0001558370-20-012258 | 10-Q | XBRL Viewer | Tactile Systems Technology INC

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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2020	Oct. 30, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-37799
Entity Registrant Name	Tactile Systems Technology, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	41-1801204
Entity Address, Address Line One	3701 Wayzata Blvd, Suite 300
Entity Address, City or Town	Minneapolis
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55416
City Area Code	612
Local Phone Number	355-5100
Title of 12(b) Security	Common Stock
Trading Symbol	TCMD
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		19,424,679
Entity Central Index Key	0001027838
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 42,204	$ 22,770
Marketable securities	0	22,464
Accounts receivable	36,033	33,444
Net investment in leases	9,451	8,147
Inventories	22,419	19,059
Prepaid expenses and other current assets	4,003	2,451
Total current assets	114,110	108,335
Non-current assets
Property and equipment, net	7,177	7,408
Right of use operating lease assets	20,717	15,885
Intangible assets, net	1,671	5,312
Accounts receivable, non-current	7,100	4,184
Deferred income taxes	5,010	8,970
Other non-current assets	1,965	1,658
Total non-current assets	43,640	43,417
Total assets	157,750	151,752
Current liabilities
Accounts payable	5,053	3,843
Accrued payroll and related taxes	10,864	10,098
Accrued expenses	3,582	4,498
Income taxes payable	1,459	632
Operating lease liabilities	2,010	1,454
Other current liabilities	2,673	903
Total current liabilities	25,641	21,428
Non-current liabilities
Accrued warranty reserve, non-current	3,071	2,541
Income taxes, non-current		54
Operating lease liabilities, non-current	19,919	15,134
Total non-current liabilities	22,990	17,729
Total liabilities	48,631	39,157
Commitments and Contingencies (see Note 10)
Stockholders' equity:
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019
Common stock, $0.001 par value, 300,000,000 shares authorized; 19,424,679 shares issued and outstanding as of September 30, 2020; 19,152,715 shares issued and outstanding as of December 31, 2019	19	19
Additional paid-in capital	101,157	91,874
Retained earnings	7,943	20,676
Accumulated other comprehensive income		26
Total stockholders' equity	109,119	112,595
Total liabilities and stockholders' equity	$ 157,750	$ 151,752

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
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	19,424,679	19,152,715
Common Stock, Shares, Outstanding	19,424,679	19,152,715

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Total revenue	$ 49,092	$ 49,612	$ 127,887	$ 132,429
Total cost of revenue	14,120	14,239	36,930	39,293
Gross profit	34,972	35,373	90,957	93,136
Operating expenses
Sales and marketing	19,488	20,737	59,856	56,546
Research and development	1,102	1,467	3,891	3,982
Reimbursement, general and administrative	12,588	9,972	37,830	28,177
Total operating expenses	33,178	32,176	101,577	88,705
Income (loss) from operations	1,794	3,197	(10,620)	4,431
Other (expense) income	(121)	166	181	498
Income (loss) before income taxes	1,673	3,363	(10,439)	4,929
Income tax (benefit) expense	(751)	932	2,294	(1,759)
Net income (loss)	$ 2,424	$ 2,431	$ (12,733)	$ 6,688
Net income (loss) per common share
Basic (in dollars per share)	$ 0.12	$ 0.13	$ (0.66)	$ 0.35
Diluted (in dollars per share)	$ 0.12	$ 0.12	$ (0.66)	$ 0.34
Weighted-average common shares used to compute net income (loss) per common share
Basic (in shares)	19,415,640	18,981,015	19,309,344	18,870,622
Diluted (in shares)	19,747,365	19,641,853	19,309,344	19,630,721
Sales revenue
Total revenue	$ 42,573	$ 42,882	$ 109,714	$ 112,503
Total cost of revenue	11,558	12,233	30,868	33,231
Gross profit	31,015	30,649	78,846	79,272
Rental revenue
Total revenue	6,519	6,730	18,173	19,926
Total cost of revenue	2,562	2,006	6,062	6,062
Gross profit	$ 3,957	$ 4,724	$ 12,111	$ 13,864

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Condensed Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$ 2,424	$ 2,431	$ (12,733)	$ 6,688
Other comprehensive (loss) income:
Unrealized (loss) gain on marketable securities	(14)	(13)	(21)	51
Income tax related to items of other comprehensive (loss) income	(15)	4	(5)	(12)
Total other comprehensive (loss) income	(29)	(9)	(26)	39
Comprehensive income (loss)	$ 2,395	$ 2,422	$ (12,759)	$ 6,727

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive (Loss) Income	Total
Balances at the beginning at Dec. 31, 2018	$ 19	$ 79,554	$ 9,705	$ (8)	$ 89,270
Balances at the beginning (in shares) at Dec. 31, 2018	18,631,125
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		7,387			7,387
Exercise of common stock options and vesting of restricted stock units		1,838			1,838
Exercise of common stock options and vesting of restricted stock units (in shares)	398,477
Taxes paid for net share settlement of restricted stock units		(3,107)			(3,107)
Taxes paid for net share settlement of restricted stock units (in shares)	(56,956)
Common shares issued for employee stock purchase plan		1,852			1,852
Common shares issued for employee stock purchase plan (in shares)	43,386
Comprehensive income (loss) for the period			6,688	39	6,727
Balances at the end at Sep. 30, 2019	$ 19	87,524	16,393	31	103,967
Balances at the end (in shares) at Sep. 30, 2019	19,016,032
Balances at the beginning at Jun. 30, 2019	$ 19	84,987	13,962	40	99,008
Balances at the beginning (in shares) at Jun. 30, 2019	18,956,912
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		2,330			2,330
Exercise of common stock options and vesting of restricted stock units		296			296
Exercise of common stock options and vesting of restricted stock units (in shares)	60,833
Taxes paid for net share settlement of restricted stock units		(89)			(89)
Taxes paid for net share settlement of restricted stock units (in shares)	(1,713)
Comprehensive income (loss) for the period			2,431	(9)	2,422
Balances at the end at Sep. 30, 2019	$ 19	87,524	16,393	31	103,967
Balances at the end (in shares) at Sep. 30, 2019	19,016,032
Balances at the beginning at Dec. 31, 2019	$ 19	91,874	20,676	26	112,595
Balances at the beginning (in shares) at Dec. 31, 2019	19,152,715
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		8,288			8,288
Exercise of common stock options and vesting of restricted stock units		762			762
Exercise of common stock options and vesting of restricted stock units (in shares)	259,406
Taxes paid for net share settlement of restricted stock units		(1,592)			(1,592)
Taxes paid for net share settlement of restricted stock units (in shares)	(31,095)
Common shares issued for employee stock purchase plan		1,825			1,825
Common shares issued for employee stock purchase plan (in shares)	43,653
Comprehensive income (loss) for the period			(12,733)	(26)	(12,759)
Balances at the end at Sep. 30, 2020	$ 19	101,157	7,943		109,119
Balances at the end (in shares) at Sep. 30, 2020	19,424,679
Balances at the beginning at Jun. 30, 2020	$ 19	97,818	5,519	29	103,385
Balances at the beginning (in shares) at Jun. 30, 2020	19,411,404
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		3,164			3,164
Exercise of common stock options and vesting of restricted stock units		214			214
Exercise of common stock options and vesting of restricted stock units (in shares)	14,322
Taxes paid for net share settlement of restricted stock units		(39)			(39)
Taxes paid for net share settlement of restricted stock units (in shares)	(1,047)
Comprehensive income (loss) for the period			2,424	$ (29)	2,395
Balances at the end at Sep. 30, 2020	$ 19	$ 101,157	$ 7,943		$ 109,119
Balances at the end (in shares) at Sep. 30, 2020	19,424,679

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities
Net (loss) income	$ (12,733)	$ 6,688
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	2,102	2,808
Net amortization of premiums and discounts on securities available-for-sale	(91)	(225)
Deferred income taxes	3,934	(31)
Stock-based compensation expense	8,288	7,387
Gain on other investments and maturities of marketable securities	10
Impairment losses	4,025
Changes in assets and liabilities:
Accounts receivable	(2,589)	(3,349)
Net investment in leases	(1,304)	(7,628)
Inventories	(3,538)	(5,693)
Income taxes	773	(2,051)
Prepaid expenses and other assets	(1,553)	(418)
Right of use operating lease assets	509	107
Medicare accounts receivable, non-current	(2,916)	(1,141)
Accounts payable	938	979
Accrued payroll and related taxes	766	3,915
Accrued expenses and other liabilities	1,134	1,073
Net cash (used in) provided by operating activities	(2,245)	2,421
Cash flows from investing activities
Proceeds from maturities of securities available-for-sale	22,500	16,000
Purchases of securities available-for-sale		(14,859)
Purchases of property and equipment	(1,623)	(4,276)
Intangible assets costs	(163)	(154)
Other investments	(30)
Net cash provided by (used in) investing activities	20,684	(3,289)
Cash flows from financing activities
Taxes paid for net share settlement of restricted stock units	(1,592)	(3,107)
Proceeds from exercise of common stock options	762	1,838
Proceeds from the issuance of common stock from the employee stock purchase plan	1,825	1,852
Net cash provided by financing activities	995	583
Net increase (decrease) in cash and cash equivalents	19,434	(285)
Cash and cash equivalents - beginning of period	22,770	20,099
Cash and cash equivalents - end of period	42,204	19,814
Supplemental cash flow disclosure
Cash paid for taxes	475	326
Capital expenditures incurred but not yet paid	$ 41	$ 801

Nature of Business and Operations

9 Months Ended

Sep. 30, 2020

Nature of Business and Operations

Nature of Business and Operations

Note 1. Nature of Business and Operations

Tactile Systems Technology, Inc. (“we,” “us,” and “our”) is the sole manufacturer and distributor of the Flexitouch® and Entre™ systems, medical devices that help control symptoms of lymphedema, a chronic and progressive medical condition. Our products are purchased or rented for at-home use and are recommended by vascular, wound and lymphedema clinics throughout the United States.

We were originally incorporated in Minnesota under the name Tactile Systems Technology, Inc. on January 30, 1995. During 2006, we established a merger corporation and subsequently, on July 21, 2006, merged with and into this merger corporation, resulting in our reincorporation as a Delaware corporation. The resulting corporation assumed the name Tactile Systems Technology, Inc. In September 2013, we began doing business as “Tactile Medical”.

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. As a result, at August 2, 2016, we did not have any redeemable convertible preferred stock issued or outstanding.

Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher revenue in the third and fourth quarters of the year when patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for our products, and because patients desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products. Further, seasonality trends in 2020 may be significantly different than in prior years as a result of the COVID-19 pandemic and related impacts.

Basis of Presentation

9 Months Ended

Sep. 30, 2020

Basis of Presentation

Basis of Presentation

Note 2. Basis of Presentation

The 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.

The results for the nine months ended September 30, 2020, are not necessarily indicative of results to be expected for the year ending December 31, 2020, or for any other interim period or for any future year. 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, 2019.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc. All intercompany balances and transactions have been eliminated in consolidation.

Risks and Uncertainties

Coronavirus (COVID-19)

The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic. We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols. There are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it. For that reason, we are unable to reasonably estimate the long-term impact of the pandemic on our business at this time. Our first priority with regard to the COVID-19 pandemic is to ensure the safety and health of our employees, clinicians and patients. Subject to that, we are focusing our efforts on attempting to continue our business operations in this unprecedented environment. Part of our strategy includes changing many of our processes and practices in an effort to help mitigate the impact of COVID-19 on our business so that we can support our clinicians and safely make our at-home therapies available to patients. Since the onset of COVID-19, we have remained proactive to ensure we continue to adapt to our employees, clinicians and patients needs. These changes to our business include, but are not limited to:

●

Initially, we modified our operations with the primary focus on keeping our employees safe while continuing to serve our clinicians and patients. As an essential business under federal guidelines, we continued to manufacture product and implemented multiple, smaller rotational shifts and other best practices to help protect the health and safety of our workforce. More recently, we have migrated closer to our pre-COVID work shifts, however we have implemented more stringent safety measures including mandatory use of face masks, social distancing and temperature checks for our employees.

●

We have continued to incorporate remote and flexible work arrangements for employees whenever possible, including real-time, online training of our new sales representatives.

●

Continuing employee travel and contact restrictions to reduce exposure.

●

Collaborating with payers to modify coverage requirements by serving patients virtually.

●

In concert with COVID-19 social distancing requirements and recommendations, we moved to a “no contact” virtual patient training model. This new model substantially reduced the need for in-person contact and visits to patients’ homes and clinics in order to protect the health and limit the exposure of both our trainers and patients. Accordingly in the second quarter of 2020, we inactivated our independent healthcare practitioners, who acted as at-home trainers to educate patients on the proper use of our systems, in order to allow these individuals to have access to specific COVID related financial relief.

●

We continue to transition large, in-person medical education programs in favor of conducting virtual meetings whenever possible.

●

When in-person visits are required, we are supporting clinicians and patients by using rigorous infection control practices.

We cannot assure you that these changes to our processes and practices will be successful in mitigating the impact of COVID-19 on our business. We continue to evaluate and, if appropriate, will adopt other measures in the future related to the ongoing safety of our employees, clinicians and patients.

Use of Estimates

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

Comprehensive Income (Loss)

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

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

Significant Accounting Policies

There were no material changes in our significant accounting policies during the nine months ended September 30, 2020, except as set forth below. See Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, for information regarding our significant accounting policies.

Impairment of Long-Lived Assets

We review long-lived assets, including property and equipment and patents, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. We assess long-lived assets used in operations for impairment indicators, including when undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.

In the second quarter of 2020, we reevaluated the Airwear wrap go-to market plan, and determined to focus our strategy on more advanced solutions within our core, long-standing Flexitouch and Entre franchises. Accordingly, we made the strategic decision to discontinue the Airwear wrap in the second quarter of 2020. Due to the planned discontinuation of the product line, we recorded a $4.0 million non-cash impairment charge to fully write-off the inventory and long-lived assets of the Airwear wrap in the quarter ended June 30, 2020. The majority of the impairment charge was comprised of the intangible assets and property and equipment, totaling $3.6 million, and was classified within the reimbursement, general and administrative line of the Condensed Consolidated Statements of Operations. The inventory-related component of the impairment charge was $0.4 million, and was classified within the cost of revenue line of the Condensed Consolidated Statements of Operations.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments — Credit Losses” (“ASU 2016-13”), which introduced a new model for recognizing credit losses on financial instruments based on an estimate of the current expected credit losses. The new current expected credit losses (“CECL”) model generally calls for the immediate recognition of all expected credit losses and applies to financial instruments and other assets, including accounts receivable and other financial assets measured at amortized cost, debt securities and other financial assets. This guidance replaces the previous incurred loss model for measuring expected credit losses and requires expected losses on available-for-sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities. We adopted ASU 2016-13 as of January 1, 2020, and it did not have an impact on the condensed consolidated financial statements.

Accounting Pronouncements Issued Not Yet Adopted

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects of the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the applicability and impact of the standard on our condensed consolidated financial statements and related disclosures.

Marketable Securities

9 Months Ended

Sep. 30, 2020

Marketable Securities

Marketable Securities

Note 4. Marketable Securities

There were no investments in marketable securities at September 30, 2020. At December 31, 2019 investments in marketable securities were classified as available-for-sale and consisted of the following:


	At December 31, 2019
	Amortized		Unrealized				Fair
(In thousands)	Cost		Gains		Losses		Value
U.S. government and agency obligations	$	19,950	$	14	$	1	$	19,963
Corporate debt securities		2,493		8		—		2,501
Marketable securities	$	22,443	$	22	$	1	$	22,464

There were no net pre-tax unrealized gains for marketable securities at September 30, 2020. There were no sales of marketable securities during the nine months ended September 30, 2020.

There were no marketable securities in an unrealized loss position at September 30, 2020.

At December 31, 2019, unrealized losses and the fair value of marketable securities aggregated by investment category and the length of time the securities were in a continuous loss position, were as follows:


	At December 31, 2019
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. government and agency obligations	$	5,997	$	1	$	—	$	—	$	5,997	$	1
Corporate debt securities		—		—		—		—		—		—
Marketable securities	$	5,997	$	1	$	—	$	—	$	5,997	$	1

Inventories

9 Months Ended

Sep. 30, 2020

Inventories

Inventories

Note 5. Inventories

Inventories consisted of the following:


(In thousands)	At September 30, 2020		At December 31, 2019
Finished goods	$	9,287	$	6,508
Component parts and work-in-process		13,132		12,551
Total inventories	$	22,419	$	19,059

Intangible Assets

9 Months Ended

Sep. 30, 2020

Intangible Assets

Intangible Assets

Note 6. Intangible Assets

Our patents and other intangible assets are summarized as follows:


	Weighted-	At September 30, 2020
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Patents	12 years	$	388	$	55	$	333
Defensive intangible assets	4 years		1,125		378		747
Customer accounts	3 years		125		57		68
Total amortizable intangible assets			1,638		490		1,148
Patents pending			523		—		523
Total intangible assets		$	2,161	$	490	$	1,671


	Weighted-	At December 31, 2019
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Patents	11 years	$	4,386	$	447	$	3,939
Defensive intangible assets	5 years		1,125		250		875
Customer accounts	3 years		125		37		88
Total amortizable intangible assets			5,636		734		4,902
Patents pending			410		—		410
Total intangible assets		$	6,046	$	734	$	5,312

Amortization expense was $0.1 million for each of the three months ended September 30, 2020 and 2019, and $0.3 million and $0.4 million for the nine months ended September 30, 2020 and 2019, respectively. Future amortization expenses are expected as follows:


(In thousands)
2020 (October 1 - December 31)	$	58
2021		230
2022		230
2023		200
2024		179
Thereafter		251
Total	$	1,148

Accrued Expenses

9 Months Ended

Sep. 30, 2020

Accrued Expenses

Accrued Expenses

Note 7. Accrued Expenses

Accrued expenses consisted of the following:


(In thousands)	At September 30, 2020		At December 31, 2019
Warranty	$	1,443	$	1,218
Legal and consulting		675		617
Travel and business		413		776
In-transit inventory		129		106
Sales and use tax		183		200
Clinical studies		38		85
Lease termination costs		—		1,200
Other		701		296
Total	$	3,582	$	4,498

Warranty Reserves

9 Months Ended

Sep. 30, 2020

Warranty Reserves

Warranty Reserves

Note 8. Warranty Reserves

The activity in the warranty reserve during and as of the end of the reporting periods presented was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Beginning balance	$	4,208	$	3,002	$	3,759	$	2,566
Warranty provision		820		664		2,097		1,677
Processed warranty claims		(514)		(386)		(1,342)		(963)
Ending balance	$	4,514	$	3,280	$	4,514	$	3,280

Accrued warranty reserve, current	$	1,443	$	1,053	$	1,443	$	1,053
Accrued warranty reserve, non-current		3,071		2,227		3,071		2,227
Total accrued warranty reserve	$	4,514	$	3,280	$	4,514	$	3,280

Credit Agreement

9 Months Ended

Sep. 30, 2020

Credit Agreement

Credit Agreement

Note 9. Credit Agreement

On August 3, 2018, we entered into a credit agreement with Wells Fargo Bank, National Association, which was amended by a First Amendment dated February 12, 2019, a Waiver and Second Amendment dated March 25, 2019, and a Third Amendment dated August 2, 2019 (collectively, the “Credit Agreement”), which expires on August 3, 2021.

The Credit Agreement provides for a $10.0 million revolving credit facility. Subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed an incremental $25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $35.0 million. As of September 30, 2020, and the date on which we filed this report, we did not have any outstanding borrowings under the Credit Agreement.

Our obligations under the Credit Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets and are also guaranteed by our subsidiaries. The Credit Agreement contains a number of restrictions and covenants, including that we maintain compliance with a maximum leverage ratio and a minimum liquidity covenant. As of September 30, 2020, we were in compliance with all financial covenants under the Credit Agreement.

Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies

Commitments and Contingencies

Note 10. Commitments and Contingencies

Lease Obligations

We lease property and equipment under operating leases, typically with terms greater than 12 months, and determine if an arrangement contains a lease at inception. In general, an arrangement contains a lease if there is an identified asset and we have the right to direct the use of and obtain substantially all of the economic benefit from the use of the identified asset. We record an operating lease liability at the present value of lease payments over the lease term on the commencement date. The related right of use (“ROU”) operating lease asset reflects rental escalation clauses, as well as renewal options and/or termination options. The exercise of lease renewal and/or termination options are at our discretion and are included in the determination of the lease term and lease payment obligations when it is deemed reasonably certain that the option will be exercised. When available, we use the rate implicit in the lease to discount lease payments to present value; however, certain leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.

We classify our leases as buildings, vehicles or computer and office equipment and do not separate lease and nonlease components of contracts for any of the aforementioned classifications. In accordance with applicable guidance, we do not record leases with terms that are less than one year on the Condensed Consolidated Balance Sheet.

None of our lease agreements contain material restrictive covenants or residual value guarantees.

Buildings

We lease certain office and warehouse space at various locations in the United States where we provide services. These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Condensed Consolidated Balance Sheet, with rent expense to be recognized on a straight-line basis over the term of the lease. The remaining lease terms vary from approximately three to ten years as of September 30, 2020.

In March 2008, we entered into a noncancelable operating lease agreement for building space for our previous corporate headquarters that provided for monthly rent, real estate taxes and operating expenses that was subsequently extended to July 31, 2021. Due to the move to our new headquarters in September 2019, we entered into a termination agreement for our former corporate headquarters on December 31, 2019. We agreed to pay $1.2 million in order to terminate all future rights and obligations of the lease. The lease was removed from our ROU operating lease assets and operating lease liabilities and the total net loss on termination of $1.1 million was recorded in the reimbursement, general and administrative line of our Condensed Consolidated Statements of Operations.

We entered into a lease (“initial lease”) in October 2018, for approximately 80,000 square feet of office space for our new corporate headquarters in Minneapolis, Minnesota. In December 2018, we amended the initial lease to add approximately 29,000 square feet of additional office space, which is accounted for as a separate lease (“second lease”) in accordance with ASU No. 2016-02, “Leases” (Topic 842) (“ASC 842”). In December 2019, we further amended the lease which extended the expiration date of the initial lease, extended the expiration date of and added approximately 4,000 square feet to the second lease, as well as added approximately 37,000 square feet of additional office space, accounted for as a separate lease (“third lease”) in accordance with ASC 842. The portion of the space under the initial lease was placed in service in September 2019. This portion was recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets beginning as of September 30, 2019. The portion of the space covered under the second lease commenced on September 1, 2020. This portion was recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets as of September 30, 2020. The portion of the space covered under the third lease is expected to be occupied and commence in the second half of 2021.

Vehicles

We lease vehicles for certain members of our field sales organization under a vehicle fleet program whereby the initial, noncancelable lease is for a term of 367 days, thus more than one year. Subsequent to the initial term, the lease becomes a month-to-month, cancelable lease. As of September 30, 2020, we had approximately 69 vehicles with agreements within the initial, noncancelable lease term that are recorded as ROU operating lease assets and operating lease liabilities. In addition to monthly rental fees specific to the vehicle, there are fixed monthly nonlease components that have been included in the ROU operating lease assets and operating lease liabilities. The nonlease components are not significant.

Computer and Office Equipment

We also have operating lease agreements for certain computer and office equipment. The remaining lease terms as of September 30, 2020, ranged from less than one year to approximately three years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities. The leases provide an option to purchase the related equipment at fair market value at the end of the lease. The leases will automatically renew as a month-to-month rental at the end of the lease if the equipment is not purchased or returned.

Lease Position, Undiscounted Cash Flow and Supplemental Information

The table below presents information related to our ROU operating lease assets and operating lease liabilities that we have recorded:


(In thousands)	At September 30, 2020		At December 31, 2019
Right of use operating lease assets	$	20,717	$	15,885

Operating lease liabilities:
Current	$	2,010	$	1,454
Non-current		19,919		15,134
Total	$	21,929	$	16,588

Operating leases:
Weighted average remaining lease term		9.6 years		10.1 years
Weighted average discount rate		4.3%		4.6%

	Nine Months Ended September 30,
	2020		2019
Supplemental cash flow information for our operating leases:
Cash paid for operating lease liabilities	$	1,849	$	1,147
Non-cash right of use assets obtained in exchange for new operating lease obligations	$	6,664	$	16,296

The table below reconciles the undiscounted cash flows under the operating lease liabilities recorded on the Condensed Consolidated Balance Sheet for the periods presented:


(In thousands)
2020 (October 1 - December 31)	$	788
2021		2,781
2022		2,643
2023		2,594
2024		2,575
Thereafter		15,344
Total minimum lease payments		26,725
Less: Amount of lease payments representing interest		(4,796)
Present value of future minimum lease payments		21,929
Less: Current obligations under operating lease liabilities		(2,010)
Non-current obligations under operating lease liabilities	$	19,919

As of September 30, 2020, we have additional lease commitments of $7.1 million related to amendments to existing building leases that have not yet commenced. As the lessee we are involved in providing guidance to the lessor for related improvements, however these improvements are managed and owned by the lessor.

Operating lease costs were $0.8 million and $0.6 million for the three months ended September 30, 2020 and 2019, respectively. Operating lease costs were $2.1 million and $1.3 for the nine months ended September 30, 2020 and 2019, respectively.

Major Vendors

We had purchases from two major vendors that accounted for 31% and 33% of our total purchases for the three and nine months ended September 30, 2020, respectively. We had purchases from two major vendors that accounted for 42% and 37% of our total purchases for the three and nine months ended September 30, 2019, respectively.

Purchase Commitments

We issued purchase orders prior to September 30, 2020, totaling $20.5 million for goods that we expect to receive within the next year.

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. Discretionary contributions to the 401(k) plan totaled $0.1 million for each of the three ended September 30, 2020 and 2019, and $0.2 million for each of the nine months ended September 30, 2020 and 2019.

Stockholders' Equity

9 Months Ended

Sep. 30, 2020

Stockholders' Equity

Stockholders' Equity

Note 11. Stockholders' Equity

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, expired, cancelled, settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan. Pursuant to the automatic increase feature of the 2016 Plan, shares were added as approved by the Board of Directors for each year since inception other than 2019, at which point, the Board exercised its prerogative to forgo the increase. On January 1, 2020, 952,697 shares were added as available for issuance thereunder. As of September 30, 2020, 4,658,176 shares were available for future grant pursuant to the 2016 Plan.

Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continue to vest in accordance with the original vesting schedules and will expire at the end of their original terms.

In the second fiscal quarter of 2020, our Board of Directors appointed a new President and Chief Executive Officer (“CEO”), effective June 8, 2020. In conjunction with the acceptance of the written offer, our CEO received both restricted stock units and stock option awards under our 2016 Plan during the third fiscal quarter of 2020 and the stock options have a seven year term. A portion of the awards will vest on June 30, 2021, with the remaining portion of the awards vesting over a period of three years from the date of grant. Further, all of the stock options included in these awards require that our stock price exceed $40.15 for 20 consecutive trading days during the term of the option in order to vest.

We recorded stock-based compensation expense of $3.2 million and $2.3 million for the three months ended September 30, 2020 and 2019, respectively, and $8.3 million and $7.4 million for the nine months ended September 30, 2020 and 2019, respectively. This expense was allocated as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Cost of revenue	$	171	$	75	$	358	$	249
Sales and marketing expenses		1,436		1,029		3,915		3,262
Research and development expenses		87		95		269		275
Reimbursement, general and administrative expenses		1,470		1,131		3,746		3,601
Total stock-based compensation expense	$	3,164	$	2,330	$	8,288	$	7,387

Stock Options

We have granted stock options to certain participants that vest over three or four years and typically have a contractual term of seven or ten years. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $1.1 million and $0.6 million for the three months ended September 30, 2020 and 2019, respectively, and $3.0 million and $2.0 million for the nine months ended September 30, 2020 and 2019, respectively.

At September 30, 2020, there was approximately $7.9 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 2.1 years.

Our stock option activity for the nine months ended September 30, 2020, was as follows:


		Weighted-		Weighted-
		Average		Average	Aggregate
	Options	Exercise Price		Remaining	Intrinsic
(In thousands except options and per share data)	Outstanding	Per Share ⁽¹⁾		Contractual Life	Value ⁽²⁾
Balance at December 31, 2019	866,955	$	28.76	6.1 years	$	33,957
Granted	284,674	$	47.66
Exercised	(132,911)	$	5.74		$	6,224
Forfeited	(33,818)	$	53.54
Expired	(2,718)	$	63.02
Balance at September 30, 2020	982,182	$	36.41	5.8 years	$	8,829

Options exercisable at September 30, 2020	461,138	$	23.35	4.9 years	$	8,102

(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 trading day of the period.

Options exercisable of 539,487 as of September 30, 2019, had a weighted-average exercise price of $5.15 per share.

Time-Based Restricted Stock Units

We have granted time-based restricted stock units to certain participants under the 2016 Plan that are stock-settled with common shares. Time-based restricted stock units granted under the 2016 Plan vest over one to three years. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $1.4 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $4.0 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, there was approximately $7.5 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.9 years.

Our time-based restricted stock unit activity for the nine months ended September 30, 2020, was as follows:


		Weighted-
		Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2019	171,687	$	43.74	$	11,591
Granted	149,175	$	48.20
Modification	2,288	$	21.85
Vested	(94,640)	$	38.07
Forfeited	(11,701)	$	55.33
Balance at September 30, 2020	216,809	$	48.42	$	7,933

Deferred and unissued at September 30, 2020⁽²⁾	6,967	$	40.27	$	255

(1)	The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

(2)

For the nine months ended September 30, 2020, there were 858 restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments. These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock, per unit, upon the earlier of the director’s termination of service as a director of ours or the occurrence of a change of control of us. These restricted stock units are included in the “Granted” line in the table above and are also included in the “Vested” line in the table above due to their being fully vested upon grant. As of September 30, 2020, there were 6,967 outstanding restricted stock units that have been previously granted to non-employee directors in lieu of their quarterly director retainer payments.

Performance-Based Restricted Stock Units

We have granted performance-based restricted stock units (“PSUs”) to certain participants under the 2016 Plan. These PSUs have both performance-based and time-based vesting features. The PSUs granted in 2018 were earned to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2019. The PSUs granted in 2019 will be earned if and to the extent performance goals based on revenue and adjusted EBITDA are achieved in 2020. The PSUs granted in 2020 will be earned if and to the extent performance goals based on revenue and adjusted EBITDA are achieved in 2021. The number of PSUs earned will depend on the level at which the performance targets are achieved and can range from 50% of target if the minimum performance threshold is achieved and up to 150% of target if maximum performance is achieved. One-third of the earned PSUs will vest on the date the Compensation and Organization Committee certifies the number of PSUs earned, and the remaining two-thirds of the earned PSUs will vest on the first anniversary of that certification date. All earned and vested PSUs will be settled in shares of common stock.

Stock-based compensation expense recognized for PSUs was $0.4 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively, and $0.5 million and $1.7 million for the nine months ended September 30, 2020 and 2019, respectively. The stock-based compensation expense for the nine months ended September 30, 2020 reflects a $1.0 million benefit due to a change in the estimated payout associated with PSUs granted in 2019 being below the minimum performance target threshold level, as defined. As of September 30, 2020, there was approximately $1.4 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.0 years.

Our performance-based restricted stock unit activity for the nine months ended September 30, 2020, was as follows:


	Performance-	Weighted-
	Based	Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2019	91,151	$	44.63	$	6,154
Granted	31,731	$	50.41
Vested	(21,589)	$	33.62
Forfeited	(8,846)	$	70.46
Balance at September 30, 2020	92,447	$	46.72	$	3,383

(1)	The aggregate intrinsic value of performance-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

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 ESPP 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 ESPP provides for six-month purchase periods, beginning on May 16 and November 16 of each calendar year.

A total of 1,600,000 shares of common stock was initially reserved for issuance under the ESPP. 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 (a) 1% of the shares of our common stock outstanding on the immediately preceding December 31, (b) 500,000 shares or (c) such lesser amount as our Board of Directors may determine. Pursuant to the automatic increase feature of the ESPP, shares were added as approved by the Board of Directors for each year since inception other than 2019, at which point, the Board exercised its prerogative to forgo the increase. On January 1, 2020, 190,539 shares were added as available for issuance thereunder. As of September 30, 2020, 1,618,335 shares were available for future issuance under the ESPP. We recognized stock-based compensation expense associated with the ESPP of $0.3 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $0.8 million and $0.7 million for the nine months ended September 30, 2020 and 2019, respectively.

Revenue

9 Months Ended

Sep. 30, 2020

Revenue

Revenue

Note 12. Revenue

We derive our revenue from the sale and rental of our compression products to our customers in the United States. The following table presents our revenue, inclusive of sales and rental revenue, disaggregated by product categories:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Revenue
Flexitouch system	$	42,908	$	44,699	$	112,621	$	119,767
Other products⁽¹⁾		6,184		4,913		15,266		12,662
Total	$	49,092	$	49,612	$	127,887	$	132,429

Percentage of total revenue
Flexitouch system		87 %		90 %		88 %		90 %
Other products⁽¹⁾		13 %		10 %		12 %		10 %
Total		100 %		100 %		100 %		100 %

(1)

The “other products” line primarily includes revenue from our Entre system. The Actitouch system and the Airwear wrap contributed immaterial amounts of revenue for each of the three and nine months ended September 30, 2020 and 2019.

Rental revenue for the three and nine months ended September 30, 2020 and 2019, was primarily from private insurers. Our revenue from third-party payers, inclusive of sales and rental revenue, for the three and nine months ended September 30, 2020 and 2019, are summarized in the following table:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Private insurers and other payers	$	34,554	$	35,909	$	90,459	$	93,932
Veterans Administration		6,788		7,764		18,168		23,690
Medicare		7,750		5,939		19,260		14,807
Total	$	49,092	$	49,612	$	127,887	$	132,429

Our rental revenue is derived from rent-to-purchase arrangements that typically range from three to ten months. Under ASC 840 (the previous guidance for lease accounting), our rental revenue was recognized as month-to-month, cancelable leases; however, because title transfers to the patient, with whom we have the contract, upon the termination of the lease term and because collectability is probable, under ASC 842, these are recognized as sales-type leases. Each rental agreement contains two components, the controller and related garments, both of which are interdependent and recognized as one lease component.

Rental agreements initiated subsequent to January 1, 2019, are recorded as sales-type leases in accordance with ASC 842, whereby rental revenue and cost of rental revenue are recognized upon the lease commencement date. In 2019, in accordance with applicable guidance, we continued to recognize rental agreements commencing prior to December 31, 2018, on a month-to-month basis as an operating lease until they were completed. These rental agreements do not have an impact on the revenue results in 2020. Total rental revenue for the three and nine months ended September 30, 2019 included both operating and sales-type lease revenue. Operating lease revenue was $0.6 million and $4.8 million for the three and nine months ended September 30, 2019.

The revenue and associated cost of revenue of sales-type leases are recognized on the lease commencement date and a net investment in leases is recorded on the Condensed Consolidated Balance Sheet. We bill the patients’ insurance payers monthly over the duration of the rental term. We record the net investment in leases and recognize revenue upon commencement of the lease in the amount of the expected consideration to be received through the monthly payments. Similar to our sales revenue, the transaction price is impacted by multiple factors, including the terms and conditions contracted by third party payers. As the rental contract resides with the patients, we have elected the portfolio approach, at the payer level, to determine

the expected consideration, which considers the impact of early terminations. While the contract is with the patient, in certain circumstances, the third party payer elects an initial rental period with an option to extend. We assess the likelihood of extending the lease at the onset of the lease to determine if the option is reasonably certain to be exercised. As the lease is short-term in nature, we anticipate collection of substantially all of the net investment within the first year of the lease agreement. Completion of these payments represents the fair market value of the equipment, and as such, interest income is not applicable.

Sales-type lease revenue and the associated cost of revenue for the three and nine months ended September 30, 2020 and 2019, was:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Sales-type lease revenue	$	6,519	$	6,088	$	18,173	$	15,088
Cost of sales-type lease revenue		2,562		1,932		6,062		5,358
Gross profit	$	3,957	$	4,156	$	12,111	$	9,730

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

Income Taxes

9 Months Ended

Sep. 30, 2020

Income Taxes

Income Taxes

Note 13. 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 adjusting 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. Our provision for income taxes included current federal and state income tax expense, as well as deferred federal and state income tax expense.

The effective tax rate for the three months ended September 30, 2020 was a benefit of 55%, compared to an expense of 27% for the three months ended September 30, 2019. The primary driver of the change in our effective tax rate is attributable to a change in projected taxable income, including proportionately higher tax benefits for stock-based compensation as compared to the same period last year. We recorded an income tax benefit of $0.8 million and an expense of $0.9 million for the three months ended September 30, 2020 and 2019, respectively.

The effective tax rate for the nine months ended September 30, 2020 was an expense of 17%, compared to a benefit of 36% for the nine months ended September 30, 2019. The primary driver of the change in our effective tax rate is attributable to a change in projected taxable income, including proportionately lower tax benefits for stock-based compensation as compared to the same period last year. We recorded an income tax expense of $2.3 million and a benefit of $1.8 million for the nine months ended September 30, 2020 and 2019, respectively.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority is more-likely-than-not to 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.

We are not currently under examination in any 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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Net Income Per Common Share

9 Months Ended

Sep. 30, 2020

Net Income Per Share

Net Income Per Share

Note 14. Net Income Per Share

The following table sets forth the computation of our basic and diluted net income (loss) per share:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands, except share and per share data)	2020		2019		2020		2019
Net income (loss)	$	2,424	$	2,431	$	(12,733)	$	6,688
Weighted-average shares outstanding		19,415,640		18,981,015		19,309,344		18,870,622
Dilutive effect of stock-based awards		331,725		660,838		—		760,099
Weighted-average shares used to compute diluted net (loss) income per share		19,747,365		19,641,853		19,309,344		19,630,721
Net income (loss) per share - Basic	$	0.12	$	0.13	$	(0.66)	$	0.35
Net income (loss) per share - Diluted	$	0.12	$	0.12	$	(0.66)	$	0.34

The following common stock equivalents were excluded from the computation of diluted net (loss) income per share for the periods presented because including them would have been anti-dilutive:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2020	2019	2020	2019
Restricted stock units	104,786	37,813	223,776	39,905
Common stock options	594,117	198,663	982,182	202,179
Performance stock units	38,666	25,724	113,646	25,724
Employee stock purchase plan	60,196	—	48,360	—
Total	797,765	262,200	1,367,964	267,808

Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Fair Value Measurements

Fair Value Measurements

Note 15. 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 cash equivalents and marketable securities as of September 30, 2020, and December 31, 2019, according to the three-level fair value hierarchy:


	At September 30, 2020
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Recurring Fair Value Measurements:
Money market mutual funds	$	9,159	$	—	$	—	$	9,159
U.S. government and agency obligations		5,000		—		—		5,000
Total	$	14,159	$	—	$	—	$	14,159


	At December 31, 2019
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Recurring Fair Value Measurements:
Money market mutual funds	$	481	$	—	$	—	$	481
U.S. government and agency obligations		25,954		—		—		25,954
Corporate debt securities		—		2,501		—		2,501
Total	$	26,435	$	2,501	$	—	$	28,936

During the three and nine months ended September 30, 2020, there were no transfers within the three-level hierarchy. A significant transfer is recognized when the inputs used to value a security have been changed, which merits a transfer between the disclosed levels of the valuation hierarchy.

The fair values for our 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. As of June 30, 2020, we re-measured the value of our intangible assets related to the Airwear wrap product line to their fair value, which was deemed to be $0.

- Definition

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

+ References + Details

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Summary of Significant Accounting Policies

Basis of Presentation

Principles of Consolidation

Risks and Uncertainties

Coronavirus (COVID-19)

●

We have continued to incorporate remote and flexible work arrangements for employees whenever possible, including real-time, online training of our new sales representatives.

●

Continuing employee travel and contact restrictions to reduce exposure.

●

Collaborating with payers to modify coverage requirements by serving patients virtually.

●

We continue to transition large, in-person medical education programs in favor of conducting virtual meetings whenever possible.

●

When in-person visits are required, we are supporting clinicians and patients by using rigorous infection control practices.

Use of Estimates

Comprehensive Income (Loss)

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Recently Adopted Accounting Pronouncements

Accounting Pronouncements Issued Not Yet Adopted

Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2020

Marketable Securities

Schedule of marketable securities


	At December 31, 2019
	Amortized		Unrealized				Fair
(In thousands)	Cost		Gains		Losses		Value
U.S. government and agency obligations	$	19,950	$	14	$	1	$	19,963
Corporate debt securities		2,493		8		—		2,501
Marketable securities	$	22,443	$	22	$	1	$	22,464

Schedule of unrealized losses on investment


	At December 31, 2019
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. government and agency obligations	$	5,997	$	1	$	—	$	—	$	5,997	$	1
Corporate debt securities		—		—		—		—		—		—
Marketable securities	$	5,997	$	1	$	—	$	—	$	5,997	$	1

Inventories (Tables)

9 Months Ended

Sep. 30, 2020

Inventories

Schedule of inventories


(In thousands)	At September 30, 2020		At December 31, 2019
Finished goods	$	9,287	$	6,508
Component parts and work-in-process		13,132		12,551
Total inventories	$	22,419	$	19,059

Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2020

Intangible Assets

Schedule of finite lived intangible assets


	Weighted-	At September 30, 2020
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Patents	12 years	$	388	$	55	$	333
Defensive intangible assets	4 years		1,125		378		747
Customer accounts	3 years		125		57		68
Total amortizable intangible assets			1,638		490		1,148
Patents pending			523		—		523
Total intangible assets		$	2,161	$	490	$	1,671


	Weighted-	At December 31, 2019
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Patents	11 years	$	4,386	$	447	$	3,939
Defensive intangible assets	5 years		1,125		250		875
Customer accounts	3 years		125		37		88
Total amortizable intangible assets			5,636		734		4,902
Patents pending			410		—		410
Total intangible assets		$	6,046	$	734	$	5,312

Schedule of future amortization expense


(In thousands)
2020 (October 1 - December 31)	$	58
2021		230
2022		230
2023		200
2024		179
Thereafter		251
Total	$	1,148

Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2020

Accrued Expenses

Schedule of Accrued Expenses


(In thousands)	At September 30, 2020		At December 31, 2019
Warranty	$	1,443	$	1,218
Legal and consulting		675		617
Travel and business		413		776
In-transit inventory		129		106
Sales and use tax		183		200
Clinical studies		38		85
Lease termination costs		—		1,200
Other		701		296
Total	$	3,582	$	4,498

Warranty Reserves (Tables)

9 Months Ended

Sep. 30, 2020

Warranty Reserves

Schedule of warranty reserves


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Beginning balance	$	4,208	$	3,002	$	3,759	$	2,566
Warranty provision		820		664		2,097		1,677
Processed warranty claims		(514)		(386)		(1,342)		(963)
Ending balance	$	4,514	$	3,280	$	4,514	$	3,280

Accrued warranty reserve, current	$	1,443	$	1,053	$	1,443	$	1,053
Accrued warranty reserve, non-current		3,071		2,227		3,071		2,227
Total accrued warranty reserve	$	4,514	$	3,280	$	4,514	$	3,280

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies

Summary of lease-related assets and liabilities


(In thousands)	At September 30, 2020		At December 31, 2019
Right of use operating lease assets	$	20,717	$	15,885

Operating lease liabilities:
Current	$	2,010	$	1,454
Non-current		19,919		15,134
Total	$	21,929	$	16,588

Operating leases:
Weighted average remaining lease term		9.6 years		10.1 years
Weighted average discount rate		4.3%		4.6%

	Nine Months Ended September 30,
	2020		2019
Supplemental cash flow information for our operating leases:
Cash paid for operating lease liabilities	$	1,849	$	1,147
Non-cash right of use assets obtained in exchange for new operating lease obligations	$	6,664	$	16,296

Summary of undiscounted cash flows


(In thousands)
2020 (October 1 - December 31)	$	788
2021		2,781
2022		2,643
2023		2,594
2024		2,575
Thereafter		15,344
Total minimum lease payments		26,725
Less: Amount of lease payments representing interest		(4,796)
Present value of future minimum lease payments		21,929
Less: Current obligations under operating lease liabilities		(2,010)
Non-current obligations under operating lease liabilities	$	19,919

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2020

Schedule of allocation of stock-based compensation expense


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Cost of revenue	$	171	$	75	$	358	$	249
Sales and marketing expenses		1,436		1,029		3,915		3,262
Research and development expenses		87		95		269		275
Reimbursement, general and administrative expenses		1,470		1,131		3,746		3,601
Total stock-based compensation expense	$	3,164	$	2,330	$	8,288	$	7,387

Schedule of stock option activity


		Weighted-		Weighted-
		Average		Average	Aggregate
	Options	Exercise Price		Remaining	Intrinsic
(In thousands except options and per share data)	Outstanding	Per Share ⁽¹⁾		Contractual Life	Value ⁽²⁾
Balance at December 31, 2019	866,955	$	28.76	6.1 years	$	33,957
Granted	284,674	$	47.66
Exercised	(132,911)	$	5.74		$	6,224
Forfeited	(33,818)	$	53.54
Expired	(2,718)	$	63.02
Balance at September 30, 2020	982,182	$	36.41	5.8 years	$	8,829

Options exercisable at September 30, 2020	461,138	$	23.35	4.9 years	$	8,102

(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)

Time-Based Restricted Stock Units

Schedule of stock-settled restricted stock unit activity


		Weighted-
		Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2019	171,687	$	43.74	$	11,591
Granted	149,175	$	48.20
Modification	2,288	$	21.85
Vested	(94,640)	$	38.07
Forfeited	(11,701)	$	55.33
Balance at September 30, 2020	216,809	$	48.42	$	7,933

Deferred and unissued at September 30, 2020⁽²⁾	6,967	$	40.27	$	255

(1)	The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

(2)

Performance-based stock-settled restricted stock units

Schedule of stock-settled restricted stock unit activity


	Performance-	Weighted-
	Based	Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2019	91,151	$	44.63	$	6,154
Granted	31,731	$	50.41
Vested	(21,589)	$	33.62
Forfeited	(8,846)	$	70.46
Balance at September 30, 2020	92,447	$	46.72	$	3,383

(1)	The aggregate intrinsic value of performance-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

Revenue (Tables)

9 Months Ended

Sep. 30, 2020

Revenue

Summary of revenue disaggregated by product


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Revenue
Flexitouch system	$	42,908	$	44,699	$	112,621	$	119,767
Other products⁽¹⁾		6,184		4,913		15,266		12,662
Total	$	49,092	$	49,612	$	127,887	$	132,429

Percentage of total revenue
Flexitouch system		87 %		90 %		88 %		90 %
Other products⁽¹⁾		13 %		10 %		12 %		10 %
Total		100 %		100 %		100 %		100 %

(1)

Summary of revenue from third-party payers


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Private insurers and other payers	$	34,554	$	35,909	$	90,459	$	93,932
Veterans Administration		6,788		7,764		18,168		23,690
Medicare		7,750		5,939		19,260		14,807
Total	$	49,092	$	49,612	$	127,887	$	132,429

Sales-type lease revenue and the associated cost of goods sold



	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Sales-type lease revenue	$	6,519	$	6,088	$	18,173	$	15,088
Cost of sales-type lease revenue		2,562		1,932		6,062		5,358
Gross profit	$	3,957	$	4,156	$	12,111	$	9,730

Net Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2020

Net Income Per Share

Schedule of computation of the basic and diluted net income (loss) per common share


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands, except share and per share data)	2020		2019		2020		2019
Net income (loss)	$	2,424	$	2,431	$	(12,733)	$	6,688
Weighted-average shares outstanding		19,415,640		18,981,015		19,309,344		18,870,622
Dilutive effect of stock-based awards		331,725		660,838		—		760,099
Weighted-average shares used to compute diluted net (loss) income per share		19,747,365		19,641,853		19,309,344		19,630,721
Net income (loss) per share - Basic	$	0.12	$	0.13	$	(0.66)	$	0.35
Net income (loss) per share - Diluted	$	0.12	$	0.12	$	(0.66)	$	0.34

Schedule of potentially dilutive securities outstanding


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2020	2019	2020	2019
Restricted stock units	104,786	37,813	223,776	39,905
Common stock options	594,117	198,663	982,182	202,179
Performance stock units	38,666	25,724	113,646	25,724
Employee stock purchase plan	60,196	—	48,360	—
Total	797,765	262,200	1,367,964	267,808

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Measurements

Schedule of fair value measurements for our cash equivalents and marketable securities


	At September 30, 2020
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Recurring Fair Value Measurements:
Money market mutual funds	$	9,159	$	—	$	—	$	9,159
U.S. government and agency obligations		5,000		—		—		5,000
Total	$	14,159	$	—	$	—	$	14,159


	At December 31, 2019
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Recurring Fair Value Measurements:
Money market mutual funds	$	481	$	—	$	—	$	481
U.S. government and agency obligations		25,954		—		—		25,954
Corporate debt securities		—		2,501		—		2,501
Total	$	26,435	$	2,501	$	—	$	28,936

Nature of Business and Operations (Details) - IPO $ / shares in Units, $ in Millions	Aug. 02, 2016 USD ($) $ / shares shares
Subsidiary, Sale of Stock
Number of shares of common stock sold \| shares	4,120,000
IPO price per share (in dollars per share) \| $ / shares	$ 10.00
Proceeds from IPO	$ 35.4
Expense Relating To Initial Public Offering	$ 2.9

Summary of Significant Accounting Policies - Impairment of Long-Lived Assets (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jun. 30, 2020	Sep. 30, 2020
Asset Impairment Charges		$ 4,025
Airwear Product
Asset Impairment Charges	$ 4,000
Reimbursement, general and administrative \| Airwear Product
Impairment of Intangible Assets (Excluding Goodwill)	3,600
Cost of revenue \| Airwear Product
Inventory Write-down	$ 400

Marketable Securities (Details)	9 Months Ended
Marketable Securities (Details)	Sep. 30, 2020 USD ($) item	Dec. 31, 2019 USD ($)
Marketable Securities
Amortized Cost		$ 22,443,000
Unrealized Gains		22,000
Unrealized Losses		1,000
Fair Value		22,464,000
Number of marketable securities in an unrealized loss position \| item	0
Fair value less than 12 months		5,997,000
Unrealized losses, less than 12 months		1,000
Fair value, Total		5,997,000
Unrealized loss, Total		1,000
Marketable securities	$ 0	22,464,000
Net pre-tax unrealized gains for marketable securities	0
Marketable securities sold	$ 0
U.S. government and agency obligations
Marketable Securities
Amortized Cost		19,950,000
Unrealized Gains		14,000
Unrealized Losses		1,000
Fair Value		19,963,000
Fair value less than 12 months		5,997,000
Unrealized losses, less than 12 months		1,000
Fair value, Total		5,997,000
Unrealized loss, Total		1,000
Corporate debt securities
Marketable Securities
Amortized Cost		2,493,000
Unrealized Gains		8,000
Fair Value		$ 2,501,000

Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Inventories
Finished goods	$ 9,287	$ 6,508
Component parts and work-in-process	13,132	12,551
Total inventories	$ 22,419	$ 19,059

Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Patents and Intangibles
Gross Carrying Amount	$ 1,638		$ 1,638		$ 5,636
Accumulated Amortization	490		490		734
Total	1,148		1,148		4,902
Total intangible assets (Gross)	2,161		2,161		6,046
Total intangible assets (Net)	1,671		1,671		5,312
Amortization expense	100	$ 100	300	$ 400
Future Amortization
2020 (October 1 - December 31)	58		58
2021	230		230
2022	230		230
2023	200		200
2024	179		179
Thereafter	251		251
Total	1,148		1,148		4,902
Patents
Patents and Intangibles
Patents pending	523		$ 523		$ 410
Patents
Patents and Intangibles
Weighted Average Amortization Period			12 years		11 years
Gross Carrying Amount	388		$ 388		$ 4,386
Accumulated Amortization	55		55		447
Total	333		333		3,939
Future Amortization
Total	333		$ 333		$ 3,939
Defensive intangible assets
Patents and Intangibles
Weighted Average Amortization Period			4 years		5 years
Gross Carrying Amount	1,125		$ 1,125		$ 1,125
Accumulated Amortization	378		378		250
Total	747		747		875
Future Amortization
Total	747		$ 747		$ 875
Customer accounts
Patents and Intangibles
Weighted Average Amortization Period			3 years		3 years
Gross Carrying Amount	125		$ 125		$ 125
Accumulated Amortization	57		57		37
Total	68		68		88
Future Amortization
Total	$ 68		$ 68		$ 88

Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Accrued Expenses
Warranty	$ 1,443	$ 1,218	$ 1,053
Legal and consulting	675	617
Travel and business	413	776
In-transit inventory	129	106
Sales and use tax	183	200
Clinical studies	38	85
Lease termination costs		1,200
Other	701	296
Total	$ 3,582	$ 4,498

Warranty Reserves (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Warranty Reserves (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Movement in Standard Product Warranty Accrual [Roll Forward]
Beginning balance	$ 4,208	$ 3,002	$ 3,759	$ 2,566
Warranty provision	820	664	2,097	1,677
Processed warranty claims	(514)	(386)	(1,342)	(963)
Ending balance	4,514	3,280	4,514	3,280
Accrued warranty reserve, current	1,443	1,053	1,443	1,053	$ 1,218
Accrued warranty reserve, non-current	3,071	2,227	3,071	2,227	$ 2,541
Total accrued warranty reserve	$ 4,514	$ 3,280	$ 4,514	$ 3,280

Credit Agreement (Details) - USD ($) $ in Millions	Aug. 03, 2018	Sep. 30, 2020
Credit Agreement
Line of credit	$ 10.0
Aggregate Borrowings	25.0
Total aggregate principal amount of loans	$ 35.0
Credit facility outstanding amount		$ 0.0

- Definition

The carrying value as of the balance sheet date of the current and noncurrent portions of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

Commitments and Contingencies - Lease Obligations (Details) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2020 item	Dec. 31, 2019 USD ($) ft²	Dec. 31, 2018 ft²	Oct. 31, 2018 ft²
Lessee, Lease, Description [Line Items]
Lease Termination Fee \| $		$ 1.2
Total net loss on termination of lease \| $		$ 1.1
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease terms	12 months
Building \| Minimum
Lessee, Lease, Description [Line Items]
Remaining lease terms	3 years
Building \| Maximum
Lessee, Lease, Description [Line Items]
Remaining lease terms	10 years
Vehicles
Lessee, Lease, Description [Line Items]
Remaining lease terms	367 days
Number of vehicles with agreements within the initial, noncancelable lease term \| item	69
Equipment
Lessee, Lease, Description [Line Items]
Option to renew	true
Equipment \| Minimum
Lessee, Lease, Description [Line Items]
Remaining lease terms	1 year
Equipment \| Maximum
Lessee, Lease, Description [Line Items]
Remaining lease terms	3 years
Initial lease
Lessee, Lease, Description [Line Items]
Area of office space				80,000
Second lease
Lessee, Lease, Description [Line Items]
Area of office space			29,000
Additional office space added to the lease		4,000
Third lease
Lessee, Lease, Description [Line Items]
Additional office space added to the lease		37,000

Commitments and Contingencies - Lease related assets and liabilities (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Lease-related assets and liabilities
Right of use operating lease assets	$ 20,717		$ 15,885
Operating lease liabilities, Current	2,010		1,454
Operating lease liabilities, non-current	19,919		15,134
Present value of future minimum lease payments	$ 21,929		$ 16,588
Weighted average remaining lease term	9 years 7 months 6 days		10 years 1 month 6 days
Weighted average discount rate	4.30%		4.60%
Cash paid for operating lease liabilities	$ 1,849	$ 1,147
Non-cash right of use assets obtained in exchange for new operating lease obligations	$ 6,664	$ 16,296

Commitments and Contingencies - Undiscounted cash flows (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Undiscounted cash flows
2020 (October 1 - December 31)	$ 788
2021	2,781
2022	2,643
2023	2,594
2024	2,575
Thereafter	15,344
Total minimum lease payments	26,725
Less: Amount of lease payments representing interest	(4,796)
Present value of future minimum lease payments	21,929	$ 16,588
Less: Current obligations under operating lease liabilities	(2,010)	(1,454)
Non-current obligations under operating lease liabilities	$ 19,919	$ 15,134

Commitments and Contingencies - Lease commitments and operating lease cost (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Commitments and Contingencies
Additional lease commitments	$ 7.1		$ 7.1
Operating lease cost	$ 0.8	$ 0.6	$ 2.1	$ 1.3

Commitments and Contingencies - Major Vendors (Details) - item	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Commitments and Contingencies
Number of vendors	2	2	2	2
Purchases \| Vendor
Commitments and Contingencies
Accounts Receivable (in percentage)	31.00%	42.00%	33.00%	37.00%

Commitments and Contingencies - Purchase Commitments (Details) $ in Millions	Sep. 30, 2020 USD ($)
Purchase commitments
Purchase orders issued	$ 20.5

Commitments and Contingencies - Retirement Plan (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
401(k)
Retirement Plan
Discretionary contributions	$ 0.1	$ 0.1	$ 0.2	$ 0.2

Stockholders' Equity - Stock-Based Compensation General Information (Details)	Sep. 30, 2020 shares
2016 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized	4,800,000

Stockholders' Equity - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Jan. 01, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Stock-based compensation
Shares available for future issuance		4,658,176		4,658,176
Compensation expense		$ 3,164	$ 2,330	$ 8,288	$ 7,387
Cost of revenue
Stock-based compensation
Compensation expense		171	75	358	249
Sales and marketing
Stock-based compensation
Compensation expense		1,436	1,029	3,915	3,262
Research and development
Stock-based compensation
Compensation expense		87	95	269	275
Reimbursement, general and administrative
Stock-based compensation
Compensation expense		$ 1,470	1,131	$ 3,746	3,601
2016 Plan
Stock-based compensation
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%		5.00%
Automatic annual increase to the number of shares reserved and available for issuance		2,500,000		2,500,000
Increase in number of shares reserved and available for issuance	952,697
Common stock options
Stock-based compensation
Compensation expense		$ 1,100	$ 600	$ 3,000	$ 2,000

Stockholders' Equity - Stock Options and Restricted Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Stock-based compensation, general disclosures
Stock-based compensation expense	$ 3,164	$ 2,330	$ 8,288	$ 7,387
Common stock options
Stock-based compensation, general disclosures
Stock-based compensation expense	1,100	$ 600	3,000	$ 2,000
Total unrecognized pre-tax compensation expense related to nonvested stock option awards	$ 7,900		$ 7,900
Weighted-average period over which unrecognized compensation cost is expected to be recognized			2 years 1 month 6 days
Options
Outstanding at beginning of period			866,955
Granted			284,674
Exercised			(132,911)
Forfeited			(33,818)
Expired			(2,718)
Outstanding at end of period	982,182		982,182		866,955
Weighted Average Exercise Price ($/share)
Outstanding at beginning of period			$ 28.76
Granted			47.66
Exercised			5.74
Forfeited			53.54
Expired			63.02
Outstanding at end of period	$ 36.41		$ 36.41		$ 28.76
Other information
Options exercisable Number of Exercisable	461,138	539,487	461,138	539,487
Options exercisable, weighted-average exercise price	$ 23.35	$ 5.15	$ 23.35	$ 5.15
Options outstanding	$ 8,829		$ 8,829		$ 33,957
Exercised			6,224
Options exercisable	$ 8,102		$ 8,102
Weighted average remaining contractual life (in years)			5 years 9 months 18 days		6 years 1 month 6 days
Options exercisable, weighted-average remaining contractual life			4 years 10 months 24 days
Common stock options \| Minimum
Stock-based compensation, general disclosures
Vesting period (in years)			3 years
Term (in years)			7 years
Common stock options \| Maximum
Stock-based compensation, general disclosures
Vesting period (in years)			4 years
Term (in years)			10 years
Common stock options \| Chief Executive Officer [Member]
Stock-based compensation, general disclosures
Share-based payment award, term	7 years
Vesting period (in years)	3 years
Number of consecutive trading days	20 days
Common stock options \| Chief Executive Officer [Member] \| Minimum
Stock-based compensation, general disclosures
Stock price	$ 40.15		$ 40.15
Time-Based Restricted Stock Units
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Number of share of common stock that restricted stock unit has the right to convert to	1		1
Time-Based Restricted Stock Units \| Non-employee Directors
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Granted (in shares)			858
Number of granted and vested restricted stock units	6,967		6,967
Performance-based stock-settled restricted stock units
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Granted (in shares)			31,731
Vested (in shares)			21,589
2016 Plan \| Time-Based Restricted Stock Units
Stock-based compensation, general disclosures
Stock-based compensation expense	$ 1,400	$ 1,000	$ 4,000	$ 2,900
Total unrecognized pre-tax compensation expense related to awards	$ 7,500		$ 7,500
Weighted-average period over which unrecognized compensation cost is expected to be recognized			1 month 27 days
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Restricted stock unit awards outstanding at the beginning of the period (in shares)			171,687
Granted (in shares)			149,175
Modification (in shares)			2,288
Vested (in shares)			94,640
Forfeited (in shares)			(11,701)
Restricted stock unit awards outstanding at the end of the period (in shares)	216,809		216,809		171,687
Deferred and unissued (in shares)	6,967		6,967
Weighted Average Grant Date Fair Value Per Share
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share)			$ 43.74
Granted (in dollars per share)			48.20
Modification (in dollars per share)			21.85
Vested (in dollars per share)			38.07
Forfeited ( in dollars per share)			55.33
Restricted stock unit awards outstanding at the end of the period (in dollars per share)	$ 48.42		48.42		$ 43.74
Deferred and unissued (in dollars per share)	$ 40.27		$ 40.27
Restricted stock unit awards, Average Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value	$ 7,933		$ 7,933		$ 11,591
Restricted stock unit awards deferred and unissued, Average Intrinsic Value	255		$ 255
2016 Plan \| Time-Based Restricted Stock Units \| Minimum
Stock-based compensation, general disclosures
Vesting period (in years)			1 year
2016 Plan \| Time-Based Restricted Stock Units \| Maximum
Stock-based compensation, general disclosures
Vesting period (in years)			3 years
2016 Plan \| Performance-based stock-settled restricted stock units
Stock-based compensation, general disclosures
Stock-based compensation expense	400	$ 500	$ 500	$ 1,700
Total unrecognized pre-tax compensation expense related to awards	$ 1,400		$ 1,400
Weighted-average period over which unrecognized compensation cost is expected to be recognized			2 years
Estimated payout			$ 1,000
Weighted Average Exercise Price ($/share)
Forfeited			$ 70.46
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Restricted stock unit awards outstanding at the beginning of the period (in shares)			91,151
Forfeited (in shares)			(8,846)
Restricted stock unit awards outstanding at the end of the period (in shares)	92,447		92,447		91,151
Weighted Average Grant Date Fair Value Per Share
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share)			$ 44.63
Granted (in dollars per share)			50.41
Vested (in dollars per share)			33.62
Restricted stock unit awards outstanding at the end of the period (in dollars per share)	$ 46.72		$ 46.72		$ 44.63
Restricted stock unit awards, Average Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value	$ 3,383		$ 3,383		$ 6,154
2016 Plan \| Performance-based stock-settled restricted stock units \| Minimum
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Percentage to earn or vest the performance-based stock-settled restricted stock units			50.00%
2016 Plan \| Performance-based stock-settled restricted stock units \| Maximum
Number of Stock-Settled Restricted Stock Unit Awards Outstanding
Percentage to earn or vest the performance-based stock-settled restricted stock units			150.00%
2016 Plan \| Tranche one \| Performance-based stock-settled restricted stock units
Stock-based compensation, general disclosures
Compensation arrangement			33.33%
2016 Plan \| Tranche two \| Performance-based stock-settled restricted stock units
Stock-based compensation, general disclosures
Compensation arrangement			66.67%

Stockholders' Equity - Employee Stock Purchase Plan (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Jan. 01, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Apr. 27, 2017
Stockholders' Equity
Shares reserved		4,658,176		4,658,176
Stock-based compensation expense		$ 3,164	$ 2,330	$ 8,288	$ 7,387
Employee Stock Purchase Plan
Stockholders' Equity
Purchase price of common stock under plan (as a percent)				85.00%
Offering period (in months)				6 months
Shares reserved		1,618,335		1,618,335		1,600,000
Incremental share increase (in shares)				500,000
Incremental share increase (as a percent)				1.00%
Increase in number of shares reserved and available for issuance	190,539
Stock-based compensation expense		$ 300	$ 200	$ 800	$ 700

Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Revenue (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue
Revenue	$ 49,092	$ 49,612	$ 127,887	$ 132,429
Percentage of total revenue (in percent)	100.00%	100.00%	100.00%	100.00%
Operating lease revenue		$ 600		$ 4,800
Revenue from sale type lease
Sales-type lease revenue	$ 6,519	6,088	$ 18,173	15,088
Cost of sales-type lease revenue	2,562	1,932	6,062	5,358
Gross profit	3,957	4,156	12,111	9,730
Private insurers and other payers
Revenue
Revenue	34,554	35,909	90,459	93,932
Veterans Administration
Revenue
Revenue	6,788	7,764	18,168	23,690
Medicare
Revenue
Revenue	7,750	5,939	19,260	14,807
Flexitouch system
Revenue
Revenue	$ 42,908	$ 44,699	$ 112,621	$ 119,767
Percentage of total revenue (in percent)	87.00%	90.00%	88.00%	90.00%
Other products
Revenue
Revenue	$ 6,184	$ 4,913	$ 15,266	$ 12,662
Percentage of total revenue (in percent)	13.00%	10.00%	12.00%	10.00%
Rental revenue
Revenue
Revenue	$ 6,519	$ 6,730	$ 18,173	$ 19,926

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Taxes
Income tax (benefit) expense	$ (751)	$ 932	$ 2,294	$ (1,759)
Effective Income Tax Rate Reconciliation, Percent
Net effective rate	(55.00%)	27.00%	17.00%	(36.00%)

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Net Income Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net Income Per Share
Net income (loss)	$ 2,424	$ 2,431	$ (12,733)	$ 6,688
Weighted-average shares outstanding	19,415,640	18,981,015	19,309,344	18,870,622
Dilutive effect of stock-based awards	331,725	660,838		760,099
Weighted-average shares used to compute diluted net income (loss) per share	19,747,365	19,641,853	19,309,344	19,630,721
Net income (loss) per share - Basic	$ 0.12	$ 0.13	$ (0.66)	$ 0.35
Net income (loss) per share - Diluted	$ 0.12	$ 0.12	$ (0.66)	$ 0.34

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109234566&loc=d3e22583-107794

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 11
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=109234566&loc=d3e22694-107794

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121326447&loc=d3e1448-109256

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=109234566&loc=d3e22595-107794

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 11
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=109234566&loc=d3e22694-107794

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=121326447&loc=d3e1337-109256

Reference 7: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 55
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The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities; of income (loss) available to common shareholders.

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Net Income Per Common Share (Details) - shares	3 Months Ended		9 Months Ended
Net Income Per Common Share (Details) - shares	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net Income (Loss) Per Share Attributable to Common Stockholders
Antidilutive securities excluded from computation of earnings per share	797,765	262,200	1,367,964	267,808
Common stock options
Net Income (Loss) Per Share Attributable to Common Stockholders
Antidilutive securities excluded from computation of earnings per share	594,117	198,663	982,182	202,179
Performance stock units
Net Income (Loss) Per Share Attributable to Common Stockholders
Antidilutive securities excluded from computation of earnings per share	38,666	25,724	113,646	25,724
Restricted Stock Units
Net Income (Loss) Per Share Attributable to Common Stockholders
Antidilutive securities excluded from computation of earnings per share	104,786	37,813	223,776	39,905
Employee stock purchase plan
Net Income (Loss) Per Share Attributable to Common Stockholders
Antidilutive securities excluded from computation of earnings per share	60,196		48,360

Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Fair Value Measurements
Available for sale debt securities		$ 22,464
Amount of transfers of marketable securities within the three level hierarchy	$ 0
Intangible assets	1,671	5,312
U.S. government and agency obligations
Fair Value Measurements
Available for sale debt securities		19,963
Corporate debt securities
Fair Value Measurements
Available for sale debt securities		2,501
Recurring
Fair Value Measurements
Available for sale debt securities	14,159	28,936
Recurring \| Money market mutual funds
Fair Value Measurements
Money market mutual funds	9,159	481
Recurring \| U.S. government and agency obligations
Fair Value Measurements
Available for sale debt securities	5,000	25,954
Recurring \| Corporate debt securities
Fair Value Measurements
Available for sale debt securities		2,501
Recurring \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Measurements
Available for sale debt securities	14,159	26,435
Recurring \| Quoted Prices in Active Markets for Identical Assets (Level 1) \| Money market mutual funds
Fair Value Measurements
Money market mutual funds	9,159	481
Recurring \| Quoted Prices in Active Markets for Identical Assets (Level 1) \| U.S. government and agency obligations
Fair Value Measurements
Available for sale debt securities	5,000	25,954
Recurring \| Significant Other Observable Inputs (Level 2)
Fair Value Measurements
Available for sale debt securities		2,501
Recurring \| Significant Other Observable Inputs (Level 2) \| Corporate debt securities
Fair Value Measurements
Available for sale debt securities		$ 2,501
Non-recurring \| Significant Unobservable Inputs (Level 3) \| Airwear Product
Fair Value Measurements
Intangible assets	$ 0