IRIDEX (IRIX) 10-Q 7 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 19, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	IRIDEX CORP
Entity Central Index Key	1,006,045
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-30
Trading Symbol	IRIX
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		11,579,817

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	[1]
Current assets:
Cash and cash equivalents	$ 22,751	$ 23,747
Accounts receivable, net of allowance for doubtful accounts of $226 as of September 30, 2017 and $230 as of December 31, 2016	7,390	10,025
Inventories	10,669	11,643
Prepaid expenses and other current assets	671	450
Total current assets	41,481	45,865
Property and equipment, net	1,428	1,534
Intangible assets, net	120	132
Goodwill	533	533
Other long-term assets	48	80
Total assets	43,610	48,144
Current liabilities:
Accounts payable	1,864	1,994
Accrued compensation	2,338	2,346
Accrued expenses	1,680	2,135
Accrued warranty	427	310
Deferred revenue	1,403	1,383
Total current liabilities	7,712	8,168
Long-term liabilities:
Accrued warranty	255	293
Other long-term liabilities	541	523
Total liabilities	8,508	8,984
Stockholders’ equity:
Preferred stock, $0.01 par value, 2,000,000 shares authorized, no shares issued and outstanding
Common stock, $0.01 par value: Authorized: 30,000,000 shares; Issued and outstanding 11,579,379 and 11,304,736 shares as of September 30, 2017 and December 31, 2016, respectively	126	124
Additional paid-in capital	58,810	55,158
Accumulated deficit	(23,834)	(16,122)
Total stockholders’ equity	35,102	39,160
Total liabilities and stockholders’ equity	$ 43,610	$ 48,144
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016.

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 226	$ 230
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	11,579,379	11,304,736
Common stock, shares outstanding	11,579,379	11,304,736

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Income Statement [Abstract]
Total revenues	$ 10,865	$ 9,789	$ 31,350	$ 33,628
Cost of revenues	6,492	5,544	18,017	18,352
Gross profit	4,373	4,245	13,333	15,276
Operating expenses:
Research and development	1,428	1,256	4,452	4,007
Sales and marketing	3,769	2,378	10,346	7,212
General and administrative	2,422	1,858	6,380	5,546
Gain on sale of intellectual property	(175)		(175)
Total operating expenses	7,444	5,492	21,003	16,765
Loss from operations	(3,071)	(1,247)	(7,670)	(1,489)
Other expense, net	(16)	(51)	(19)	(83)
Loss from operations before provision for (benefit from) income taxes	(3,087)	(1,298)	(7,689)	(1,572)
Provision for (benefit from) income taxes	9	(627)	23	(674)
Net loss	$ (3,096)	$ (671)	$ (7,712)	$ (898)
Net loss per share:
Basic	$ (0.27)	$ (0.07)	$ (0.67)	$ (0.09)
Diluted	$ (0.27)	$ (0.07)	$ (0.67)	$ (0.09)
Weighted average shares used in computing net loss per common share:
Basic	11,569	10,129	11,544	10,083
Diluted	11,569	10,129	11,544	10,083

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (3,096)	$ (671)	$ (7,712)	$ (898)
Comprehensive loss	$ (3,096)	$ (671)	$ (7,712)	$ (898)

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017		Oct. 01, 2016
Operating activities:
Net loss	$ (7,712)		$ (898)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Gain on sale of intellectual property	(175)
Depreciation and amortization	660		461
Change in fair value of earn-out liability	122		86
Stock-based compensation	1,357		1,270
Provision for doubtful accounts	(4)		66
Changes in operating assets and liabilities:
Accounts receivable	2,639		1,290
Inventories	974		(1,572)
Prepaid expenses and other current assets	(221)		(839)
Other long-term assets	32		77
Accounts payable	(130)		249
Accrued compensation	(8)		2
Accrued expenses	(347)		16
Accrued warranty	79		(33)
Deferred revenue	20		(6)
Other long-term liabilities	80		26
Net cash (used in) provided by operating activities	(2,634)		195
Investing activities:
Acquisition of property and equipment	(542)		(792)
Proceeds from sale of intellectual property	175
Payment on earn-out liability	(292)		(313)
Net cash used in investing activities	(659)		(1,105)
Financing activities:
Proceeds from issuance of common stock, net of issuance costs	2,263
Proceeds from stock option exercises	328		650
Taxes paid related to net share settlements of equity awards	(294)		(99)
Repurchase of common stock			(59)
Net cash provided by financing activities	2,297		492
Net decrease in cash and cash equivalents	(996)		(418)
Cash and cash equivalents, beginning of period	23,747	[1]	9,995
Cash and cash equivalents, end of period	22,751		9,577
Cash paid during the period for:
Income taxes	$ 19		$ 37
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016.

Basis of Presentation

Basis of Presentation	9 Months Ended
	Sep. 30, 2017
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Basis of Presentation	1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of IRIDEX Corporation (“IRIDEX”, the “Company”, “we”, “our”, or “us”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, together with management’s discussion and analysis of the Company’s financial condition and results of operations, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the Securities and Exchange Commission (“SEC”) on March 15, 2017. The results of operations for the three and nine months ended September 30, 2017 and October 1, 2016 are not necessarily indicative of the results for the fiscal year ending December 30, 2017 or any future interim period. The three and nine month periods ended September 30, 2017 and October 1, 2016, each had 13 weeks. For purposes of reporting the financial results, the Company’s fiscal years end on the Saturday closest to the end of December. Periodically, the Company includes a 53rd week to a year in order to end that year on the Saturday closest to the end of December.

Summary of Significant Accounti

Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2017
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies The Company’s significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on March 15, 2017. Financial Statement Presentation. The unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates. The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on our operating results. Revenue Recognition. Our revenues arise from the sale of laser consoles, delivery devices, consumables and service and support activities. Revenue from product sales is recognized upon receipt of a purchase order and product shipment provided that no significant obligations remain and collectibility is reasonably assured. Shipments are generally made with Free-On-Board (“FOB”) shipping point terms, whereby title passes upon shipment from our dock. Any shipments with FOB receiving point terms are recorded as revenue when the shipment arrives at the receiving point. Cost is recognized as product sales revenue is recognized. The Company’s sales may include post-sales obligations for training or other deliverables. For revenue arrangements such as these, we recognize revenue in accordance with Accounting Standards Codification (“ASC”) 605, “Revenue Recognition, Multiple-Element Arrangements” In international regions, we utilize distributors to market and sell our products. We recognize revenue upon shipment for sales to these independent, third-party distributors as we have no continuing obligations subsequent to shipment. Generally our distributors are responsible for all marketing, sales, installation, training and warranty labor coverage for our products. Our standard terms and conditions do not provide price protection or stock retention rights to any of our distributors. Royalty revenues are typically based on licensees’ net sales of products that utilize our technology and are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured, such as upon the earlier of the receipt of a royalty statement from the licensee or upon payment by the licensee. Concentration of Credit Risk. Our cash and cash equivalents are deposited in demand and money market accounts. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand and therefore, bear minimal risk. We market our products to distributors and end-users throughout the world. Sales to international distributors are generally made on open credit terms and letters of credit. Management performs ongoing credit evaluations of our customers and maintains an allowance for potential credit losses. Historically, we have not experienced any significant losses related to individual customers or a group of customers in any particular geographic area. For the three and nine month periods ended September 30, 2017 and October 1, 2016 no single customer accounted for more than 10% of total revenues. As of September 30, 2017, one customer accounted for 12% of our accounts receivable and no customer accounted for over 10% of our accounts receivable as of December 31, 2016. For the three month period ended September 30, 2017, one supplier accounted for 14% of our purchases and no supplier accounted for over 10% of our purchases for the nine month period then ended. For the three and nine month periods ended October 1, 2016 no supplier accounted for over 10% of our purchases. Taxes Collected from Customers and Remitted to Governmental Authorities. Taxes collected from customers and remitted to governmental authorities are recognized on a net basis in the accompanying condensed consolidated statements of operations. Shipping and Handling Costs. Our shipping and handling costs billed to customers are included in revenues and the associated expense is recorded in cost of revenues for all periods presented. Deferred Revenue. Revenue related to extended service contracts is deferred and recognized on a straight line basis over the period of the applicable service contract. Costs associated with these service arrangements are recognized as incurred. A reconciliation of the changes in the Company’s deferred revenue balance for the nine months ended September 30, 2017 and October 1, 2016 is as follows: Nine Months Ended September 30, 2017 October 1, 2016 Balance, beginning of period $ 1,383 $ 1,311 Additions to deferral 981 1,025 Revenue recognized (961 ) (1,031 ) Balance, end of period $ 1,403 $ 1,305 Warranty. In March 2017, the Company began offering a 5 year warranty on the laser heads for its IQ 532/577 laser consoles. The Company has previously provided a one to two year warranty on its products, which is accrued for upon shipment of products. Actual warranty costs incurred have not materially differed from those accrued. The Company’s warranty policy is applicable to products which are considered defective in their performance or fail to meet the product specifications. Warranty costs are reflected in the statement of operations as cost of revenues. A reconciliation of the changes in the Company’s warranty liability for the nine months ended September 30, 2017 and October 1, 2016 is as follows: Nine Months Ended September 30, 2017 October 1, 2016 Balance, beginning of period $ 603 $ 603 Accruals for product warranties 319 318 Cost of warranty claims (240 ) (351 ) Balance, end of period $ 682 $ 570 Reclassifications. Certain reclassifications have been made to the prior year financial statements included in these condensed consolidated financial statements to conform to the current year presentation. The reclassifications had no impact on previously reported net loss or accumulated deficit. Recently Issued and Adopted Accounting Standards. In May 2014, as part of its ongoing efforts to assist in the convergence of accounting principles generally accepted in the United States (“U.S. GAAP”) and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers (Topic 606). Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients In February 2016, the FASB issued ASU 2016-02, "Leases," In October 2016, the FASB issued ASU 2016-16 to ASC 740 " Income Taxes

Inventories

Inventories	9 Months Ended
	Sep. 30, 2017
Inventory Disclosure [Abstract]
Inventories	3. Inventories The components of the Company’s inventories as of September 30, 2017 and December 31, 2016 are as follows: September 30, 2017 December 31, 2016 Raw materials $ 5,003 $ 5,331 Work in process 1,864 2,337 Finished goods 3,802 3,975 Total inventories $ 10,669 $ 11,643

Goodwill and Intangible Assets

Goodwill and Intangible Assets	9 Months Ended
	Sep. 30, 2017
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill and Intangible Assets	4. Goodwill and Intangible Assets Goodwill. The carrying value of goodwill was $0.5 million as of September 30, 2017 and December 31, 2016. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company performs an annual impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceed the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to assess impairment, its common stock price is an important component of the fair value calculation. If the Company’s stock price continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit and can lead to potential impairment in future periods. The Company performed its annual impairment test during the second quarter of fiscal 2017 and determined that its goodwill was not impaired. As of September 30, 2017, the Company had not identified any factors that indicated there was an impairment of its goodwill and determined that no additional impairment analysis was then required. Intangible Assets. The following table summarizes the components of gross and net intangible asset balances: September 30, 2017 December 31, 2016 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Remaining Amortization Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relations 240 120 120 7.50 Years 240 108 132 For the nine months ended September 30, 2017 and October 1, 2016, amortization expense totaled $12 thousand for each period. The amortization of customer relations was charged to sales and marketing expense and the amortization of patents was charged to cost of revenues. Future estimated amortization expense (in thousands): Fiscal Year: 2017 (three months) $ 4 2018 16 2019 16 2020 16 2021 16 Thereafter 52 Total $ 120 In August 2017, we closed the sale of certain intellectual property. Proceeds from the sale were $175 thousand.

Fair Value Measurements

Fair Value Measurements	9 Months Ended
	Sep. 30, 2017
Fair Value Disclosures [Abstract]
Fair Value Measurements	5. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: • Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. • Level 2: Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument. • Level 3: Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considers counterparty credit risk in its assessment of fair value. The carrying amounts of the Company’s financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses as of September 30, 2017 and December 31, 2016, approximate fair value because of the short maturity of these instruments. As of September 30, 2017 and December 31, 2016, financial assets and liabilities measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows: As of September 30, 2017 As of December 31, 2016 Fair Value Measurements Fair Value Measurements (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Money market funds $ 22,149 $ — $ — $ 22,149 $ 8,270 $ — $ — $ 8,270 Liabilities: Earn-out liability $ — $ — $ 524 $ 524 $ — $ — $ 694 $ 694 The Company’s Level 1 financial assets are money market funds whose fair values are based on quoted market prices. The Company does not have any Level 2 financial assets or liabilities. The fair value of the earn-out liability arising from the acquisition of RetinaLabs, Inc. is classified within Level 3 of the fair value hierarchy since it is based on significant unobservable inputs. The significant unobservable inputs include projected royalties and discount rates to present value the payments. A significant increase (decrease) in the projected royalty payments in isolation could result in a significantly higher (lower) fair value measurement and a significant increase (decrease) in the discount rate in isolation could result in a significantly lower (higher) fair value measurement. The fair value of the earn-out liability is calculated on a quarterly basis by the Company based on a collaborative effort of the Company’s operations, finance and accounting groups as additional information becomes available. Any change in the fair value adjustment is recorded in the statement of operations of that period. The following tables present quantitative information about the inputs and valuation methodologies used for our fair value measurements classified in Level 3 of the fair value hierarchy as of September 30, 2017 and December 31, 2016. As of September 30, 2017 Fair Value (in thousands) Valuation Technique Significant Unobservable Input Weighted Average (range) Earn-out liability $ 524 Discounted cash flow Projected royalties (in thousands) $1,719 Discount rate 10.89% (10.89% - 27.00%) As of December 31, 2016 Fair Value (in thousands) Valuation Technique Significant Unobservable Input Weighted Average (range) Earn-out liability $ 694 Discounted cash flow Projected royalties (in thousands) $2,154 Discount rate 11.22% (11.22% - 27.00%) A reconciliation of the changes in the Company’s earn-out liability (Level 3 liability) for the nine months ended September 30, 2017 and October 1, 2016 is as follows: Nine Months Ended (in thousands) September 30, 2017 October 1, 2016 Balance as of beginning of the period $ 694 $ 1,005 Payments against earn-out (292 ) (313 ) Change in fair value of earn-out liability 122 86 Balance as of the end of the period $ 524 $ 778 The earn-out liability is included in accrued expenses and other long-term liabilities in the condensed consolidated balance sheets. Any change in the fair value adjustment is recorded to other expense in the condensed consolidated statements of operations.

Stock Based Compensation

Stock Based Compensation	9 Months Ended
	Sep. 30, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock Based Compensation	6. Stock Based Compensation The Company accounts for stock-based compensation granted to employees and directors, including employees stock option awards, restricted stock and restricted stock units in accordance with ASC 718 , “Compensation – Stock Compensation” The Company values options using the Black-Scholes option pricing model. Restricted stock and time-based restricted stock units are valued at the grant date fair value of the underlying common shares. Performance-based restricted stock units with market conditions are valued using the Monte Carlo simulation model. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock. The Monte Carlo simulation model incorporates assumptions for the holding period, risk-free interest rate, stock price volatility and dividend yield. 2008 Equity Incentive Plan. For the nine months ended September 30, 2017, the only active stock-based compensation plan was the 2008 Equity Incentive Plan (the “Incentive Plan”). The terms of awards granted during the nine months ended September 30, 2017 were consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016. On June 14, 2017, the stockholders approved an increase of 650,000 shares of Common Stock reserved for issuance under the Incentive Plan. Summary of Stock Options The following table summarizes information regarding activity under the Incentive Plan during the nine months ended September 30, 2017: Number of Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value (thousands) Outstanding as of December 31, 2016 470,985 $ 8.69 Granted 465,900 $ 10.05 Exercised (55,752 ) $ 5.89 Canceled or forfeited (52,607 ) $ 10.50 Outstanding as of September 30, 2017 828,526 $ 9.53 $ 601 The weighted average grant date fair value of the options granted under the Incentive Plan as calculated using the Black-Scholes option-pricing model was $3.55 and $6.37 per share for the three months ended September 30, 2017 and October 1, 2016, respectively. The weighted average grant date fair value of the options granted under the Incentive Plan as calculated using the Black-Scholes option-pricing model was $3.75 and $5.23 per share for the nine months ended September 30, 2017 and October 1, 2016, respectively. The Company uses the Black-Scholes option-pricing model to estimate fair value of stock-based awards (options) with the following weighted average assumptions: Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 Average risk free interest rate 1.80 % 1.03 % 1.79 % 1.10 % Expected life (in years) 4.55 years 4.55 years 4.55 years 4.55 years Dividend yield —% —% —% —% Average volatility 42 % 46 % 42 % 46 % Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility is based on analysis of the Company’s stock price history over a period commensurate with the expected term of the options, trading volume of the Company’s stock, look-back volatilities and Company specific events that affected volatility in a prior period. The expected term of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is based on the history of exercises and cancellations on all past option grants made by the Company, the contractual term, the vesting period and the expected remaining term of the outstanding options. The risk-free interest rate is based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. No dividend yield is included as the Company has not issued any dividends and does not anticipate issuing any dividends in the future. The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and October 1, 2016: Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 Cost of revenues $ 39 $ 3 $ 131 $ 84 Research and development 104 39 215 90 Sales and marketing 59 38 238 119 General and administrative 319 390 773 977 $ 521 $ 470 $ 1,357 $ 1,270 Stock-based compensation expense capitalized to inventory was immaterial for the nine months ended September 30, 2017 and October 1, 2016. Occasionally, the Company will grant stock-based instruments to non-employees. During the nine months ended September 30, 2017 and October 1, 2016, the amount of stock-based compensation related to non-employee options was not material. Information regarding stock options outstanding, vested, expected to vest, and exercisable as of September 30, 2017 is summarized below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic (thousands) Options outstanding 828,526 $ 9.53 5.45 $ 601 Options vested and expected to vest 743,785 $ 9.45 5.30 $ 597 Options exercisable 272,008 $ 7.94 3.39 $ 555 The aggregate intrinsic value in the table above represents the pre-tax intrinsic value, based on the Company’s closing price as of September 30, 2017, that would have been received by option holders had all option holders exercised their stock options as of that date. This amount changes based on the fair market value of the Company’s common stock. The total intrinsic value of options exercised for the three months ended September 30, 2017 and October 1, 2016 was approximately $31 thousand and $187 thousand, respectively, and the nine months ended September 30, 2017 and October 1, 2016 was approximately $328 thousand and $735 thousand, respectively. As of September 30, 2017, there was $3.9 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested stock-based compensation arrangements under the Incentive Plan. The cost is expected to be recognized over a weighted average period of 3.41 years. Summary of Restricted Stock Units and Awards Information regarding the restricted stock units (“RSUs”) activity for the nine months ended September 30, 2017 is summarized below: Number of Shares Outstanding as of December 31, 2016 335,805 Restricted stock units granted 112,391 Restricted stock units released (67,197 ) Restricted stock units forfeited (30,789 ) Outstanding as of September 30, 2017 350,210 During the nine months ended September 30, 2017, the Company awarded 112,391 restricted stock units at a weighted-average grant date fair value of $11.28 per share. RSUs granted with market conditions are valued using the Monte Carlo simulation model and compensation expense is recognized ratably during the service period even if the market condition is not satisfied. To the extent that the market condition is not met, the RSUs will not vest and will be cancelled. No RSUs with market conditions were granted during the nine months ended September 30, 2017. RSUs granted with performance conditions are valued at the grant date fair value of the underlying common shares. The Company makes a determination regarding the probability of the performance criteria being achieved and compensation expense is recognized ratably over the vesting period, if it is expected that the performance criteria will be met. Information regarding the RSUs granted with performance conditions activity for the nine months ended September 30, 2017 is summarized below: Number of Shares Outstanding as of December 31, 2016 1,289 Restricted stock awards granted 4,301 Restricted stock awards released (1,289 ) Outstanding as of September 30, 2017 4,301 During the nine months ended September 30, 2017, the Company awarded 4,301 RSUs granted with performance conditions at a weighted-average grant date fair value of $9.30 per share.

Income Taxes

Income Taxes	9 Months Ended
	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Income Taxes	7. Income Taxes Provision for Income Tax. The Company calculates its interim tax provision in accordance with the provisions of ASC 740-270, Income Taxes; Interim Reporting The Company recorded a provision for income tax of $23 thousand and an income tax benefit of $674 thousand for the nine months ended September 30, 2017 and October 1, 2016, respectively. Deferred Income Taxes. The Company accounts for income taxes in accordance with ASC topic 740, Income Taxes As of the fourth quarter of fiscal year 2016, based on the Company’s recent history of earnings and its forecasted losses, management believes on the more likely than not basis that a full valuation allowance is required. Accordingly, in the fourth quarter of fiscal year 2016, the company provided a full valuation allowance on its federal and states deferred tax assets. Uncertain Tax Positions. The Company accounts for its uncertain tax positions in accordance with ASC 740. As of December 31, 2016, the Company had $1.0 million of unrecognized tax benefits none of unrecognized tax benefits would result in a change in the Company’s effective tax rate if recognized in future years. The Company is not aware of any other uncertain tax positions that could result in significant additional payments, accruals, or other material deviation in this estimate during the fiscal year. The Company is subject to United States federal income tax as well as to income taxes in state jurisdictions. The Company’s federal and state income tax returns are open to examination by tax authorities for three years and three-to-five years, respectively.

Computation of Basic and Dilute

Computation of Basic and Diluted Net Loss Per Common Share	9 Months Ended
	Sep. 30, 2017
Earnings Per Share [Abstract]
Computation of Basic and Diluted Net Loss Per Common Share	8. Computation of Basic and Diluted Net Loss Per Common Share Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding during the period. Common stock equivalents consist of incremental common shares issuable upon the exercise of stock options, and the release (vesting) of restricted stock units and awards and are calculated under the treasury stock method. Common stock equivalent shares from unexercised stock options, and unvested restricted stock units and awards are excluded from the computation for periods in which we incur a net loss or if the exercise price of such options is greater than the average market price of our common stock for the period as their effect would be anti-dilutive. For the nine months ended September 30, 2017 and October 1, 2016, stock options, RSUs, and Restricted Stock Awards (“RSAs”) to purchase 1,178,736 and 799,480 shares, respectively, were excluded from the computation of diluted weighted average shares outstanding. A reconciliation of the numerator and denominator of basic and diluted net loss per common share is provided as follows: Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 Numerator: Net loss $ (3,096 ) $ (671 ) $ (7,712 ) $ (898 ) Denominator: Weighted average shares of common stock (basic) 11,569 10,129 11,544 10,083 Effect of dilutive preferred shares - - - - Weighted average shares of common stock (diluted) 11,569 10,129 11,544 10,083 Per share data: Basic net loss per share $ (0.27 ) $ (0.07 ) $ (0.67 ) $ (0.09 ) Diluted net loss per share $ (0.27 ) $ (0.07 ) $ (0.67 ) $ (0.09 )

Business Segments

Business Segments	9 Months Ended
	Sep. 30, 2017
Segment Reporting [Abstract]
Business Segments	9. Business Segments The Company operates in one segment, ophthalmology. The Company develops, manufactures and markets medical devices. Our revenues arise from the sale of consoles, delivery devices, consumables, service, and support activities. Revenue information shown by geographic region, based on the sales destination, is as follows: Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 United States $ 6,294 $ 5,871 $ 17,880 $ 18,642 Europe 1,727 2,191 5,502 6,779 Rest of Americas 689 476 1,853 1,858 Asia/Pacific Rim 2,155 1,251 6,115 6,349 $ 10,865 $ 9,789 $ 31,350 $ 33,628 Revenues are attributed to countries based on location of end customers. No individual country accounted for more than 10% of the Company’s revenues, other than the United States. United States accounted for 57.9% and 60.0% of revenues for the three month periods ended September 30, 2017 and October 1, 2016, respectively. For the nine month period ended September 30, 2017 and October 1, 2016, the United States accounted for 57.0% and 55.4% of sales, respectively. International sales, other than the United States, accounted for 42.1% and 40.0% of revenues for the three month periods ended September 30, 2017 and October 1, 2016, respectively. For nine month period ended September 30, 2017 and October 1, 2016, International sales, other than the United States, accounted for 43.0% and 44.6% of sales, respectively.

Subsequent Events

Subsequent Events	9 Months Ended
	Sep. 30, 2017
Subsequent Events [Abstract]
Subsequent Events	10. Subsequent Events The Company has evaluated subsequent events and has concluded that no subsequent events that require disclosure in the financial statements have occurred since the quarter ended September 30, 2017.

Summary of Significant Accoun17

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2017
Accounting Policies [Abstract]
Financial Statement Presentation	Financial Statement Presentation. The unaudited condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates	Use of Estimates. The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on our operating results.
Revenue Recognition	Revenue Recognition. Our revenues arise from the sale of laser consoles, delivery devices, consumables and service and support activities. Revenue from product sales is recognized upon receipt of a purchase order and product shipment provided that no significant obligations remain and collectibility is reasonably assured. Shipments are generally made with Free-On-Board (“FOB”) shipping point terms, whereby title passes upon shipment from our dock. Any shipments with FOB receiving point terms are recorded as revenue when the shipment arrives at the receiving point. Cost is recognized as product sales revenue is recognized. The Company’s sales may include post-sales obligations for training or other deliverables. For revenue arrangements such as these, we recognize revenue in accordance with Accounting Standards Codification (“ASC”) 605, “Revenue Recognition, Multiple-Element Arrangements” In international regions, we utilize distributors to market and sell our products. We recognize revenue upon shipment for sales to these independent, third-party distributors as we have no continuing obligations subsequent to shipment. Generally our distributors are responsible for all marketing, sales, installation, training and warranty labor coverage for our products. Our standard terms and conditions do not provide price protection or stock retention rights to any of our distributors. Royalty revenues are typically based on licensees’ net sales of products that utilize our technology and are recognized as earned in accordance with the contract terms when royalties from licensees can be reliably measured and collectibility is reasonably assured, such as upon the earlier of the receipt of a royalty statement from the licensee or upon payment by the licensee.
Concentration of Credit Risk	Concentration of Credit Risk. Our cash and cash equivalents are deposited in demand and money market accounts. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand and therefore, bear minimal risk. We market our products to distributors and end-users throughout the world. Sales to international distributors are generally made on open credit terms and letters of credit. Management performs ongoing credit evaluations of our customers and maintains an allowance for potential credit losses. Historically, we have not experienced any significant losses related to individual customers or a group of customers in any particular geographic area. For the three and nine month periods ended September 30, 2017 and October 1, 2016 no single customer accounted for more than 10% of total revenues. As of September 30, 2017, one customer accounted for 12% of our accounts receivable and no customer accounted for over 10% of our accounts receivable as of December 31, 2016. For the three month period ended September 30, 2017, one supplier accounted for 14% of our purchases and no supplier accounted for over 10% of our purchases for the nine month period then ended. For the three and nine month periods ended October 1, 2016 no supplier accounted for over 10% of our purchases.
Taxes Collected from Customers and Remitted to Governmental Authorities	Taxes Collected from Customers and Remitted to Governmental Authorities. Taxes collected from customers and remitted to governmental authorities are recognized on a net basis in the accompanying condensed consolidated statements of operations.
Shipping and Handling Costs	Shipping and Handling Costs. Our shipping and handling costs billed to customers are included in revenues and the associated expense is recorded in cost of revenues for all periods presented.
Deferred Revenue	Deferred Revenue. Revenue related to extended service contracts is deferred and recognized on a straight line basis over the period of the applicable service contract. Costs associated with these service arrangements are recognized as incurred. A reconciliation of the changes in the Company’s deferred revenue balance for the nine months ended September 30, 2017 and October 1, 2016 is as follows: Nine Months Ended September 30, 2017 October 1, 2016 Balance, beginning of period $ 1,383 $ 1,311 Additions to deferral 981 1,025 Revenue recognized (961 ) (1,031 ) Balance, end of period $ 1,403 $ 1,305
Warranty	Warranty. In March 2017, the Company began offering a 5 year warranty on the laser heads for its IQ 532/577 laser consoles. The Company has previously provided a one to two year warranty on its products, which is accrued for upon shipment of products. Actual warranty costs incurred have not materially differed from those accrued. The Company’s warranty policy is applicable to products which are considered defective in their performance or fail to meet the product specifications. Warranty costs are reflected in the statement of operations as cost of revenues. A reconciliation of the changes in the Company’s warranty liability for the nine months ended September 30, 2017 and October 1, 2016 is as follows: Nine Months Ended September 30, 2017 October 1, 2016 Balance, beginning of period $ 603 $ 603 Accruals for product warranties 319 318 Cost of warranty claims (240 ) (351 ) Balance, end of period $ 682 $ 570
Reclassifications	Reclassifications. Certain reclassifications have been made to the prior year financial statements included in these condensed consolidated financial statements to conform to the current year presentation. The reclassifications had no impact on previously reported net loss or accumulated deficit.
Recently Issued and Adopted Accounting Standards	Recently Issued and Adopted Accounting Standards. In May 2014, as part of its ongoing efforts to assist in the convergence of accounting principles generally accepted in the United States (“U.S. GAAP”) and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers (Topic 606). Revenue from Contracts with Customers (Topic 606) Narrow-Scope Improvements and Practical Expedients In February 2016, the FASB issued ASU 2016-02, "Leases," In October 2016, the FASB issued ASU 2016-16 to ASC 740 " Income Taxes

Summary of Significant Accoun18

Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2017
Accounting Policies [Abstract]
Reconciliation of Changes in Deferred Revenue	A reconciliation of the changes in the Company’s deferred revenue balance for the nine months ended September 30, 2017 and October 1, 2016 is as follows: Nine Months Ended September 30, 2017 October 1, 2016 Balance, beginning of period $ 1,383 $ 1,311 Additions to deferral 981 1,025 Revenue recognized (961 ) (1,031 ) Balance, end of period $ 1,403 $ 1,305
Reconciliation of Changes in Warranty Liability	A reconciliation of the changes in the Company’s warranty liability for the nine months ended September 30, 2017 and October 1, 2016 is as follows: Nine Months Ended September 30, 2017 October 1, 2016 Balance, beginning of period $ 603 $ 603 Accruals for product warranties 319 318 Cost of warranty claims (240 ) (351 ) Balance, end of period $ 682 $ 570

Inventories (Tables)

Inventories (Tables)	9 Months Ended
	Sep. 30, 2017
Inventory Disclosure [Abstract]
Components of Inventories	The components of the Company’s inventories as of September 30, 2017 and December 31, 2016 are as follows: September 30, 2017 December 31, 2016 Raw materials $ 5,003 $ 5,331 Work in process 1,864 2,337 Finished goods 3,802 3,975 Total inventories $ 10,669 $ 11,643

Goodwill and Intangible Assets

Goodwill and Intangible Assets (Tables)	9 Months Ended
	Sep. 30, 2017
Goodwill And Intangible Assets Disclosure [Abstract]
Summary of Components of Gross and Net Intangible Asset	The following table summarizes the components of gross and net intangible asset balances: September 30, 2017 December 31, 2016 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Remaining Amortization Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relations 240 120 120 7.50 Years 240 108 132
Future Estimated Amortization Expense	Future estimated amortization expense (in thousands): Fiscal Year: 2017 (three months) $ 4 2018 16 2019 16 2020 16 2021 16 Thereafter 52 Total $ 120

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	9 Months Ended
	Sep. 30, 2017
Fair Value Disclosures [Abstract]
Financial Assets and Liabilities Measured and Recognized at Fair Value on a Recurring Basis	As of September 30, 2017 and December 31, 2016, financial assets and liabilities measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows: As of September 30, 2017 As of December 31, 2016 Fair Value Measurements Fair Value Measurements (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Money market funds $ 22,149 $ — $ — $ 22,149 $ 8,270 $ — $ — $ 8,270 Liabilities: Earn-out liability $ — $ — $ 524 $ 524 $ — $ — $ 694 $ 694
Quantitative Information about the Inputs and Valuation Methodologies Used for Fair Value Measurements	The following tables present quantitative information about the inputs and valuation methodologies used for our fair value measurements classified in Level 3 of the fair value hierarchy as of September 30, 2017 and December 31, 2016. As of September 30, 2017 Fair Value (in thousands) Valuation Technique Significant Unobservable Input Weighted Average (range) Earn-out liability $ 524 Discounted cash flow Projected royalties (in thousands) $1,719 Discount rate 10.89% (10.89% - 27.00%) As of December 31, 2016 Fair Value (in thousands) Valuation Technique Significant Unobservable Input Weighted Average (range) Earn-out liability $ 694 Discounted cash flow Projected royalties (in thousands) $2,154 Discount rate 11.22% (11.22% - 27.00%)
Reconciliation of the Changes in the Company's Earn-Out - Cash (Level 3 Liabilities) Balance	A reconciliation of the changes in the Company’s earn-out liability (Level 3 liability) for the nine months ended September 30, 2017 and October 1, 2016 is as follows: Nine Months Ended (in thousands) September 30, 2017 October 1, 2016 Balance as of beginning of the period $ 694 $ 1,005 Payments against earn-out (292 ) (313 ) Change in fair value of earn-out liability 122 86 Balance as of the end of the period $ 524 $ 778

Stock Based Compensation (Table

Stock Based Compensation (Tables)	9 Months Ended
	Sep. 30, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Summary of Activity under Incentive Plan	The following table summarizes information regarding activity under the Incentive Plan during the nine months ended September 30, 2017: Number of Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value (thousands) Outstanding as of December 31, 2016 470,985 $ 8.69 Granted 465,900 $ 10.05 Exercised (55,752 ) $ 5.89 Canceled or forfeited (52,607 ) $ 10.50 Outstanding as of September 30, 2017 828,526 $ 9.53 $ 601
Weighted Average Assumptions for Fair Value Estimate of Stock-Based Awards (Options)	The Company uses the Black-Scholes option-pricing model to estimate fair value of stock-based awards (options) with the following weighted average assumptions: Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 Average risk free interest rate 1.80 % 1.03 % 1.79 % 1.10 % Expected life (in years) 4.55 years 4.55 years 4.55 years 4.55 years Dividend yield —% —% —% —% Average volatility 42 % 46 % 42 % 46 %
Stock-Based Compensation Expense	The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and October 1, 2016: Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 Cost of revenues $ 39 $ 3 $ 131 $ 84 Research and development 104 39 215 90 Sales and marketing 59 38 238 119 General and administrative 319 390 773 977 $ 521 $ 470 $ 1,357 $ 1,270
Summary of Stock Options Outstanding, Vested, Expected to Vest and Exercisable	Information regarding stock options outstanding, vested, expected to vest, and exercisable as of September 30, 2017 is summarized below: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic (thousands) Options outstanding 828,526 $ 9.53 5.45 $ 601 Options vested and expected to vest 743,785 $ 9.45 5.30 $ 597 Options exercisable 272,008 $ 7.94 3.39 $ 555
Restricted Stock Units and Awards	Information regarding the restricted stock units (“RSUs”) activity for the nine months ended September 30, 2017 is summarized below: Number of Shares Outstanding as of December 31, 2016 335,805 Restricted stock units granted 112,391 Restricted stock units released (67,197 ) Restricted stock units forfeited (30,789 ) Outstanding as of September 30, 2017 350,210 Information regarding the RSUs granted with performance conditions activity for the nine months ended September 30, 2017 is summarized below: Number of Shares Outstanding as of December 31, 2016 1,289 Restricted stock awards granted 4,301 Restricted stock awards released (1,289 ) Outstanding as of September 30, 2017 4,301

Computation of Basic and Dilu23

Computation of Basic and Diluted Net Loss Per Common Share (Tables)	9 Months Ended
	Sep. 30, 2017
Earnings Per Share [Abstract]
Reconciliation of Numerator and Denominator of Basic and Diluted Net Loss Per Common Share	A reconciliation of the numerator and denominator of basic and diluted net loss per common share is provided as follows: Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 Numerator: Net loss $ (3,096 ) $ (671 ) $ (7,712 ) $ (898 ) Denominator: Weighted average shares of common stock (basic) 11,569 10,129 11,544 10,083 Effect of dilutive preferred shares - - - - Weighted average shares of common stock (diluted) 11,569 10,129 11,544 10,083 Per share data: Basic net loss per share $ (0.27 ) $ (0.07 ) $ (0.67 ) $ (0.09 ) Diluted net loss per share $ (0.27 ) $ (0.07 ) $ (0.67 ) $ (0.09 )

Business Segments (Tables)

Business Segments (Tables)	9 Months Ended
	Sep. 30, 2017
Segment Reporting [Abstract]
Revenue Information by Geographic Region	Revenue information shown by geographic region, based on the sales destination, is as follows: Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 United States $ 6,294 $ 5,871 $ 17,880 $ 18,642 Europe 1,727 2,191 5,502 6,779 Rest of Americas 689 476 1,853 1,858 Asia/Pacific Rim 2,155 1,251 6,115 6,349 $ 10,865 $ 9,789 $ 31,350 $ 33,628

Summary of Significant Accoun25

Summary of Significant Accounting Policies - Additional Information (Details)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 31, 2017	Sep. 30, 2017CustomerSupplier	Oct. 01, 2016CustomerSupplier	Sep. 30, 2017CustomerSupplier	Oct. 01, 2016CustomerSupplier	Dec. 31, 2016Customer
IQ 532/577 Laser Consoles
Disclosure Summary Of Significant Accounting Policies [Line Items]
Products warranty period	5 years
Minimum
Disclosure Summary Of Significant Accounting Policies [Line Items]
Products warranty period				1 year
Maximum
Disclosure Summary Of Significant Accounting Policies [Line Items]
Products warranty period				2 years
Revenue, Total | Customer Concentration Risk
Disclosure Summary Of Significant Accounting Policies [Line Items]
Number of customer accounted for total revenues and net accounts receivable		0	0	0	0
Customer and supplier accounted percentage of total revenues, accounts receivable and purchases		10.00%	10.00%	10.00%	10.00%
Accounts Receivable | Customer Concentration Risk
Disclosure Summary Of Significant Accounting Policies [Line Items]
Number of customer accounted for total revenues and net accounts receivable		1		1		0
Customer and supplier accounted percentage of total revenues, accounts receivable and purchases				12.00%		10.00%
Purchases | Supplier Concentration Risk
Disclosure Summary Of Significant Accounting Policies [Line Items]
Number of supplier accounted for total purchases | Supplier		1	0	0	0
Customer and supplier accounted percentage of total revenues, accounts receivable and purchases		14.00%	10.00%	10.00%	10.00%

Summary of Significant Accoun26

Summary of Significant Accounting Policies - Reconciliation of Changes in Deferred Revenue (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017		Oct. 01, 2016
Reconciliation of the changes in the Company's deferred revenue balance
Balance, beginning of period	$ 1,383	[1]	$ 1,311
Additions to deferral	981		1,025
Revenue recognized	(961)		(1,031)
Balance, end of period	$ 1,403		$ 1,305
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016.

Summary of Significant Accoun27

Summary of Significant Accounting Policies - Reconciliation of Changes in Warranty Liability (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016
Reconciliation of the changes in the Company's warranty liability
Balance, beginning of period	$ 603	$ 603
Accruals for product warranties	319	318
Cost of warranty claims	(240)	(351)
Balance, end of period	$ 682	$ 570

Inventories - Components of Inv

Inventories - Components of Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Raw materials	$ 5,003	$ 5,331
Work in process	1,864	2,337
Finished goods	3,802	3,975
Total inventories	$ 10,669	$ 11,643	[1]
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016.

Goodwill and Intangible Asset29

Goodwill and Intangible Assets - Additional Information (Details) - USD ($)	1 Months Ended	9 Months Ended
	Aug. 31, 2017	Sep. 30, 2017	Oct. 01, 2016	Dec. 31, 2016	[1]
Goodwill And Intangible Assets Disclosure [Abstract]
Carrying value of goodwill		$ 533,000		$ 533,000
Impairment of goodwill		0
Amortization expense		12,000	$ 12,000
Proceeds from sale of intellectual property	$ 175,000	$ 175,000
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016.

Goodwill and Intangible Asset30

Goodwill and Intangible Assets - Summary of Components of Gross and Net Intangible Asset (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Schedule of Intangible Assets
Net Carrying Amount	$ 120	$ 132	[1]
Customer relations
Schedule of Intangible Assets
Gross Carrying Amount	240	240
Accumulated Amortization	120	108
Net Carrying Amount	$ 120	$ 132
Remaining Amortization Life	7 years 6 months
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016.

Goodwill and Intangible Asset31

Goodwill and Intangible Assets - Future Estimated Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	[1]
Future estimated amortization expense
2017 (three months)	$ 4
2,018	16
2,019	16
2,020	16
2,021	16
Thereafter	52
Net Carrying Amount	$ 120	$ 132
[1]	Derived from the audited consolidated financial statements included in the Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016.

Fair Value Measurements - Finan

Fair Value Measurements - Financial Assets and Liabilities Measured and Recognized at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Money Market Funds
Assets:
Assets, Fair Value Measurements	$ 22,149	$ 8,270
Earn Out Liability
Liabilities:
Liabilities, Fair Value Measurements	524	694
Level 1 | Money Market Funds
Assets:
Assets, Fair Value Measurements	22,149	8,270
Level 3 | Earn Out Liability
Liabilities:
Liabilities, Fair Value Measurements	$ 524	$ 694

Fair Value Measurements - Quant

Fair Value Measurements - Quantitative Information about the Inputs and Valuation Methodologies Used for Fair Value Measurements (Details) - Earn Out Liability - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	$ 524	$ 694
Level 3
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	524	694
Level 3 | Discounted Cash Flow
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Liabilities, Fair Value Measurements	$ 524	$ 694
Valuation Technique, Earn-out liability	Discounted cash flow	Discounted cash flow
Level 3 | Discounted Cash Flow | Weighted Average
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Weighted Average, Projected royalties	$ 1,719	$ 2,154
Weighted Average, Discount rate	10.89%	11.22%
Level 3 | Discounted Cash Flow | Minimum
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Weighted Average, Discount rate	10.89%	11.22%
Level 3 | Discounted Cash Flow | Maximum
Quantitative information about the inputs and valuation methodologies used for fair value measurements
Weighted Average, Discount rate	27.00%	27.00%

Fair Value Measurements - Recon

Fair Value Measurements - Reconciliation of the Changes in the Company's Earn-Out - Cash (Level 3 Liabilities) Balance (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016
Reconciliation of the changes in the Company's earn-out - cash (Level 3 liabilities) balance
Balance as of beginning of the period	$ 694	$ 1,005
Payments against earn-out	(292)	(313)
Change in fair value of earn-out liability	122	86
Balance as of the end of the period	$ 524	$ 778

Stock Based Compensation - Addi

Stock Based Compensation - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016	Jun. 14, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average grant date fair value of the options granted	$ 3.55	$ 6.37	$ 3.75	$ 5.23
Total intrinsic value of options exercised	$ 31	$ 187	$ 328	$ 735
Total unrecognized compensation cost related to non-vested share-based compensation arrangements	$ 3,900		$ 3,900
Cost is expected to be recognized over a weighted average period			3 years 4 months 28 days
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock awarded			112,391
Weighted-average grant date fair value of restricted stock awarded			$ 11.28
Restricted Stock Units With Market Conditions
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock awarded			0
Restricted Stock Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested restricted stock awarded			4,301
Weighted-average grant date fair value of restricted stock awarded			$ 9.30
2008 Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for issuance					650,000

Stock Based Compensation - Summ

Stock Based Compensation - Summary of Activity under Incentive Plan (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2017USD ($)$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract]
Outstanding, Number of Shares, Beginning Balance | shares	470,985
Number of Shares, Options Granted | shares	465,900
Number of Shares, Options Exercised | shares	(55,752)
Number of Shares, Options Cancelled or forfeited | shares	(52,607)
Outstanding, Number of Shares, Ending Balance | shares	828,526
Outstanding, Weighted Average Exercise Price Per Share, Beginning Balance | $ / shares	$ 8.69
Weighted Average Exercise Price Per Share, Options Granted | $ / shares	10.05
Weighted Average Exercise Price Per Share, Options Exercised | $ / shares	5.89
Weighted Average Exercise Price Per Share, Options Cancelled or forfeited | $ / shares	10.50
Outstanding, Weighted Average Exercise Price Per Share, Ending Balance | $ / shares	$ 9.53
Aggregate Intrinsic Value, Ending Balance | $	$ 601

Stock Based Compensation - Weig

Stock Based Compensation - Weighted Average Assumptions for Fair Value Stock-Based Awards (Options) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Weighted average assumptions for fair value estimate of stock-based awards (options)
Average risk free interest rate	1.80%	1.03%	1.79%	1.10%
Expected life (in years)	4 years 6 months 18 days	4 years 6 months 18 days	4 years 6 months 18 days	4 years 6 months 18 days
Average volatility	42.00%	46.00%	42.00%	46.00%

Stock Based Compensation - Stoc

Stock Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 521	$ 470	$ 1,357	$ 1,270
Cost of revenues
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	39	3	131	84
Research and development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	104	39	215	90
Sales and marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	59	38	238	119
General and administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 319	$ 390	$ 773	$ 977

Stock Based Compensation - Su39

Stock Based Compensation - Summary of Stock Options Outstanding, Vested, Expected to Vest and Exercisable (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Stock options outstanding, exercisable and expected to vest
Options outstanding, Number of Shares	828,526	470,985
Options vested and expected to vest, Number of Shares	743,785
Options exercisable, Number of Shares	272,008
Options outstanding, Weighted Average Exercise Price	$ 9.53	$ 8.69
Options vested and expected to vest, Weighted Average Exercise Price	9.45
Options exercisable, Weighted Average Exercise Price	$ 7.94
Options outstanding, Weighted Average Remaining Contractual Life (Years)	5 years 5 months 13 days
Options vested and expected to vest, Weighted Average Remaining Contractual Life (Years)	5 years 3 months 18 days
Options exercisable, Weighted Average Remaining Contractual Life (Years)	3 years 4 months 20 days
Options outstanding, Aggregate Intrinsic Value	$ 601
Options vested and expected to vest, Aggregate Intrinsic Value	597
Options exercisable, Aggregate Intrinsic Value	$ 555

Stock Based Compensation - Rest

Stock Based Compensation - Restricted Stock Units and Awards (Details)	9 Months Ended
	Sep. 30, 2017shares
Restricted Stock Units (RSUs)
Restricted stock units
Outstanding, Number of Shares, Beginning Balance	335,805
Number of Shares, Restricted stock granted	112,391
Number of Shares, Restricted stock released	(67,197)
Number of Shares, Restricted stock forfeited	(30,789)
Outstanding, Number of Shares, Ending Balance	350,210
Restricted Stock Awards
Restricted stock units
Outstanding, Number of Shares, Beginning Balance	1,289
Number of Shares, Restricted stock granted	4,301
Number of Shares, Restricted stock released	(1,289)
Outstanding, Number of Shares, Ending Balance	4,301

Income Taxes - Additional Infor

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016	Dec. 31, 2016
Income Taxes [Line Items]
Provision for (benefit from) income taxes	$ 9,000	$ (627,000)	$ 23,000	$ (674,000)
Unrecognized tax benefits					$ 1,000,000
Unrecognized tax benefits recognition impact on income tax rate					$ 0
Federal
Income Taxes [Line Items]
Income tax returns examination period			3 years
Minimum | State Jurisdictions
Income Taxes [Line Items]
Income tax returns examination period			3 years
Maximum | State Jurisdictions
Income Taxes [Line Items]
Income tax returns examination period			5 years

Computation of Basic and Dilu42

Computation of Basic and Diluted Net Loss Per Common Share - Additional Information (Details) - shares	9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016
Stock options, RSU and Restricted Stock Award (“RSA”)
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares that were excluded from the computation of diluted weighted average shares outstanding	1,178,736	799,480

Computation of Basic and Dilu43

Computation of Basic and Diluted Net Loss Per Common Share - Reconciliation of Numerator and Denominator of Basic and Diluted Net Loss Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Numerator:
Net loss	$ (3,096)	$ (671)	$ (7,712)	$ (898)
Denominator:
Weighted average shares of common stock (basic)	11,569	10,129	11,544	10,083
Weighted average shares of common stock (diluted)	11,569	10,129	11,544	10,083
Per share data:
Basic net loss per share	$ (0.27)	$ (0.07)	$ (0.67)	$ (0.09)
Diluted net loss per share	$ (0.27)	$ (0.07)	$ (0.67)	$ (0.09)

Business Segments - Additional

Business Segments - Additional Information (Details) - Segment	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Segment Reporting Information [Line Items]
Number of operating segments			1
Customer Concentration Risk | Revenue, Total
Segment Reporting Information [Line Items]
Customer accounted percentage of total revenues	10.00%	10.00%	10.00%	10.00%
United States | Customer Concentration Risk | Revenue, Total
Segment Reporting Information [Line Items]
Customer accounted percentage of total revenues	57.90%	60.00%	57.00%	55.40%
Other Than United States | Customer Concentration Risk | Revenue, Total
Segment Reporting Information [Line Items]
Customer accounted percentage of total revenues	42.10%	40.00%	43.00%	44.60%

Business Segments - Revenue Inf

Business Segments - Revenue Information by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 10,865	$ 9,789	$ 31,350	$ 33,628
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	6,294	5,871	17,880	18,642
Europe
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	1,727	2,191	5,502	6,779
Rest of Americas
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	689	476	1,853	1,858
Asia/Pacific Rim
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 2,155	$ 1,251	$ 6,115	$ 6,349