance thereunder, pursuant to the automatic increase feature of the plan. As of December 31, 2017, 1,461,205 shares were available for future issuance under the ESPP. Effective January 1, 2018, 178,463 shares were added to the ESPP, as available for issuance thereunder, pursuant to the automatic increase feature of the plan. We recognized $0.7 million and $0.4 million in stock-based compensation expense related to the ESPP for the years ended December 31, 2017 and 2016, respectively. We did not recognize any stock-based compensation expense related to the ESPP for the year ended December 31, 2015.

Stock Warrants

We have also issued warrants to purchase shares of our common stock which are summarized below:


				Weighted-
		Weighted-		Average
		Average		Remaining
	Number	Exercise		Contractual
Warrants outstanding at:	Outstanding	Price		Life
December 31, 2014	172,817	$	4.43
Exercised	166,617	$	3.81
Expired	400	$	—
December 31, 2015	5,800	$	4.23
Exercised	2,882	$	4.23
Expired	—	$	—
December 31, 2016	2,918	$	4.23
Exercised	2,918	$	4.23
Expired	—	$	—
December 31, 2017	—	$	—		—

Income Taxes

12 Months Ended

Dec. 31, 2017

Income Taxes

Income Taxes

Note 10. Income Taxes

The provision for income tax expense consisted of the following:


	Year Ended
	December 31,
(In thousands)	2017		2016		2015
Current income taxes	$	(1,823)	$	2,042	$	1,012
Deferred income taxes		158		(611)		852
Total (benefit) provision for income taxes	$	(1,665)	$	1,431	$	1,864

The components of our deferred tax assets and liabilities were as follows:


	As of
	December 31,
(In thousands)	2017		2016
Deferred tax assets:
Accounts receivable and inventory reserves	$	846	$	1,182
Stock-based compensation		739		410
Intangible assets		515		837
Warranty reserves		410		285
Net operating loss carryforwards		197		156
Accrued liabilities		71		97
Other		194		157
Total deferred tax assets	$	2,972	$	3,124

Deferred tax liabilities:
Depreciation		(310)		(339)
Total deferred tax liabilities	$	(310)	$	(339)

Net deferred tax assets	$	2,662	$	2,785

A reconciliation of income tax expense to the statutory federal tax rate of 34% is as follows:


	Year Ended
	December 31,
	2017		2016		2015
Tax expense at statutory rate	34.0	%	34.0	%	34.0	%
Deferred reprice - federal	28.0		—		—
Meals and entertainment	6.3		5.4		4.8
Unrecognized tax benefits	5.1		—		—
Transaction costs	3.8		—		—
Deferred reprice - state	1.9		(0.3)		9.2
Return to provision	1.4		—		—
Deferred true-up	0.5		(7.9)		—
Employee Stock Purchase Plan	(4.6)		3.0		—
Excess benefit on non-qualified stock options and RSUs	(22.8)		(8.0)		—
Incentive stock options	(89.1)		2.7		3.6
State income taxes, net of federal benefit	(4.4)		3.3		3.6
Other	0.2		1.0		2.0
Net effective rate	(39.7)	%	33.2	%	57.2	%

Deferred income taxes result from temporary differences between the reporting of amounts for financial statement purposes and income tax purposes. These differences relate primarily to different methods used for income tax purposes including depreciation and amortization, warranty and vacation accruals, and deductions related to allowances for doubtful accounts receivable and inventory reserves.

As of December 31, 2017, we had no U.S. federal net operating loss (“NOL”) carry-forwards and approximately $5.6 million of state NOLs. The state NOL carry-forward amounts expire beginning in tax year 2024 if not utilized.

We are subject to income tax examinations in the U.S. federal jurisdiction as well as in various state jurisdictions. U.S. federal and state tax years prior to 2013 were closed to examination at December 31, 2017.

Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. On December 22, 2017, the U.S. President signed into law the Tax Cuts and Jobs Act (the “Act”), which enacted significant tax law changes largely effective for tax years beginning after December 31, 2017. The Act reduces the corporate tax rate to 21 percent, effective January 1, 2018, for all corporations. Because GAAP requires the effect of a change in tax laws or rates to be recognized as of the date of enactment, we have revalued our deferred tax assets and liabilities as of December 22, 2017. As a result of the revaluation of our deferred tax assets and liabilities, we have accounted for $1.2 million of tax expense as a discrete item in our provision for income taxes for the year ended December 31, 2017.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. As of December 31, 2017, we had an unrecognized tax benefit ("UTB") with respect to state income taxes of approximately $0.2 million. The UTB represents estimated tax, interest, and penalties related to unfiled and unpaid income taxes in several state jurisdictions. We recognize interest and penalties accrued related to unrecognized tax benefits in tax expense. We are pursuing actions to settle outstanding liabilities and ensure we are compliant in all tax jurisdictions.

We are currently under examination by the U.S. Internal Revenue Service for tax year 2016. We are not under examination by any other taxing jurisdiction. In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense on our Statements of Operations

Fair Value Measurements

12 Months Ended

Dec. 31, 2017

Fair Value Measurements

Fair Value Measurements

Note 12. Fair Value Measurements

We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3). The following provides information regarding fair value measurements for our marketable securities as of December 31, 2017 according to the three-level fair value hierarchy.


	As of
	December 31, 2017
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Recurring Fair Value Measurements:
Money market mutual funds	$	9,212	$	—	$	—	$	9,212
U.S. government and agency obligations		1,000		10,941		—		11,941
Corporate debt securities		—		8,003		—		8,003
Total	$	10,212	$	18,944	$	—	$	29,156


	As of
	December 31, 2016
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Recurring Fair Value Measurements:
Currency	$	14	$	—	$	—	$	14
Money market mutual funds		18,976		—		—		18,976
U.S. government and agency obligations		2,017		6,979		—		8,996
Corporate debt securities		—		1,998		—		1,998
Total	$	21,007	$	8,977	$	—	$	29,984

During the year ended December 31, 2017, there were no transfers within the three-level hierarchy. A significant transfer is recognized when the inputs used to value a security have been changed, which merits a transfer between the disclosed levels of the valuation hierarchy.

The fair values for our currency, money market mutual funds, U.S. government and agency obligations and corporate debt securities are determined based on valuations provided by external investment managers who obtain them from a variety of industry standard data providers.

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these items. Non-financial assets, such as equipment and leasehold improvements, and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired. We had no re-measurements of non-financial assets to fair value in the years ended December 31, 2017 or 2016.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Quarterly Financial Information (Unaudited)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information (Unaudited)

Quarterly Financial Information (Unaudited)

Note 13. Quarterly Financial Information (Unaudited)

The quarterly financial data presented below should be read in conjunction with the consolidated financial statements and related notes. The adjustment related to the first three quarters of 2016 was due to the retrospective application of ASU 2016-09.


	Three Months Ended
	Mar. 31,		Jun. 30,		Sep. 30,		Dec. 31,
(In thousands, except per share data)	2017		2017		2017		2017
Revenues	$	19,850	$	26,264	$	28,283	$	34,886
Gross profit		14,226		19,230		20,755		26,057
(Loss) income from operations		(2,932)		730		1,258		4,927
Net (loss) income		(1,504)		3,787		1,342		2,230
Net (loss) income per share - Basic(1)		(0.09)		0.22		0.08		0.13
Net (loss) income per share - Diluted(1)		(0.09)		0.20		0.07		0.12


	Three Months Ended
	Mar. 31,				Jun. 30,				Sep. 30,
	2016				2016				2016
	As		As		As		As		As		As		Dec. 31,
(In thousands, except per share data)	Reported		Adjusted(2)		Reported		Adjusted(2)		Reported		Adjusted(2)		2016
Revenues	$	13,700	$	13,700	$	19,729	$	19,729	$	22,635	$	22,635	$	28,478
Gross profit		9,889		9,889		14,405		14,405		16,353		16,353		20,955
(Loss) income from operations		(1,786)		(1,786)		1,792		1,792		974		974		3,292
Net (loss) income attributable to common stockholders		(1,494)		(1,231)		177		204		169		334		2,379
Net (loss) income per share - Basic(1)		(0.45)		(0.38)		0.05		0.06		0.01		0.03		0.14
Net (loss) income per share - Diluted(1)		(0.45)		(0.38)		0.04		0.04		0.01		0.02		0.13

(1)

The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely.

(2)

As adjusted amounts include the impact of adopting ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes and statutory tax withholding requirements and classification within the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2016. We elected to adopt this new standard in the fourth quarter of 2016, effective as of January 1, 2016.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. The results for the year ended December 31, 2017 are not necessarily indicative of results to be expected for any future year. All intercompany balances and transactions have been eliminated in consolidation. We have reclassified certain prior year amounts to conform to the current year’s presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive Income

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on available-for-sale marketable securities.

JOBS Act Accounting Election

As an emerging growth company under the Jumpstart Our Business Startups (“JOBS”) Act, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We have elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies

Cash and Cash Equivalents

Accounts Receivable

The majority of our accounts receivable and revenues are from commercial insurance payers and government payers, such as Medicare, the Veterans Administration and Medicaid.

The reserves for uncollectible copayment reimbursements and doubtful accounts were as follows:


	Year Ended
	December 31,
(In thousands)	2017		2016
Beginning balance	$	2,568	$	2,000
Accounts receivable provision		6,492		7,087
Write-offs		(6,191)		(6,519)
Ending balance	$	2,869	$	2,568

Advertising

Advertising costs are charged to operations when incurred. Advertising expense was $119,000, $57,000 and $52,000 for the years ended December 31, 2017, 2016 and 2015, respectively.

Research and Development Costs

We expense research and development costs as incurred, including expenses associated with clinical research studies and development.

Shipping and Handling Costs

We do not charge any shipping and handling costs to our customers. Shipping and handling costs incurred are included in cost of goods sold.

Product Warranty

The warranty reserve was as follows:


	Year Ended
	December 31,
(In thousands)	2017		2016
Beginning balance	$	793	$	360
Warranty provision		1,487		766
Processed warranty claims		(608)		(333)
Ending balance	$	1,672	$	793

Accrued warranty reserve, current	$	531	$	290
Accrued warranty reserve, long-term		1,141		503
Total accrued warranty reserve	$	1,672	$	793

Inventories

Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value, and consisted of the following:


	As of
	December 31,
(In thousands)	2017		2016
Finished goods	$	4,267	$	2,884
Component parts and work-in-process		6,773		3,670
Total inventories	$	11,040	$	6,554

Property and Equipment


	As of
	December 31,
(In thousands)	2017		2016
Equipment	$	3,235	$	2,322
Tooling		1,932		1,216
Furniture and fixtures		427		323
Demonstration equipment		460		—
Leasehold improvements		938		501
Patient rental equipment		1,131		—
Subtotal		8,123		4,362
Less: accumulated depreciation		(4,347)		(2,799)
Property and equipment, net	$	3,776	$	1,563

Deferred Offering Costs

Impairment of Long-Lived Assets

Revenue Recognition

Net Income (Loss) per Share Attributable to Common Stockholders

Income Taxes

Stock-Based Compensation

Marketable Securities

Recent Accounting Pronouncements

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Significant Accounting Policies

Schedule of reserves for uncollectible co-payment reimbursements and doubtful accounts


	Year Ended
	December 31,
(In thousands)	2017		2016
Beginning balance	$	2,568	$	2,000
Accounts receivable provision		6,492		7,087
Write-offs		(6,191)		(6,519)
Ending balance	$	2,869	$	2,568

Schedule of warranty reserves


	Year Ended
	December 31,
(In thousands)	2017		2016
Beginning balance	$	793	$	360
Warranty provision		1,487		766
Processed warranty claims		(608)		(333)
Ending balance	$	1,672	$	793

Accrued warranty reserve, current	$	531	$	290
Accrued warranty reserve, long-term		1,141		503
Total accrued warranty reserve	$	1,672	$	793

Schedule of inventories


	As of
	December 31,
(In thousands)	2017		2016
Finished goods	$	4,267	$	2,884
Component parts and work-in-process		6,773		3,670
Total inventories	$	11,040	$	6,554

Schedule of components of property and equipment


	As of
	December 31,
(In thousands)	2017		2016
Equipment	$	3,235	$	2,322
Tooling		1,932		1,216
Furniture and fixtures		427		323
Demonstration equipment		460		—
Leasehold improvements		938		501
Patient rental equipment		1,131		—
Subtotal		8,123		4,362
Less: accumulated depreciation		(4,347)		(2,799)
Property and equipment, net	$	3,776	$	1,563

Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2017

Marketable Securities.

Schedule of marketable securities


	As of
	December 31, 2017
			Unrealized				Fair
(In thousands)	Cost		Gains		Losses		Value
U.S. government and agency obligations	$	11,997	$	—	$	56	$	11,941
Corporate debt securities and certificates of deposit		8,017		—		14		8,003
Marketable securities	$	20,014	$	—	$	70	$	19,944


	As of
	December 31, 2016
			Unrealized				Fair
(In thousands)	Cost		Gains		Losses		Value
U.S. government and agency obligations	$	9,011	$	2	$	17	$	8,996
Corporate debt securities and certificates of deposit		2,000		—		2		1,998
Marketable securities	$	11,011	$	2	$	19	$	10,994

Schedule of unrealized losses on investment


	As of
	December 31, 2017
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. government and agency obligations	$	5,974	$	25	$	5,967	$	31	$	11,941	$	56
Corporate debt securities and certificates of deposit		7,005		13		998		1		8,003		14
Marketable securities	$	12,979	$	38	$	6,965	$	32	$	19,944	$	70


	As of
	December 31, 2016
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. government and agency obligations	$	5,978	$	17	$	—	$	—	$	5,978	$	17
Corporate debt securities and certificates of deposit		995		2		—		—		995		2
Marketable securities	$	6,973	$	19	$	—	$	—	$	6,973	$	19

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

+ References + Details

Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2017

Stockholders' Equity

Schedule of allocation of stock-based compensation expense


	Year Ended
	December 31,
(In thousands)	2017		2016		2015
Cost of goods sold	$	117	$	112	$	73
Sales and marketing expenses		1,521		514		178
Research and development expenses		140		36		—
Reimbursement, general and administrative expenses		2,457		1,227		65
Total stock-based compensation expense	$	4,235	$	1,889	$	316

Schedule of estimated weighted-average fair values and assumptions for stock options granted


	Year Ended
	December 31,
	2017		2016		2015
Expected term		6 years		6 years		6 years
Expected volatility		44%		43%		60%
Risk-free interest rate		2%		1%		2%
Expected dividend yield		0%		0%		0%
Weighted-average fair value on the date of grant	$	11.81	$	4.43	$	1.91

Schedule of stock option activity


		Weighted-		Weighted-
		Average		Average	Aggregate
	Options	Exercise Price		Remaining	Intrinsic
(In thousands except share, per share and years data)	Outstanding	Per Share1		Contractual Life	Value2
Balance at December 31, 2014	2,157,298	$	0.87	6.2 years	$	5,912
Granted	169,501	$	4.23
Exercised	(428,856)	$	0.65		$	4,569
Forfeited	(57,495)	$	2.26
Balance at December 31, 2015	1,840,448	$	1.18	5.8 years	$	18,573
Granted	305,236	$	10.60
Exercised	(253,138)	$	0.93		$	2,447
Forfeited	(36,247)	$	5.34
Balance at December 31, 2016	1,856,299	$	2.69	5.5 years	$	25,467
Granted	345,995	$	25.26
Exercised	(657,916)	$	1.23		$	15,927
Forfeited	(56,658)	$	7.22
Balance at December 31, 2017	1,487,720	$	8.41	6.2 years	$	29,611

Options exercisable at December 31, 2017	998,269	$	2.45	4.8 years	$	26,488

(1)

The exercise price of each option granted during the periods shown was equal to the market price of the underlying stock on the date of grant.

Schedule of Nonvested Share Activity


	As of
	December 31,
Number of:	2017		2016
Non-vested options beginning of the year		496,997		472,401
Non-vested options end of the year		489,451		496,997
Vested options		315,082		251,968


	As of
	December 31,
Weighted-average grant date fair value of:	2017		2016
Non-vested options beginning of the year	$	2.99	$	2.85
Non-vested options end of the year		9.57		2.99
Vested options		2.45		0.76
Forfeited options		3.25		2.71

Schedule of stock-settled restricted stock unit activity


		Weighted-
		Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except share and per share data)	Outstanding	Per Share		Value(1)
Balance at December 31, 2016	324,863	$	10.39	$	5,331
Granted	240,070	$	22.28
Vested	(87,539)	$	11.81
Cancelled	(35,887)	$	15.17
Balance at December 31, 2017	441,507	$	16.38	$	12,795

Deferred and unissued at December 31, 2017 (2)	2,213	$	22.53	$	64

(1)

Intrinsic value of stock-settled restricted stock units vested was based on our closing stock price on the last trading day of the year.

Schedule of stock warrants outstanding


				Weighted-
		Weighted-		Average
		Average		Remaining
	Number	Exercise		Contractual
Warrants outstanding at:	Outstanding	Price		Life
December 31, 2014	172,817	$	4.43
Exercised	166,617	$	3.81
Expired	400	$	—
December 31, 2015	5,800	$	4.23
Exercised	2,882	$	4.23
Expired	—	$	—
December 31, 2016	2,918	$	4.23
Exercised	2,918	$	4.23
Expired	—	$	—
December 31, 2017	—	$	—		—

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Taxes

Schedule of provision for income tax expense


	Year Ended
	December 31,
(In thousands)	2017		2016		2015
Current income taxes	$	(1,823)	$	2,042	$	1,012
Deferred income taxes		158		(611)		852
Total (benefit) provision for income taxes	$	(1,665)	$	1,431	$	1,864

Schedule of components of the Company’s deferred tax assets


	As of
	December 31,
(In thousands)	2017		2016
Deferred tax assets:
Accounts receivable and inventory reserves	$	846	$	1,182
Stock-based compensation		739		410
Intangible assets		515		837
Warranty reserves		410		285
Net operating loss carryforwards		197		156
Accrued liabilities		71		97
Other		194		157
Total deferred tax assets	$	2,972	$	3,124

Deferred tax liabilities:
Depreciation		(310)		(339)
Total deferred tax liabilities	$	(310)	$	(339)

Net deferred tax assets	$	2,662	$	2,785

Schedule of reconciliation of income tax expense (benefit)


	Year Ended
	December 31,
	2017		2016		2015
Tax expense at statutory rate	34.0	%	34.0	%	34.0	%
Deferred reprice - federal	28.0		—		—
Meals and entertainment	6.3		5.4		4.8
Unrecognized tax benefits	5.1		—		—
Transaction costs	3.8		—		—
Deferred reprice - state	1.9		(0.3)		9.2
Return to provision	1.4		—		—
Deferred true-up	0.5		(7.9)		—
Employee Stock Purchase Plan	(4.6)		3.0		—
Excess benefit on non-qualified stock options and RSUs	(22.8)		(8.0)		—
Incentive stock options	(89.1)		2.7		3.6
State income taxes, net of federal benefit	(4.4)		3.3		3.6
Other	0.2		1.0		2.0
Net effective rate	(39.7)	%	33.2	%	57.2	%

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2017

Fair Value Measurements

Schedule of fair value measurements for marketable securities


	As of
	December 31, 2017
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Recurring Fair Value Measurements:
Money market mutual funds	$	9,212	$	—	$	—	$	9,212
U.S. government and agency obligations		1,000		10,941		—		11,941
Corporate debt securities		—		8,003		—		8,003
Total	$	10,212	$	18,944	$	—	$	29,156


	As of
	December 31, 2016
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Recurring Fair Value Measurements:
Currency	$	14	$	—	$	—	$	14
Money market mutual funds		18,976		—		—		18,976
U.S. government and agency obligations		2,017		6,979		—		8,996
Corporate debt securities		—		1,998		—		1,998
Total	$	21,007	$	8,977	$	—	$	29,984

Quarterly Fiancial Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information (Unaudited)

Schedule of quarterly financial information


	Three Months Ended
	Mar. 31,		Jun. 30,		Sep. 30,		Dec. 31,
(In thousands, except per share data)	2017		2017		2017		2017
Revenues	$	19,850	$	26,264	$	28,283	$	34,886
Gross profit		14,226		19,230		20,755		26,057
(Loss) income from operations		(2,932)		730		1,258		4,927
Net (loss) income		(1,504)		3,787		1,342		2,230
Net (loss) income per share - Basic(1)		(0.09)		0.22		0.08		0.13
Net (loss) income per share - Diluted(1)		(0.09)		0.20		0.07		0.12


	Three Months Ended
	Mar. 31,				Jun. 30,				Sep. 30,
	2016				2016				2016
	As		As		As		As		As		As		Dec. 31,
(In thousands, except per share data)	Reported		Adjusted(2)		Reported		Adjusted(2)		Reported		Adjusted(2)		2016
Revenues	$	13,700	$	13,700	$	19,729	$	19,729	$	22,635	$	22,635	$	28,478
Gross profit		9,889		9,889		14,405		14,405		16,353		16,353		20,955
(Loss) income from operations		(1,786)		(1,786)		1,792		1,792		974		974		3,292
Net (loss) income attributable to common stockholders		(1,494)		(1,231)		177		204		169		334		2,379
Net (loss) income per share - Basic(1)		(0.45)		(0.38)		0.05		0.06		0.01		0.03		0.14
Net (loss) income per share - Diluted(1)		(0.45)		(0.38)		0.04		0.04		0.01		0.02		0.13

(1)

The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely.

(2)

Summary of Significant Accounting Policies (Details)	12 Months Ended
Summary of Significant Accounting Policies (Details)	Dec. 31, 2017 USD ($) item	Dec. 31, 2016 USD ($) item	Dec. 31, 2015 USD ($)	Sep. 03, 2016 USD ($) item
Accounts Receivable
Allowance for estimated non-receipt of co-payment reimbursements and for uncollectible accounts	$ 2,869,000	$ 2,568,000	$ 2,000,000
Percentage of claims	90.00%
Number of insurance companies \| item	2	2
Medicare accounts receivable	$ 4,400,000	$ 3,800,000
Medicare accounts receivable, long-term	2,718,000	2,823,000
Number of claims for which settlement agreement is made \| item				247
Value of claims for which settlement agreement is made				$ 1,500,000
Amount receivable on the settlement agreement	900,000
Reduction in accounts receivable			800,000
Reserves for uncollectible co-payment reimbursements and doubtful accounts
Beginning balance	2,568,000	2,000,000
Accounts receivable provision	6,492,000	7,087,000
Write- offs	(6,191,000)	(6,519,000)
Ending balance	2,869,000	2,568,000	2,000,000
Advertising
Advertising Expense	119,000	57,000	52,000
Product Warranty
Beginning balance	793,000	360,000
Warranty Provision	1,487,000	766,000
Processed warranty claims	(608,000)	(333,000)
Ending balance	1,672,000	793,000	360,000
Accrued warranty reserve, current	531,000	290,000
Accrued warranty reserve, long-term	1,141,000	503,000
Total accrued warranty reserve	1,672,000	793,000
Inventories
Finished goods	4,267,000	2,884,000
Component parts and work- in- process	6,773,000	3,670,000
Total inventories	11,040,000	6,554,000
Property and Equipment
Subtotal	8,123,000	4,362,000
Less: accumulated depreciation	(4,347,000)	(2,799,000)
Depreciation expense	1,500,000	600,000	500,000
Deferred Offering Costs
Deferred Offering Costs	0	0	$ 1,300,000
Impairment of Long-Lived Assets
Impairment of Long-Lived Assets	0
Equipment
Property and Equipment
Subtotal	3,235,000	2,322,000
Tooling
Property and Equipment
Subtotal	1,932,000	1,216,000
Furniture and Fixtures
Property and Equipment
Subtotal	427,000	323,000
Demonstration equipment
Property and Equipment
Subtotal	460,000
Leasehold improvements
Property and Equipment
Subtotal	938,000	$ 501,000
Patient rental equipment
Property and Equipment
Subtotal	$ 1,131,000
Minimum
Property and Equipment
Useful life	3 years
Maximum
Property and Equipment
Useful life	7 years
Garments \| Minimum
Product Warranty
Product Warranty	1 year
Garments \| Maximum
Product Warranty
Product Warranty	5 years
Controllers \| Minimum
Product Warranty
Product Warranty	1 year
Controllers \| Maximum
Product Warranty
Product Warranty	2 years
Accounts Receivable \| Insurance Company One \| Credit Concentration Risk
Accounts Receivable
Percentage of concentration	32.00%	27.00%
Accounts Receivable \| Insurance Company Two \| Credit Concentration Risk
Accounts Receivable
Percentage of concentration	15.00%	16.00%
Revenue \| Insurance Company One \| Customer Concentration Risk
Accounts Receivable
Percentage of concentration	31.00%	28.00%
Revenue \| Insurance Company Two \| Customer Concentration Risk
Accounts Receivable
Percentage of concentration	8.00%	12.00%

Marketable Securities (Details) - USD ($) $ in Thousands	12 Months Ended
Marketable Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Marketable Securities
Cost	$ 20,014	$ 11,011
Unrealized Gains		2
Unrealized Losses	70	19
Fair Value	19,944	10,994
Fair value less than 12 months	12,979	6,973
Unrealized losses, less than 12 months	38	19
Fair value, 12 months or more	6,965
Unrealized losses, 12 months or more	32
Fair Value, Total	19,944	6,973
Unrealized loss, Total	70	19
Unrealized holding loss on marketable debt securities in other comprehensive loss	100
Marketable securities sold	1,000
Gain or loss on sale of marketable securities	$ 0
Minimum
Marketable Securities
Maturity period of the marketable debt securities	12 months
Maximum
Marketable Securities
Maturity period of the marketable debt securities	25 months
U.S. government and agency obligations
Marketable Securities
Cost	$ 11,997	9,011
Unrealized Gains		2
Unrealized Losses	56	17
Fair Value	11,941	8,996
Fair value less than 12 months	5,974	5,978
Unrealized losses, less than 12 months	25	17
Fair value, 12 months or more	5,967
Unrealized losses, 12 months or more	31
Fair Value, Total	11,941	5,978
Unrealized loss, Total	56	17
Corporate debt securities and certificates of deposit
Marketable Securities
Cost	8,017	2,000
Unrealized Losses	14	2
Fair Value	8,003	1,998
Fair value less than 12 months	7,005	995
Unrealized losses, less than 12 months	13	2
Fair value, 12 months or more	998
Unrealized losses, 12 months or more	1
Fair Value, Total	8,003	995
Unrealized loss, Total	$ 14	$ 2

Stockholders' Equity - Stock Options and Restricted Stock (Details) - USD ($)			1 Months Ended	12 Months Ended
	May 09, 2017	Jul. 27, 2016	May 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock-based compensation, general disclosures
Stock-based compensation expense				$ 4,235,000	$ 1,889,000	$ 316,000
Dividends paid to date				$ 0
Number of:
Non vested options beginning of the year				496,997,000	472,401,000
Non-vested options end of the year				489,451,000	496,997,000	472,401,000
Vested options				315,082,000	251,968,000
Weighted-average grant date fair value of:
Non-vested options beginning of the year				$ 2.99	$ 2.85
Non-vested options end of the year				9.57	2.99	$ 2.85
Vested options				2.45	0.76
Forfeited options				$ 3.25	$ 2.71
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Number of share of common stock that restricted stock unit has the right to convert to				1
Stock Warrants Number Outstanding
Warrants outstanding beginning balance				2,918	5,800	172,817
Exercised				2,918	2,882	166,617
Expired						400
Warrants outstanding ending balance					2,918	5,800	172,817
Stock Warrants Weighted average exercise price
Weighted average exercise price					$ 4.23	$ 4.23	$ 4.43
Exercised				$ 4.23	$ 4.23	$ 3.81
Common stock options
Stock-based compensation, general disclosures
Vesting period (in years)		4 years
Term (in years)		10 years		7 years
Stock-based compensation expense				$ 1,000,000	$ 1,500,000	$ 100,000
Total grant date fair value of options vested during the period				800,000	$ 200,000	$ 100,000
Total unrecognized pre-tax compensation expense related to nonvested stock option awards				$ 4,200,000
Weighted-average period over which unrecognized compensation cost is expected to be recognized				3 years 6 months
Estimated weighted-average fair values and assumptions for stock options granted
Expected term				6 years	6 years	6 years
Expected volatility (as a percent)				44.00%	43.00%	60.00%
Risk-free interest rate (as a percent)				2.00%	1.00%	2.00%
Expected dividend yield (as a percent)				0.00%	0.00%	0.00%
Weighted average fair value per share of options granted (in dollars per share)				$ 11.81	$ 4.43	$ 1.91
Options
Outstanding at beginning of period				1,856,299	1,840,448	2,157,298
Granted				345,995	305,236	169,501
Exercised				(657,916)	(253,138)	(428,856)
Forfeited				(56,658)	(36,247)	(57,495)
Outstanding at end of period				1,487,720	1,856,299	1,840,448	2,157,298
Weighted Average Exercise Price ($/share)
Outstanding at beginning of period				$ 2.69	$ 1.18	$ 0.87
Granted				25.26	10.60	4.23
Exercised				1.23	0.93	0.65
Forfeited				7.22	5.34	2.26
Outstanding at end of period				$ 8.41	$ 2.69	$ 1.18	$ 0.87
Other information
Options exercisable Number of Exercisable				998,269	1,359,302	1,368,047
Options exercisable, weighted-average exercise price				$ 2.45	$ 1.06	$ 1.18
Weighted average remaining contractual life (in years)				6 years 2 months 12 days	5 years 6 months	5 years 9 months 18 days	6 years 2 months 12 days
Exercisable options, weighted-average remaining contractual life				4 years 9 months 18 days
Options outstanding				$ 29,611,000	$ 25,467,000	$ 18,573,000	$ 5,912,000
Options exercisable				26,488,000
Exercised				$ 15,927,000	$ 2,447,000	$ 4,569,000
Weighted average fair value per share of options granted (in dollars per share)				$ 11.81	$ 4.43	$ 1.91
Restricted stock unit awards, Average Intrinsic Value
Number of option outstanding				1,487,720	1,856,299	1,840,448	2,157,298
Weighted average remaining contractual life (in years)				6 years 2 months 12 days	5 years 6 months	5 years 9 months 18 days	6 years 2 months 12 days
Options Outstanding, weighted average exercise price				$ 8.41	$ 2.69	$ 1.18	$ 0.87
Options exercisable Number of Exercisable				998,269	1,359,302	1,368,047
Options exercisable, weighted-average exercise price				$ 2.45	$ 1.06	$ 1.18
Restricted Stock Units
Stock-based compensation, general disclosures
Stock-based compensation expense				$ 2,500,000	$ 700,000
Total unrecognized pre-tax compensation expense related to nonvested stock option awards				$ 5,100,000
Weighted-average period over which unrecognized compensation cost is expected to be recognized				2 years 1 month 6 days
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Restricted stock unit awards outstanding at the beginning of the period (in shares)				324,863
Granted (in shares)				240,070
Vested (in shares)				(87,539)
Cancelled (in shares)				35,887
Restricted stock unit awards outstanding at the end of the period (in shares)				441,507	324,863
Weighted Average Grant Date Fair Value Per Share
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share)				$ 10.39
Granted (in dollars per share)				22.28
Vested (in dollars per share)				11.81
Cancelled (in dollars per share)				15.17
Restricted stock unit awards outstanding at the end of the period (in dollars per share)				$ 16.38	$ 10.39
Restricted stock unit awards, Average Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value				$ 12,795	$ 5,331,000
Restricted Stock Units \| Minimum
Stock-based compensation, general disclosures
Vesting period (in years)				1 year
Restricted Stock Units \| Maximum
Stock-based compensation, general disclosures
Vesting period (in years)				3 years
Restricted Stock Units \| Non-employee Directors
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Granted (in shares)				1,981
Restricted stock unit awards outstanding at the end of the period (in shares)				2,213
Weighted Average Grant Date Fair Value Per Share
Restricted stock unit awards outstanding at the end of the period (in dollars per share)				$ 22.53
Restricted stock unit awards, Average Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value				$ 64,000
Restricted Stock Units \| Mr Shroff [Member]
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Number of shares issued for the restricted stock awards	1,494
Restricted Stock
Stock Warrants Weighted average exercise price
Shares repurchased to cover taxes from restricted stock award vesting (in shares)			26,086

Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Line Items
Current income taxes		$ (1,823)	$ 2,042	$ 1,012
Deferred income taxes		158	(611)	852
Total (benefit) provision for income taxes		(1,665)	1,431	1,864
Income before income taxes		4,190	4,310	$ 3,257
Components of Deferred Tax Assets
Accounts receivable and inventory reserves		846	1,182
Stock-based compensation		739	410
Intangible assets		515	837
Warranty reserves		410	285
Net operating loss carryforwards		197	156
Accrued liabilities		71	97
Other		194	157
Total deferred tax assets		2,972	3,124
Deferred tax liabilities:
Depreciation		(310)	(339)
Total deferred tax liabilities		(310)	(339)
Net deferred tax assets		$ 2,662	$ 2,785
Effective Income Tax Rate Reconciliation, Percent
Tax expense at statutory rate		34.00%	34.00%	34.00%
Deferred reprice - federal		28.00%
Meals and entertainment		6.30%	5.40%	4.80%
Unrecognized tax benefits		5.10%
Transaction costs		3.80%
Deferred reprice - state		1.90%	(0.30%)	9.20%
Return to provision		1.40%
Deferred true-up		0.50%	(7.90%)
Employee Stock Purchase Plan		(4.60%)	3.00%
Excess tax benefit on non-qualified stock options and RSUs		(22.80%)	(8.00%)
Incentive stock options		(89.10%)	2.70%	3.60%
State income taxes, net of federal benefit		(4.40%)	3.30%	3.60%
Other		0.20%	1.00%	2.00%
Net effective rate		(39.70%)	33.20%	57.20%
Effect of Tax Cuts and Jobs Act of 2017
Tax rate at statutory rate		34.00%	34.00%	34.00%
Amount of income tax expense (benefit) from effect of Tax Cuts and Jobs Act of 2017		$ 1,200
Amount of income tax expense (benefit) for remeasurement of deferred tax from change in tax rate pursuant to Tax Cuts and Jobs Act of 2017		1,200
Scenario, Forecast
Effective Income Tax Rate Reconciliation, Percent
Tax expense at statutory rate	21.00%
Effect of Tax Cuts and Jobs Act of 2017
Tax rate at statutory rate	21.00%
Minnesota
Components of Deferred Tax Assets
Net operating loss carryforwards		5,600
State
Effective Income Tax Rate Reconciliation, Percent
Unrecognized tax benefits		$ 200

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2017	Dec. 31, 2016
Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	50,000,000	50,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common shares authorized	300,000,000	300,000,000
Common Stock, Shares, Issued	17,872,465	16,833,737
Common Stock, Shares, Outstanding	17,846,379	16,833,737
Treasury stock (in shares)	26,086

Nature of Business and Operations	12 Months Ended
Nature of Business and Operations	Dec. 31, 2017
Nature of Business and Operations
Nature of Business and Operations	Note 1. Nature of Business and Operations Tactile Systems Technology, Inc. (“we,” “us,” and “our”) is the sole manufacturer and distributor of the Flexitouch and Entre systems, medical devices that help control symptoms of lymphedema, a chronic and progressive medical condition, and the Actitouch system, a medical device used to treat venous leg ulcers and chronic venous insufficiency. We provide our products for use in the home and sell them through vascular, wound and lymphedema clinics throughout the United States. We do business as “Tactile Medical.” We were originally incorporated in Minnesota under the name Tactile Systems Technology, Inc. on January 30, 1995. During 2006, we established a merger corporation and subsequently, on July 21, 2006, merged with and into this merger corporation, resulting in us being reincorporated as a Delaware corporation. The resulting corporation assumed the name Tactile Systems Technology, Inc. In September 2013, we began doing business as “Tactile Medical.” In connection with preparing for our initial public offering, our board of directors and stockholders approved a one-for-2.820044 reverse stock split of our capital stock. The reverse stock split became effective in June 2016. All share and per share amounts in these consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital. On August 2, 2016 we closed the initial public offering of our common stock, which resulted in the sale of 4,120,000 shares of our common stock at a public offering price of $10.00 per share. We received net proceeds from the initial public offering of approximately $35.4 million, after deducting underwriting discounts and approximately $2.9 million of transaction expenses. In connection with the closing of the initial public offering, all of our outstanding redeemable convertible preferred stock automatically converted to common stock on August 2, 2016. At August 2, 2016, we did not have any redeemable convertible preferred stock issued or outstanding. Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher sales in the third and fourth quarters as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs for our products, or because patients often spend the remaining balances in their healthcare flexible spending accounts at that time. This seasonality applies only to purchases of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid, or Veterans Administration hospitals, as those payers do not have plans that include patient deductibles for purchases of our products.

Basis of Presentation	12 Months Ended
Basis of Presentation	Dec. 31, 2017
Basis of Presentation
Basis of Presentation	Note 2. Basis of Presentation Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. The results for the year ended December 31, 2017 are not necessarily indicative of results to be expected for any future year. All intercompany balances and transactions have been eliminated in consolidation. We have reclassified certain prior year amounts to conform to the current year’s presentation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Comprehensive Income Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on available-for-sale marketable securities. JOBS Act Accounting Election As an emerging growth company under the Jumpstart Our Business Startups (“JOBS”) Act, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We have elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies.

Line of Credit - Bank	12 Months Ended
Line of Credit - Bank	Dec. 31, 2017
Line of Credit — Bank
Line of Credit — Bank	Note 7. Line of Credit — Bank At December 31, 2016 we had a $2.0 million line of credit with a bank that bore interest based on the prime rate. There was no outstanding balance on the line of credit as of December 31, 2016. The line of credit expired on May 11, 2017, and there was no outstanding balance on the line as of that date.

Nature of Business and Operations (Details) $ / shares in Units, $ in Thousands		1 Months Ended	12 Months Ended
	Aug. 02, 2016 USD ($) $ / shares shares	Jun. 30, 2016	Dec. 31, 2016 USD ($)
Subsidiary, Sale of Stock
Reverse stock split ratio		0.354604396
Proceeds from IPO			$ 41,200
IPO
Subsidiary, Sale of Stock
Number of shares of common stock sold \| shares	4,120,000
IPO price per share (in dollars per share) \| $ / shares	$ 10.00
Proceeds from IPO	$ 35,400
Expense Relating To Initial Public Offering	$ 2,900

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Consolidated Statements of Comprehensive Income
Net income	$ 5,855	$ 2,879
Other comprehensive loss
Unrealized loss on available-for-sale securities	(53)	(17)
Income tax related to items of other comprehensive loss	20	6
Total other comprehensive loss	(33)	(11)
Comprehensive income	$ 5,822	$ 2,868

Patent Costs, Net (Details) - USD ($) $ in Thousands	12 Months Ended
Patent Costs, Net (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets
Amortization expense	$ 300
Future Amortization
Weighted average remaining amortization period	9 years
Patents
Finite-Lived Intangible Assets
Patents	$ 3,536	$ 3,462
Less: accumulated amortization	(1,318)	(1,068)
Net patents	2,218	$ 2,394
Future Amortization
2018	249
2019	249
2020	249
2021	249
2022	249
Thereafter	$ 973

Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Accrued Expenses
Accrued taxes	$ 1,070	$ 1
Warranty	531	290
Travel and entertainment	453	308
Legal and consulting	317	275
Deferred rent	173	159
Clinical	15	45
Other	39	115
Total	$ 2,598	$ 1,193

Line of Credit - Bank (Details) - USD ($) $ in Thousands	May 11, 2017	Dec. 31, 2016
Line of Credit — Bank
Maximum borrowing capacity		$ 2,000
Outstanding line of credit	$ 0	$ 0

Commitments and Contingencies (Details) $ in Thousands	12 Months Ended
Commitments and Contingencies (Details) $ in Thousands	Dec. 31, 2017 USD ($) item	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Operating Leased Assets [Line Items]
Rent expense	$ 1,100	$ 1,000	$ 900
Number of leased vehicles \| item	16
2018	$ 853
2019	838
2020	823
2021	526
Total	3,040
Building
Operating Leased Assets [Line Items]
2018	777
2019	799
2020	801
2021	526
Total	2,903
Computer/Office Equipment
Operating Leased Assets [Line Items]
2018	54
2019	39
2020	22
Total	115
Fleet Car Program
Operating Leased Assets [Line Items]
2018	22
Total	$ 22

Commitments and Contingencies - Major Vendors (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 item	Dec. 31, 2016 item	Jan. 31, 2017 USD ($)
Concentration Risk [Line Items]
Number of vendors \| item	3	3
Purchase commitments
Purchase commitments \| $			$ 14.6
Purchases \| Vendor
Concentration Risk [Line Items]
Accounts Receivable (in percentage)	40.00%	37.00%

Commitments and Contingencies - Deferred Compensation (Details) - Certain Officers	12 Months Ended
	Dec. 31, 2017 item
Deferred Compensation Arrangement with Individual, Share-based Payments
Number of officers	2
Minimum
Deferred Compensation Arrangement with Individual, Share-based Payments
Severance term (in months)	9 months
Number of months of bonus payable	9 months
Maximum
Deferred Compensation Arrangement with Individual, Share-based Payments
Severance term (in months)	15 months
Number of months of bonus payable	15 months

Stockholders' Equity - Series A & B Preferred Stock (Details) $ / shares in Units, $ in Millions	Aug. 02, 2016 USD ($) $ / shares shares
Preferred stock
Conversion of preferred stock to common stock (in shares)	5,924,453
Additional shares of common stock issued immediately prior to completion of the IPO that the Series A and Series B preferred stockholders are entitled to receive assuming an initial offering price of $10	2,354,323
IPO
Preferred stock
Number of shares of common stock sold	4,120,000
Share price (in dollars per share) \| $ / shares	$ 10.00
Series B Preferred Stock
Preferred stock
Preferred stock to common stock conversion ratio	1
Shares issued immediately prior to completion of the IPO to pay accrued stock dividends on Series B convertible preferred stock, assuming a closing date of June 30, 2016 and an initial offering price of $10.00	956,842
Series A Preferred Stock
Preferred stock
Preferred stock to common stock conversion ratio	1.03
Accrued Cumulative Dividends \| $	$ 8.2
Payment of dividends \| $	$ 0.1

Stockholders' Equity - Stock-Based Compensation General Information (Details)	Dec. 31, 2017 shares
2016 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized	4,800,000

Stockholders' Equity - Employee Stock Purchase Plan (Details) - USD ($)				12 Months Ended
	Jan. 01, 2018	Nov. 30, 2017	May 15, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Apr. 27, 2017
Class of Stock [Line Items]
Shares issued				$ 3,137,000
Allocated Share-based Compensation Expense				$ 4,235,000	$ 1,889,000	$ 316,000
Employee Stock Purchase Plan
Class of Stock [Line Items]
Purchase price of common stock under plan (as a percent)				85.00%
Offering period (in months)				6 months
Shares issued (in shares)		47,151	259,981
Shares issued		$ 900,000	$ 2,200,000		0
Incremental share increase (as a percent)				1.00%
Incremental share increase (in shares)				500,000
Increase in number of shares reserved and available for issuance	178,463			168,337
Shares reserved				1,461,205			1,600,000
Allocated Share-based Compensation Expense				$ 700,000	$ 400,000

Net Income (Loss) Per Share Attributable to Common Stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended					12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Net Income (Loss) Per Share Attributable to Common Stockholders
Net income						$ 5,855	$ 2,879	$ 1,393
Convertible preferred stock dividends							1,247	1,845
Net income (loss) attributable to common stockholders	$ 2,230	$ 1,342	$ 3,787	$ (1,504)	$ 2,379	$ 5,855	$ 1,632	$ (452)
Weighted-average shares outstanding						17,355,175	8,913,042	2,929,438
Effect of restricted stock units, common stock options, warrants, and employee stock purchase plan shares						1,522,688	1,845,642
Weighted-average shares used to compute diluted net income (loss) per share						18,877,863	10,758,684	2,929,438
Net income (loss) per share - Basic	$ 0.13	$ 0.08	$ 0.22	$ (0.09)	$ 0.14	$ 0.34	$ 0.18	$ (0.15)
Net income (loss) per share - Diluted	$ 0.12	$ 0.07	$ 0.20	$ (0.09)	$ 0.13	$ 0.31	$ 0.15	$ (0.15)

Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fair Value Measurements
Available for sale debt securities	$ 19,944	$ 10,994
Amount of transfers of marketable securities within the three level hierarchy	0
U.S. government and agency obligations
Fair Value Measurements
Available for sale debt securities	11,941	8,996
Corporate debt securities and certificates of deposit
Fair Value Measurements
Available for sale debt securities	8,003	1,998
Recurring
Fair Value Measurements
Available for sale debt securities	29,156	29,984
Recurring \| Currency
Fair Value Measurements
Marketable securities		14
Recurring \| Money market mutual funds
Fair Value Measurements
Marketable securities	9,212	18,976
Recurring \| U.S. government and agency obligations
Fair Value Measurements
Available for sale debt securities	11,941	8,996
Recurring \| Corporate debt securities and certificates of deposit
Fair Value Measurements
Available for sale debt securities	8,003	1,998
Recurring \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Measurements
Available for sale debt securities	10,212	21,007
Recurring \| Quoted Prices in Active Markets for Identical Assets (Level 1) \| Currency
Fair Value Measurements
Marketable securities		14
Recurring \| Quoted Prices in Active Markets for Identical Assets (Level 1) \| Money market mutual funds
Fair Value Measurements
Marketable securities	9,212	18,976
Recurring \| Quoted Prices in Active Markets for Identical Assets (Level 1) \| U.S. government and agency obligations
Fair Value Measurements
Available for sale debt securities	1,000	2,017
Recurring \| Significant Other Observable Inputs (Level 2)
Fair Value Measurements
Available for sale debt securities	18,944	8,977
Recurring \| Significant Other Observable Inputs (Level 2) \| U.S. government and agency obligations
Fair Value Measurements
Available for sale debt securities	10,941	6,979
Recurring \| Significant Other Observable Inputs (Level 2) \| Corporate debt securities and certificates of deposit
Fair Value Measurements
Available for sale debt securities	$ 8,003	$ 1,998