Tactile Systems Technology (TCMD) 10-Q 8 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 05, 2017
Document and Entity Information
Entity Registrant Name	TACTILE SYSTEMS TECHNOLOGY INC
Entity Central Index Key	1,027,838
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,017
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		16,940,140

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 20,714	$ 30,701
Marketable securities	20,023	10,994
Accounts receivable, net	11,428	15,003
Inventories	6,933	6,554
Income taxes receivable	555
Prepaid expenses	870	981
Total current assets	60,523	64,233
Property and equipment, net	2,273	1,563
Other assets
Patent costs, net	2,340	2,394
Medicare accounts receivable, long-term	2,869	2,823
Deferred income taxes	2,792	2,785
Other non-current assets	51	137
Total other assets	8,052	8,139
Total assets	70,848	73,935
Current liabilities
Accounts payable	4,862	5,018
Accrued payroll and related taxes	4,886	6,692
Accrued expenses	1,318	1,193
Future product royalties	48	67
Income taxes payable		823
Total current liabilities	11,114	13,793
Long-term liabilities
Accrued warranty reserve, long-term	563	503
Total liabilities	11,677	14,296
Stockholders’ equity
Preferred stock; $0.001 par value, 50,000,000 shares authorized and no shares issued and outstanding as of March 31, 2017 and December 31, 2016
Common stock; $0.001 par value, 300,000,000 shares authorized, 16,909,154 shares issued and outstanding as of March 31, 2017, and 16,833,737 shares issued and outstanding as of December 31, 2016	17	17
Additional paid-in capital	63,449	62,406
Accumulated deficit	(4,277)	(2,773)
Accumulated other comprehensive loss	(18)	(11)
Total stockholders’ equity	59,171	59,639
Total liabilities and stockholders’ equity	$ 70,848	$ 73,935

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016
Condensed 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	16,909,154	16,833,737
Common Stock, Shares, Outstanding	16,909,154	16,833,737

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Condensed Consolidated Statements of Operations
Revenues, net	$ 19,850	$ 13,700
Cost of goods sold	5,624	3,811
Gross profit	14,226	9,889
Operating expenses
Sales and marketing	10,166	7,281
Research and development	1,118	980
Reimbursement, general and administrative	5,874	3,414
Total operating expenses	17,158	11,675
Loss from operations	(2,932)	(1,786)
Other income	55	5
Loss before income taxes	(2,877)	(1,781)
Income tax benefit	(1,373)	(801)
Net loss	(1,504)	(980)
Convertible preferred stock dividends		514
Net loss attributable to common stockholders	$ (1,504)	$ (1,494)
Net loss per common share attributable to common stockholders
Basic (in dollars per share)	$ (0.09)	$ (0.45)
Diluted (in dollars per share)	$ (0.09)	$ (0.45)
Weighted-average common shares used to compute net loss per common share attributable to common stockholders
Basic (in shares)	16,878,443	3,293,326
Diluted (in shares)	16,878,443	3,293,326

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Comprehensive Income (Loss) $ in Thousands	3 Months Ended
	Mar. 31, 2017USD ($)
Condensed Consolidated Statements of Comprehensive Income (Loss)
Net loss	$ (1,504)
Other comprehensive income (loss):
Unrealized losses on available-for-sale securities	(13)
Income tax related to items of other comprehensive loss	6
Total other comprehensive loss	(7)
Comprehensive loss	$ (1,511)

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) - USD ($) $ in Thousands	Common Stock	Additional Paid In Capital.	Accumulated Deficit	Accumulated Other Comprehensive Loss	Series B Preferred Stock	Series A Preferred Stock	Total
Balance at the beginning (in shares) at Dec. 31, 2015					2,733,468	3,061,488
Balance at the beginning at Dec. 31, 2015					$ 12,599	$ 20,328
Balances at the beginning (in shares) at Dec. 31, 2015	3,222,902
Balances at the beginning at Dec. 31, 2015	$ 3		$ (5,652)				$ (5,649)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		$ 75					75
Exercise of common stock options and warrants(in shares)	118,383
Exercise of common stock options		128					128
Preferred stock dividend		203	311		$ (197)	$ (317)	514
Comprehensive loss for the period			(980)				(980)
Balance at the end (in shares) at Mar. 31, 2016					2,733,468	3,061,488
Balance at the end at Mar. 31, 2016					$ 12,796	$ 20,645
Balances at the end (in shares) at Mar. 31, 2016	3,341,285
Balances at the end at Mar. 31, 2016	$ 3		(6,943)				(6,940)
Balances at the beginning (in shares) at Dec. 31, 2016	16,833,737
Balances at the beginning at Dec. 31, 2016	$ 17	62,406	(2,773)	$ (11)			59,639
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		957					957
Exercise of common stock options		100					100
Exercise of common stock options and warrants and vesting of restricted stock units (in shares)	75,417
Taxes paid for net share settlement of restricted stock units		(14)					(14)
Comprehensive loss for the period			(1,504)	(7)			(1,511)
Balances at the end (in shares) at Mar. 31, 2017	16,909,154
Balances at the end at Mar. 31, 2017	$ 17	$ 63,449	$ (4,277)	$ (18)			$ 59,171

Condensed Consolidated Stateme7

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities
Net loss	$ (1,504)	$ (980)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	298	211
Deferred income taxes		(801)
Stock-based compensation expense	957	75
Change in allowance for doubtful accounts	(330)
Changes in assets and liabilities
Accounts receivable	3,905	2,493
Inventories	(379)	553
Prepaid expenses and other assets	(358)	66
Medicare accounts receivable – long-term	(46)	228
Accounts payable	(394)	(331)
Accrued payroll and related taxes	(1,806)	(1,534)
Accrued expenses and income taxes payable	(640)	(588)
Future product royalties	(19)	(248)
Net cash used in operating activities	(316)	(856)
Cash flows from investing activities
Purchases of marketable securities	9,049
Purchases of property and equipment	(700)	(112)
Patent costs	(8)
Net cash used in investing activities	(9,757)	(112)
Cash flows from financing activities
Proceeds from exercise of common stock options and warrants	100	128
Taxes paid for net share settlement of restricted stock units	(14)
Fees paid for IPO		(433)
Net cash provided by (used in) financing activities	86	(305)
Net change in cash and cash equivalents	(9,987)	(1,273)
Cash and cash equivalents – beginning of period	30,701	7,060
Cash and cash equivalents – end of period	20,714	5,787
Supplemental cash flow disclosure
Cash paid for taxes	5	951
Non-cash investing activities
Acquisition of assets included in accounts payable	$ 238	$ 53

Nature of Operations and Basis

Nature of Operations and Basis of Presentation	3 Months Ended
	Mar. 31, 2017
Nature of Operations and Basis of Presentation
Nature of Operations and Basis of Presentation	Note 1. Nature of Operations and Basis of Presentation Nature of Operations Tactile Systems Technology, Inc. (“we,” “us,” and “our”) is the sole manufacturer and distributor of the Flexitouch and Entré 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.” Basis of Presentation Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. We have reclassified certain prior-year amounts to conform to the current year’s presentation. The results for the three months ended March 31, 2017 are not necessarily indicative of results to be expected for the year ending December 31, 2017, or for any other interim period or for any future year. 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 yet met their annual out-of-pocket 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, and because patients often spend the remaining balances in their 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. The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016. 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. The resulting corporation assumed the name Tactile Systems Technology, Inc. The purpose of this merger was to reincorporate the company in Delaware, increase the number of authorized common shares to 8.9 million and assign a par value of $0.001 to our common stock. 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 1-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 condensed 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. The significant increase in common stock outstanding in connection with the initial public offering impacts the year-over-year comparability of our earnings per share calculations. Basis of Consolidation The condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc., after elimination of intercompany accounts and transactions. 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant Accounting Policies During the three months ended March 31, 2017 there were no material changes in our significant accounting policies. See Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for information regarding our significant accounting policies. 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 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 who 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 timing and anticipated impact of the adoption of this updated guidance on our consolidated financial statements in future periods. In November 2015, the FASB issued ASU 2015-l7, “ Income Taxes: Balance Sheet Classification of Deferred Taxes ,” which requires entities to present deferred tax assets and deferred tax liabilities as non-current in a classified balance sheet. The ASU is effective for annual periods beginning after December l5, 20l7, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for all entities. We elected to adopt this new standard prospectively in the fourth quarter of 2016. 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 timing and anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods. In March 2016, the FASB issued 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. 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 timing and 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. Therefore, we plan to further evaluate the timing and anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods. 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 March 31, 2017, our cash was held primarily in checking and money market accounts.

Marketable Securities

Marketable Securities	3 Months Ended
	Mar. 31, 2017
Marketable Securities.
Marketable Securities	Note 2. Marketable Securities Our investments in marketable securities are classified as available-for-sale and consist of the following: March 31, 2017 Unrealized Unrealized (In thousands) Cost Gains Losses Fair Value U.S. government and agency obligations $ 12,006 $ 2 $ 29 $ 11,979 Corporate debt securities and certificates of deposit 8,047 2 5 8,044 Marketable securities $ 20,053 $ 4 $ 34 $ 20,023 December 31, 2016 Unrealized Unrealized (In thousands) Cost Gains Losses Fair 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 debt securities all have contractual maturities of twelve to 24 months from March 31, 2017. At March 31, 2017, marketable debt securities valued at $4.0 million were in an unrealized gain position totaling $4,000, and marketable debt securities valued at $16.0 million were in an unrealized loss position totaling $34,000 (all had been in an unrealized loss position for less than 12 months). At December 31, 2016, marketable debt securities valued at $4.0 million were in an unrealized gain position totaling $2,000, and marketable debt securities valued at $7.0 million were in an unrealized loss position totaling $19,000 (all had been in an unrealized loss position for less than 12 months). Net pre-tax unrealized losses for marketable debt securities of $13,000 at March 31, 2017 were recorded as a component of accumulated other comprehensive loss in stockholders' equity. Marketable debt securities valued at $1.0 million were sold during the three months ended March 31, 2017 with no resulting gain or loss.

Patent Costs, Net

Patent Costs, Net	3 Months Ended
	Mar. 31, 2017
Patent Costs, Net
Patent Costs, Net	Note 3. Patent Costs, Net Our patents, all of which are subject to amortization, are summarized as follows: As of As of (In thousands) March 31, 2017 December 31, 2016 Patents $ 3,470 $ 3,462 Less: accumulated amortization (1,130) (1,068) Net patents $ 2,340 $ 2,394 Amortization expense was $0.1 million for each of the three months ended March 31, 2017 and 2016. Future amortization expenses are expected as follows: (In thousands) 2017 (April 1 - December 31) $ 187 2018 249 2019 249 2020 249 2021 249 Thereafter 1,157 Total $ 2,340

Accrued Expenses

Accrued Expenses	3 Months Ended
	Mar. 31, 2017
Accrued Expenses
Accrued Expenses	Note 4. Accrued Expenses Accrued expenses consisted of the following: As of As of (In thousands) March 31, 2017 December 31, 2016 Accrued warranty $ 310 $ 290 Accrued clinical 99 45 Other 909 858 Total $ 1,318 $ 1,193

Line of Credit _ Bank

Line of Credit — Bank	3 Months Ended
	Mar. 31, 2017
Line of Credit — Bank
Line of Credit — Bank	Note 5. Line of Credit — Bank We have a $2.0 million line of credit with a bank that bears interest based on the prime rate, which was 3.75% as of March 31, 2017, and expires on May 11, 2017. Our credit line is secured by substantially all of our assets, including property and equipment, accounts receivable and inventory. Our credit line contains customary conditions as to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, and incur indebtedness or encumbrances. There was no outstanding balance on the line of credit as of March 31, 2017 or as of December 31, 2016.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2017
Commitments and Contingencies
Commitments and Contingencies	Note 6. Commitments and Contingencies Lease Obligations In March 2008, we entered into a non-cancelable operating lease agreement for building space for our corporate headquarters that provides for monthly rent, real estate taxes and operating expenses that was extended to July 31, 2021. In July 2016, we entered into a non-cancelable operating lease agreement for building space to accommodate the relocation of our manufacturing, quality, and research and development functions. The lease agreement extends through November 2021 and provides for monthly rent, real estate taxes and operating expenses. Rent expense was $0.3 million and $0.2 million for the three months ended March 31, 2017 and 2016, respectively. In July 2016, we entered into a fleet vehicle lease program for certain members of our field sales organization. At March 31, 2017, we had 46 leased vehicles under this program. We also have operating lease agreements for certain computer and office equipment that expire in 2020. The leases provide an option to purchase the related equipment at fair market value at the end of the lease. Future base minimum lease payments for all lease obligations are expected to be as follows for the years ending December 31: Computer/Office Fleet Car (In thousands) Buildings Equipment Program Total 2017 (April 1 - December 31) $ 521 $ 46 $ 213 $ 780 2018 714 52 69 835 2019 733 39 — 772 2020 752 22 — 774 2021 526 — — 526 Thereafter — — — — Total $ 3,246 $ 159 $ 282 $ 3,687 Major Vendors We had purchases from three vendors that collectively accounted for 35% and 31% of total purchases for the three months ended March 31, 2017 and 2016, respectively. Purchase Commitments We issued purchase orders in February 2016 totaling $8.2 million, of which $3.0 million remained as of March 31, 2017, for inventory that we expect to receive between April and July of 2017. We issued purchase orders in January 2017 totaling $7.8 million for inventory that we expect to receive between June 2017 and February 2018. Employment Agreements We have entered into employment agreements with certain of our officers. The agreements provide for payment of severance ranging from nine to 15 months of then-current annualized base salary in the event of termination by us without cause or by the employee for good reason or, in the case of two of the officers, death, disability, or as a result of a qualifying termination after a change in control. The agreements also provide for payment of an amount equal to nine to 15 months of the then-current annual target bonus in the event of termination by us without cause or by the employee for good reason, or, in the case of two of the officers, death, disability, or as a result of a qualifying termination after a change in control. In addition, the agreements provide for the vesting of certain equity compensation through the date of termination in the event of termination by us without cause or by the employee for good reason. Retirement Plan We maintain a 401(k) retirement plan for our employees in which eligible employees can contribute a percentage of their pre-tax compensation. We may also make discretionary contributions to the 401(k) plan. We made contributions of $45,000 and $36,000 for the three months ended March 31, 2017 and 2016, respectively.

Stockholders' Equity

Stockholders' Equity	3 Months Ended
	Mar. 31, 2017
Stockholders' Equity
Stockholders' Equity	Note 7. 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 March 31, 2017, 4,960,398 shares were available for future grant pursuant to the 2016 Plan. Upon adoption and approval of the 2016 Equity Incentive 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 $0.9 million and $0.1 million for the three months ended March 31, 2017 and 2016, respectively. This expense was allocated as follows: Three Months Ended March 31, (In thousands) 2017 2016 Cost of goods sold $ 49 $ 19 Sales and marketing expenses 315 42 Research and development expenses 23 — Reimbursement, general and administrative expenses 570 14 Total stock-based compensation expense $ 957 $ 75 Stock Options Stock options issued to participants other than non-employees vest over four years and typically have a contractual term of 10 years. The stock options granted on July 27, 2016 to our non-employee directors vest in full on the earlier of one year after the date of grant or the date of the 2017 annual meeting of stockholders. These options have a contractual term of 7 years. Our stock option activity for the three months ended March 31, 2017 was as follows: Weighted A verage Weighted A verage Aggregate Options Exercise Price Remaining Intrinsic (In thousands except share, per share and years data) Outstanding Per Share 1 Contractual Life Value 2 Balance at December 31, 2016 1,856,299 $ 2.69 5.5 years $ 25,467 Granted 7,800 20.33 Exercised (68,591) 1.10 1,019 Forfeited (10,609) 7.71 Balance at March 31, 2017 1,784,899 2.80 5.3 years 28,839 Options exercisable at March 31, 2017 1,338,155 $ 1.07 4.4 years $ 23,925 (1) The exercise price of each option granted during the period 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 day of the quarter. Options exercisable of 1,361,442 at March 31, 2016 had a weighted average exercise price of $0.99. Stock based compensation expense included in our Condensed Consolidated Statements of Operations for stock options was $0.2 million and $0.1 million for the three months ended March 31, 2017 and 2016, respectively. At March 31, 2017, there was approximately $1.1 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted average period of 2.4 years. 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 Condensed Consolidated Statement of Operations for stock-settled restricted stock units was $0.5 million for the three months ended March 31, 2017. No restricted stock units had been granted as of March 31, 2016. As of March 31, 2017, there was $3.5 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 1.5 years. Our stock-settled restricted stock unit activity for the three months ended March 31, 2017 was as follows: Weighted Aggregate Units Average Grant Intrinsic (In thousands except share and per share data) Outstanding Date Fair Value Value 2 Balance at December 31, 2016 324,863 $ 10.39 $ 5,331 Granted 65,741 20.31 Vested 1 (5,786) 11.43 Cancelled (865) 17.35 Balance at March 31, 2017 383,953 $ 12.06 $ 7,276 (1) There were 922 restricted stock units that vested during the quarter which represent grants to non-employee directors in lieu of annual retainer installments. These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock 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. The shares of common stock underlying these restricted stock units, as well as 1,726 previously granted restricted stock units with similar terms, are not issued or outstanding. (2) Intrinsic value of stock-settled restricted stock units outstanding was based on our closing stock price on the last trading day of the quarter. 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 will end on May 15, 2017. A total of 1.6 million shares of common stock are 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. No purchases were made under the plan during the three months ended March 31, 2017. We recognized $0.2 million in stock-based compensation expense related to the ESPP for the three months ended March 31, 2017. We did not recognize any stock-based compensation expense related to the ESPP in the three months ended March 31, 2016 .

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2017
Income Taxes
Income Taxes	Note 8. Income Taxes We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjust the provision for discrete tax items recorded in the period. 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 reporting purposes, including for depreciation and amortization, warranty and vacation accruals, and deductions related to allowances for doubtful accounts receivable and inventory reserves. The effective tax rate for the three months ended March 31, 2017 was 47.7%, compared to 43.3% in the three months ended March 31, 2016, an increase of 4.4 percentage points. The primary factor that increased our effective tax rate was an increase in non-deductible expenses related to statutory stock options. We recorded an income tax benefit of $1.4 million and $0.8 million for the three months ended March 31, 2017 and 2016, respectively. Our provisions for income taxes included current federal and state income tax expense, as well as deferred federal and state income tax expense. 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 condensed 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. With few exceptions, we are no longer subject to U.S. federal, state or local income tax examinations by tax authorities for the years before 2011. We are not currently under examination by any 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 statement of operations.

Net Loss Per Share Attributable

Net Loss Per Share Attributable to Common Stockholders	3 Months Ended
	Mar. 31, 2017
Net Loss Per Share Attributable to Common Stockholders
Net Loss Per Share Attributable to Common Stockholders	Note 9. Net Loss Per Share Attributable to Common Stockholders We adopted ASU 2016-09, “ Improvements to Employee Share-Based Payment Accounting ,” in the fourth quarter of 2016 on a retrospective basis, effective January 1, 2016. The following table sets forth the computation of our basic and diluted net loss per share attributable to common stockholders and reflects the adoption of ASU 2016-09: Three Months Ended March 31, (In thousands, except share and per share data) 2017 2016 Net loss $ (1,504) $ (980) Convertible preferred stock dividends — 514 Net loss attributable to common stockholders $ (1,504) $ (1,494) Weighted average shares outstanding 16,878,443 3,293,326 Effect of convertible preferred stock outstanding, restricted stock units, common stock options, warrants, and employee stock purchase plan shares — — Weighted-average shares used to compute diluted net loss per share 16,878,443 3,293,326 Net loss per share - Basic $ (0.09) $ (0.45) Net loss per share - Diluted $ (0.09) $ (0.45) The following potentially dilutive securities were excluded from the computation of weighted-average shares outstanding for the three months ended March 31, 2017 and 2016 because these securities would have had an anti-dilutive impact due to reported losses for these periods: Three Months Ended March 31, 2017 2016 Convertible preferred stock outstanding — 5,794,957 Restricted stock units 449,963 — Common stock options 1,784,951 1,704,131 Common stock warrants — 5,800 Total 2,234,914 7,504,888 As of March 31, 2017, total common shares outstanding and the potentially dilutive shares totaled approximately 19.1 million shares.

Fair Value Measurements

Fair Value Measurements	3 Months Ended
	Mar. 31, 2017
Fair Value Measurements
Fair Value Measurements	Note 10. 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 March 31, 2017 and December 31, 2016 according to the three-level fair value hierarchy. Fair Value Measurements at March 31, 2017 Using: 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 $ — $ — $ — $ — Money market mutual funds 9,944 — — 9,944 U.S. government and agency obligations 2,011 9,968 — 11,979 Corporate debt securities and certificates of deposit — 8,044 — 8,044 Total $ 11,955 $ 18,012 $ — $ 29,967 Fair Value Measurements at December 31, 2016 Using: 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 and certificates of deposit — 1,998 — 1,998 Total $ 21,007 $ 8,977 $ — $ 29,984 During the three months ended March 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 merit 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 three months ended March 31, 2017.

Nature of Operations and Basi18

Nature of Operations and Basis of Presentation (Policies)	3 Months Ended
	Mar. 31, 2017
Nature of Operations and Basis of Presentation
Nature of Operations	Nature of Operations Tactile Systems Technology, Inc. (“we,” “us,” and “our”) is the sole manufacturer and distributor of the Flexitouch and Entré 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.”
Basis of Presentation	Basis of Presentation Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. We have reclassified certain prior-year amounts to conform to the current year’s presentation. The results for the three months ended March 31, 2017 are not necessarily indicative of results to be expected for the year ending December 31, 2017, or for any other interim period or for any future year. 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 yet met their annual out-of-pocket 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, and because patients often spend the remaining balances in their 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. The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016. 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. The resulting corporation assumed the name Tactile Systems Technology, Inc. The purpose of this merger was to reincorporate the company in Delaware, increase the number of authorized common shares to 8.9 million and assign a par value of $0.001 to our common stock. 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 1-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 condensed 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. The significant increase in common stock outstanding in connection with the initial public offering impacts the year-over-year comparability of our earnings per share calculations.
Basis of Consolidation	Basis of Consolidation The condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc., after elimination of intercompany accounts and transactions.
Estimates	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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant Accounting Policies	Significant Accounting Policies During the three months ended March 31, 2017 there were no material changes in our significant accounting policies. See Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for information regarding our significant accounting policies.
Recent Accounting Pronouncements	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 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 who 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 timing and anticipated impact of the adoption of this updated guidance on our consolidated financial statements in future periods. In November 2015, the FASB issued ASU 2015-l7, “ Income Taxes: Balance Sheet Classification of Deferred Taxes ,” which requires entities to present deferred tax assets and deferred tax liabilities as non-current in a classified balance sheet. The ASU is effective for annual periods beginning after December l5, 20l7, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for all entities. We elected to adopt this new standard prospectively in the fourth quarter of 2016. 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 timing and anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods. In March 2016, the FASB issued 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. 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 timing and 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. Therefore, we plan to further evaluate the timing and anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods.
Cash and Cash Equivalents	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 March 31, 2017, our cash was held primarily in checking and money market accounts.

Marketable Securities (Tables)

Marketable Securities (Tables)	3 Months Ended
	Mar. 31, 2017
Marketable Securities.
Schedule of marketable securities	March 31, 2017 Unrealized Unrealized (In thousands) Cost Gains Losses Fair Value U.S. government and agency obligations $ 12,006 $ 2 $ 29 $ 11,979 Corporate debt securities and certificates of deposit 8,047 2 5 8,044 Marketable securities $ 20,053 $ 4 $ 34 $ 20,023 December 31, 2016 Unrealized Unrealized (In thousands) Cost Gains Losses Fair 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

Patent Costs, Net (Tables)

Patent Costs, Net (Tables)	3 Months Ended
	Mar. 31, 2017
Patent Costs, Net
Schedule of finite lived intangible assets	As of As of (In thousands) March 31, 2017 December 31, 2016 Patents $ 3,470 $ 3,462 Less: accumulated amortization (1,130) (1,068) Net patents $ 2,340 $ 2,394
Schedule of future amortization expense	(In thousands) 2017 (April 1 - December 31) $ 187 2018 249 2019 249 2020 249 2021 249 Thereafter 1,157 Total $ 2,340

Accrued Expenses (Tables)

Accrued Expenses (Tables)	3 Months Ended
	Mar. 31, 2017
Accrued Expenses
Schedule of Accrued Expenses	As of As of (In thousands) March 31, 2017 December 31, 2016 Accrued warranty $ 310 $ 290 Accrued clinical 99 45 Other 909 858 Total $ 1,318 $ 1,193

Commitments and Contingencies (

Commitments and Contingencies (Tables)	3 Months Ended
	Mar. 31, 2017
Commitments and Contingencies
Schedule of future minimum lease payments	Computer/Office Fleet Car (In thousands) Buildings Equipment Program Total 2017 (April 1 - December 31) $ 521 $ 46 $ 213 $ 780 2018 714 52 69 835 2019 733 39 — 772 2020 752 22 — 774 2021 526 — — 526 Thereafter — — — — Total $ 3,246 $ 159 $ 282 $ 3,687

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	3 Months Ended
	Mar. 31, 2017
Stockholders' Equity
Schedule of allocation of stock-based compensation expense	Three Months Ended March 31, (In thousands) 2017 2016 Cost of goods sold $ 49 $ 19 Sales and marketing expenses 315 42 Research and development expenses 23 — Reimbursement, general and administrative expenses 570 14 Total stock-based compensation expense $ 957 $ 75
Schedule of stock option activity	Weighted A verage Weighted A verage Aggregate Options Exercise Price Remaining Intrinsic (In thousands except share, per share and years data) Outstanding Per Share 1 Contractual Life Value 2 Balance at December 31, 2016 1,856,299 $ 2.69 5.5 years $ 25,467 Granted 7,800 20.33 Exercised (68,591) 1.10 1,019 Forfeited (10,609) 7.71 Balance at March 31, 2017 1,784,899 2.80 5.3 years 28,839 Options exercisable at March 31, 2017 1,338,155 $ 1.07 4.4 years $ 23,925 (1) The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant. 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 day of the quarter.
Schedule of stock-settled restricted stock unit activity	Weighted Aggregate Units Average Grant Intrinsic (In thousands except share and per share data) Outstanding Date Fair Value Value 2 Balance at December 31, 2016 324,863 $ 10.39 $ 5,331 Granted 65,741 20.31 Vested 1 (5,786) 11.43 Cancelled (865) 17.35 Balance at March 31, 2017 383,953 $ 12.06 $ 7,276 (1) There were 922 restricted stock units that vested during the quarter which represent grants to non-employee directors in lieu of annual retainer installments. These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock 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. The shares of common stock underlying these restricted stock units, as well as 1,726 previously granted restricted stock units with similar terms, are not issued or outstanding. (2) Intrinsic value of stock-settled restricted stock units outstanding was based on our closing stock price on the last trading day of the quarter.

Net Loss Per Share Attributab24

Net Loss Per Share Attributable to Common Stockholders (Tables)	3 Months Ended
	Mar. 31, 2017
Net Loss Per Share Attributable to Common Stockholders
Schedule of computation of the basic and diluted net income (loss) per share	Three Months Ended March 31, (In thousands, except share and per share data) 2017 2016 Net loss $ (1,504) $ (980) Convertible preferred stock dividends — 514 Net loss attributable to common stockholders $ (1,504) $ (1,494) Weighted average shares outstanding 16,878,443 3,293,326 Effect of convertible preferred stock outstanding, restricted stock units, common stock options, warrants, and employee stock purchase plan shares — — Weighted-average shares used to compute diluted net loss per share 16,878,443 3,293,326 Net loss per share - Basic $ (0.09) $ (0.45) Net loss per share - Diluted $ (0.09) $ (0.45)
Schedule of potentially dilutive securities outstanding	Three Months Ended March 31, 2017 2016 Convertible preferred stock outstanding — 5,794,957 Restricted stock units 449,963 — Common stock options 1,784,951 1,704,131 Common stock warrants — 5,800 Total 2,234,914 7,504,888

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	3 Months Ended
	Mar. 31, 2017
Fair Value Measurements
Schedule of fair value measurements for marketable securities	Fair Value Measurements at March 31, 2017 Using: 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 $ — $ — $ — $ — Money market mutual funds 9,944 — — 9,944 U.S. government and agency obligations 2,011 9,968 — 11,979 Corporate debt securities and certificates of deposit — 8,044 — 8,044 Total $ 11,955 $ 18,012 $ — $ 29,967 Fair Value Measurements at December 31, 2016 Using: 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 and certificates of deposit — 1,998 — 1,998 Total $ 21,007 $ 8,977 $ — $ 29,984

Nature of Operations and Basi26

Nature of Operations and Basis of Presentation - (Details) $ / shares in Units, $ in Millions	Aug. 02, 2016USD ($)$ / sharesshares	Jun. 30, 2016	Mar. 31, 2017$ / sharesshares	Dec. 31, 2016$ / sharesshares	Jul. 21, 2006$ / sharesshares
Basis of Presentation
Common shares authorized | shares			300,000,000	300,000,000	8,900,000
Common stock, par value (in dollars per share) | $ / shares			$ 0.001	$ 0.001	$ 0.001
Reverse stock split ratio		0.354604396
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
Proceeds from Issuance Initial Public Offering | $	$ 35.4
Expense Relating To Initial Public Offering | $	$ 2.9

Marketable Securities (Details)

Marketable Securities (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Marketable Securities
Cost	$ 20,053,000	$ 11,011,000
Unrealized Gains	4,000	2,000
Unrealized Losses	34,000	19,000
Fair Value	20,023,000	10,994,000
Value of the marketable debt securities at unrealized gain position	4,000,000	4,000,000
Aggregate gains on the marketable debt securities which are at unrealized gain position	4,000	2,000
Value of the marketable debt securities at unrealized loss position, for less than 12 months	16,000,000	7,000,000
Aggregate losses on the marketable debt securities which are at unrealized loss position, for less than 12 months	34,000	19,000
Unrealized holding loss on marketable debt securities in other comprehensive loss	13,000
Marketable securities sold	1,000,000
Gain or loss on marketable securities	$ 0
Maximum
Marketable Securities
Maturity period of the marketable debt securities	24 months
Minimum
Marketable Securities
Maturity period of the marketable debt securities	12 months
US government and agency obligations
Marketable Securities
Cost	$ 12,006,000	9,011,000
Unrealized Gains	2,000	2,000
Unrealized Losses	29,000	17,000
Fair Value	11,979,000	8,996,000
Corporate debt securities and certificate of deposit
Marketable Securities
Cost	8,047,000	2,000,000
Unrealized Gains	2,000
Unrealized Losses	5,000	2,000
Fair Value	$ 8,044,000	$ 1,998,000

Patent Costs, Net (Details)

Patent Costs, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Finite-Lived Intangible Assets
Amortization expense	$ 100	$ 100
Patents
Finite-Lived Intangible Assets
Patents	3,470		$ 3,462
Less: accumulated amortization	(1,130)		(1,068)
Net patents	2,340		2,394
Future Amortization
2017 (April 1 - December 31)	187
2,018	249
2,019	249
2,020	249
2,021	249
Thereafter	1,157
Net patents	$ 2,340		$ 2,394

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Accrued Expenses
Accrued warranty	$ 310	$ 290
Accrued clinical	99	45
Other	909	858
Total	$ 1,318	$ 1,193

Line of Credit _ Bank (Details)

Line of Credit — Bank (Details) - Line of Credit - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Line of Credit Facility LineOfCreditFacility [Line Items]
Maximum borrowing capacity	$ 2,000
Outstanding line of credit	$ 0	$ 0
Prime Rate
Line of Credit Facility LineOfCreditFacility [Line Items]
Variable interest rate	3.75%

Commitments and Contingencies31

Commitments and Contingencies (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017USD ($)item	Mar. 31, 2016USD ($)
Operating Leased Assets OperatingLeasedAssets [Line Items]
Rent expense	$ 300	$ 200
Number of leased vehicles | item	46
2017 (April 1 - December 31)	$ 780
2,018	835
2,019	772
2,020	774
2,021	526
Total	3,687
Building
Operating Leased Assets OperatingLeasedAssets [Line Items]
2017 (April 1 - December 31)	521
2,018	714
2,019	733
2,020	752
2,021	526
Total	3,246
Computer/Office Equipment
Operating Leased Assets OperatingLeasedAssets [Line Items]
2017 (April 1 - December 31)	46
2,018	52
2,019	39
2,020	22
Total	159
Fleet Car Program
Operating Leased Assets OperatingLeasedAssets [Line Items]
2017 (April 1 - December 31)	213
2,018	69
Total	$ 282

Commitments and Contingencies -

Commitments and Contingencies - Major Vendors (Details) $ in Millions	3 Months Ended
	Mar. 31, 2017USD ($)item	Mar. 31, 2016item	Jan. 31, 2017USD ($)	Feb. 29, 2016USD ($)
Concentration Risk [Line Items]
Number of vendors | item	3	3
Purchase commitments
Purchase commitments | $	$ 3		$ 7.8	$ 8.2
Purchases | Vendor
Concentration Risk [Line Items]
Accounts Receivable (in percentage)	35.00%	31.00%

Commitments and Contingencies33

Commitments and Contingencies - Deferred Compensation (Details)	3 Months Ended
	Mar. 31, 2017
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

Commitments and Contingencies34

Commitments and Contingencies - Retirement Plan (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
401(k)
Defined Contribution Plan Disclosure
Discretionary contributions	$ 45,000	$ 36,000

Stockholders' Equity - Series A

Stockholders' Equity - Series A & B Preferred Stock (Details) $ / shares in Units, $ in Millions	Aug. 02, 2016$ / sharesshares	Mar. 31, 2017USD ($)shares
Preferred stock
Conversion of Stock, Shares Converted		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
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		0.9708
Accrued Cumulative Dividends | $		$ 8.2
Payment of dividends | $		$ 0.1

Stockholders' Equity - Stock-Ba

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

Stockholders' Equity - Stock Op

Stockholders' Equity - Stock Options (Details) $ / shares in Units, $ in Thousands	Jul. 27, 2016	Mar. 31, 2017USD ($)item$ / sharesshares	Mar. 31, 2016USD ($)$ / sharesshares	Dec. 31, 2016$ / sharesshares	Mar. 31, 2017USD ($)$ / sharesshares	Dec. 31, 2016USD ($)$ / sharesshares
Stock-based compensation, general disclosures
Vesting period (in years)	4 years	1 year
Term (in years)	10 years	7 years
Stock-based compensation expense | $		$ 957	$ 75
Total grant date fair value of options vested during the period | $			0
Total unrecognized pre-tax compensation expense related to nonvested stock option awards | $					$ 1,100
Weighted-average period over which unrecognized compensation cost is expected to be recognized		2 years 4 months 24 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)		65,741
Vested (in shares)		(5,786)
Cancelled (in shares)		(865)
Restricted stock unit awards outstanding at the end of the period (in shares)		383,953		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) | $ / shares		$ 10.39
Granted (in dollars per share) | $ / shares		20.31
Vested (in dollars per share) | $ / shares		11.43
Cancelled (in dollars per share) | $ / shares		17.35
Restricted stock unit awards outstanding at the end of the period (in dollars per share) | $ / shares		$ 12.06		$ 10.39
Restricted stock unit awards, Average Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value | $					$ 7,276	$ 5,331
Stock options
Stock-based compensation, general disclosures
Stock-based compensation expense | $		$ 200	$ 100
Options
Outstanding at beginning of period		1,856,299
Granted		7,800
Exercised		(68,591)
Forfeited		(10,609)
Outstanding at end of period		1,784,899		1,856,299
Weighted Average Exercise Price ($/share)
Outstanding at beginning of period | $ / shares		$ 2.69
Granted | $ / shares		20.33
Exercised | $ / shares		1.10
Forfeited | $ / shares		7.71
Outstanding at end of period | $ / shares		$ 2.80		$ 2.69
Other information
Options exercisable Number of Exercisable			1,361,442		1,338,155
Options exercisable, weighted-average exercise price | $ / shares			$ 0.99		$ 1.07
Weighted average remaining contractual life (in years)		5 years 3 months 18 days		5 years 6 months
Exercisable options, weighted-average remaining contractual life		4 years 4 months 24 days
Options outstanding | $					$ 28,839	$ 25,467
Options exercisable | $					$ 23,925
Exercised | $		$ 1,019
Restricted stock unit awards, Average Intrinsic Value
Number of option outstanding		1,856,299		1,856,299	1,784,899	1,856,299
Weighted average remaining contractual life (in years)		5 years 3 months 18 days		5 years 6 months
Options Outstanding, weighted average exercise price | $ / shares		$ 2.69		$ 2.69	$ 2.80	$ 2.69
Options exercisable Number of Exercisable			1,361,442		1,338,155
Options exercisable, weighted-average exercise price | $ / shares			$ 0.99		$ 1.07
Restricted Stock Units
Stock-based compensation, general disclosures
Stock-based compensation expense | $		$ 500
Weighted-average period over which unrecognized compensation cost is expected to be recognized		1 year 6 months
Total unrecognized pre-tax compensation expense related to awards | $					$ 3,500
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
Vested (in shares)		(922)		(1,726)
Restricted stock unit awards, Average Intrinsic Value
Number of shares upon director's termination services | item		1

Stockholders' Equity - Stock-38

Stockholders' Equity - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Stock-based compensation
Allocated Share-based Compensation Expense	$ 957	$ 75
Cost of goods sold
Stock-based compensation
Allocated Share-based Compensation Expense	49	19
Sales and marketing
Stock-based compensation
Allocated Share-based Compensation Expense	315	42
Research and development
Stock-based compensation
Allocated Share-based Compensation Expense	23
Reimbursement, general and administrative
Stock-based compensation
Allocated Share-based Compensation Expense	$ 570	$ 14
2016 Plan
Stock-based compensation
Shares reserved for issuance under the plan	4,800,000
Automatic annual increase to the number of shares reserved and available for issuance as a percentage of outstanding common stock (as a percent)	5.00%
Automatic annual increase to the number of shares reserved and available for issuance	2,500,000
Increase in number of shares reserved and available for issuance	841,686
Shares available for future issuance	4,960,398
Restricted Stock Units
Stock-based compensation
Allocated Share-based Compensation Expense	$ 500

Stockholders' Equity - Employee

Stockholders' Equity - Employee Stock Purchase Plan (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Class of Stock [Line Items]
Allocated Share-based Compensation Expense	$ 957	$ 75
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 reserved	1,600,000
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	168,337
Shares issued	0
Allocated Share-based Compensation Expense	$ 200

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Taxes
Effective rate (as percent)	47.70%	43.30%
Increase (Decrease) in percentage points	4.40%
Income tax benefit	$ (1,373)	$ (801)

Net Loss Per Share Attributab41

Net Loss Per Share Attributable to Common Stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net Loss Per Share Attributable to Common Stockholders
Net loss	$ (1,504)	$ (980)
Convertible preferred stock dividends		(514)
Net loss attributable to common stockholders	$ (1,504)	$ (1,494)
Weighted average shares outstanding	16,878,443	3,293,326
Weighted average shares used to compute diluted net income (loss) per share	16,878,443	3,293,326
Net loss per share — Basic	$ (0.09)	$ (0.45)
Net loss per share — Diluted	$ (0.09)	$ (0.45)

Net Loss Per Share Attributab42

Net Loss Per Share Attributable to Common Stockholders - Antidilutive shares (Details) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	2,234,914	7,504,888
Number of potentially dilutive shares outstanding	19,100,000
Restricted Stock Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	449,963
Convertible preferred stock outstanding
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share		5,794,957
Common stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	1,784,951	1,704,131
Common stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share		5,800

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Fair Value Measurements
Available for sale debt securities	$ 20,023	$ 10,994
Amount of transfers of marketable securities within the three level hierarchy	0
US government and agency obligations
Fair Value Measurements
Available for sale debt securities	11,979	8,996
Corporate debt securities and certificate of deposit
Fair Value Measurements
Available for sale debt securities	8,044	1,998
Recurring
Fair Value Measurements
Available for sale debt securities	29,967	29,984
Recurring | Currency
Fair Value Measurements
Marketable securities		14
Recurring | Money market mutual funds
Fair Value Measurements
Marketable securities	9,944	18,976
Recurring | US government and agency obligations
Fair Value Measurements
Available for sale debt securities	11,979	8,996
Recurring | Corporate debt securities and certificate of deposit
Fair Value Measurements
Available for sale debt securities	8,044	1,998
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Measurements
Available for sale debt securities	11,955	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	9,944	18,976
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | US government and agency obligations
Fair Value Measurements
Available for sale debt securities	2,011	2,017
Recurring | Significant Other Observable Inputs (Level 2)
Fair Value Measurements
Available for sale debt securities	18,012	8,977
Recurring | Significant Other Observable Inputs (Level 2) | US government and agency obligations
Fair Value Measurements
Available for sale debt securities	9,968	6,979
Recurring | Significant Other Observable Inputs (Level 2) | Corporate debt securities and certificate of deposit
Fair Value Measurements
Available for sale debt securities	$ 8,044	$ 1,998