(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The total number of shares of common stock outstanding as of October 31, 2014 was 18,628,900.

	September 30,			December 31,
	2014			2013
Assets
Current assets
Cash and cash equivalents	$	56,160		$	13,521
Accounts receivable, net of allowances of $3,981 and $3,390 at September 30, 2014 and December 31, 2013, respectively		18,061			10,231
Inventories, net of allowances of $183 and $100 at September 30, 2014 and December 31, 2013, respectively		7,331			4,248
Deferred cost of rental revenue		423			289
Income tax receivable		-			87
Deferred tax asset - current		6,360			3,923
Prepaid expenses and other current assets		980			531
Total current assets		89,315			32,830
Property and equipment
Rental equipment, net of allowances of $682 and $157 at September 30, 2014 and December 31, 2013, respectively		45,532			37,573
Manufacturing equipment and tooling		2,745			2,551
Computer equipment and software		3,611			2,973
Furniture and equipment		608			601
Leasehold improvements		889			887
Land and building		126			-
Construction in process		1,186			1,093
Total property and equipment		54,697			45,678
Less accumulated depreciation		(23,640	)		(15,956	)
Property and equipment, net		31,057			29,722
Intangible assets, net		274			215
Deferred tax asset - noncurrent		16,427			17,865
Other assets		80			1,765
Total assets	$	137,153		$	82,397

	September 30,			December 31,
	2014			2013
Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)
Current liabilities
Accounts payable and accrued expenses	$	11,201		$	9,219
Accrued payroll		3,732			2,898
Current portion of long-term debt		267			5,258
Warranty reserve		669			420
Deferred revenue		1,959			1,487
Income tax payable		2,647			-
Total current liabilities		20,475			19,282
Long-term liabilities
Warranty reserve - noncurrent		503			389
Preferred stock warrant liability		-			260
Deferred revenue-noncurrent		1,878			776
Long-term debt, net of current portion		391			5,391
Total liabilities		23,247			26,098
Commitments and contingencies (Note 5)
Redeemable convertible preferred stock
Preferred stock, $0.001 par value per share; 10,000,000 authorized as of December 31, 2013; 0 and 9,541,631 shares issued and outstanding; liquidation preference of $0 and $136,660 at September 30, 2014 and December 31, 2013, respectively (Note 7)		-			118,671
Stockholders' equity (deficit)
Preferred stock, $0.001 par value per share; 10,000,000 and 100,000 shares authorized; 0 and 66,666 shares issued and outstanding; liquidation preference of $0 and $250 at September 30, 2014 and December 31, 2013, respectively. (Note 7)		-			247
Common stock, $0.001 par value per share; 200,000,000 and 60,000,000 shares authorized; 18,436,802 and 280,974 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively.		18			1
Additional paid-in-capital		172,100			-
Accumulated deficit		(58,212	)		(62,620	)
Total stockholders' equity (deficit)		113,906			(62,372	)
Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)	$	137,153		$	82,397

	Three months ended September 30,						Nine months ended September 30,
		2014			2013			2014			2013
Revenue
Sales revenue	$	19,425		$	12,134		$	54,746		$	33,780
Rental revenue		9,968			7,643			28,673			21,901
Total revenue		29,393			19,777			83,419			55,681
Cost of revenue
Cost of sales revenue		10,146			6,751			28,369			18,406
Cost of rental revenue, including depreciation of $2,752 and $1,955 for the three months ended and $7,512 and $4,921 for the nine months ended, respectively		4,598			3,384			13,349			8,459
Total cost of revenue		14,744			10,135			41,718			26,865
Gross profit		14,649			9,642			41,701			28,816
Operating expenses
Research and development		798			674			2,312			1,817
Sales and marketing		5,587			4,550			17,656			13,292
General and administrative		4,697			3,532			12,654			9,796
Total operating expenses		11,082			8,756			32,622			24,905
Income from operations		3,567			886			9,079			3,911
Other income (expense)
Interest expense		(104	)		(113	)		(440	)		(312	)
Interest income		10			3			28			9
Change in fair value of preferred stock warrant liability		-			41			36			(202	)
Other income		1			-			12			209
Total other expense, net		(93	)		(69	)		(364	)		(296	)
Income before provision for income taxes		3,474			817			8,715			3,615
Provision for income taxes		1,341			43			3,408			151
Net income	$	2,133		$	774		$	5,307		$	3,464
Less deemed dividend on redeemable convertible preferred stock		-			(1,851	)		(987	)		(5,359	)
Net income (loss)	$	2,133		$	(1,077	)	$	4,320		$	(1,895	)

Basic net income (loss) per share attributable to common stockholders (note 2)	$	0.12		$	(3.90	)	$	0.24		$	(6.91	)
Diluted net income (loss) per share attributable to common stockholders (note 2)	$	0.11		$	(3.90	)	$	0.22		$	(6.91	)

Weighted-average number of shares used in calculating income (loss) per share attributable to common stockholders (note 2):
Basic common shares		18,286,208			276,618			15,340,877			274,357
Diluted common shares		20,213,102			276,618			17,293,833			274,357

	Series B						Series C						Series D						Series E						Series F						Series G						Total
	redeemable						redeemable						redeemable						redeemable						redeemable						redeemable						redeemable
	convertible						convertible						convertible						convertible						convertible						convertible						convertible
	preferred stock						preferred stock						preferred stock						preferred stock						preferred stock						preferred stock						preferred
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			stock
Balance, December 31, 2013		425,511		$	5,056			365,903		$	6,460			1,573,126		$	34,619			1,634,874		$	29,130			2,701,957		$	15,620			2,840,260		$	27,786		$	118,671
Warrants exercised		—			—			11,094			279			11,415			314			—			—			—			—			—			—			593
Deemed dividend on redeemable convertible preferred stock		—			—			—			—			—			—			—			139			—			207			—			641			987
Conversion of preferred stock to common stock in connection with initial public offering		(425,511	)		(5,056	)		(376,997	)		(6,739	)		(1,584,541	)		(34,933	)		(1,634,874	)		(29,269	)		(2,701,957	)		(15,827	)		(2,840,260	)		(28,427	)		(120,251	)
Balance, September 30, 2014		—		$	—			—		$	—			—		$	—			—		$	—			—		$	—			—		$	—		$	—

	Series A
	convertible										Additional					Total
	preferred stock						Common stock				paid-in		Accumulated			stockholders'
	Shares			Amount			Shares		Amount		capital		deficit			equity (deficit)
Balance, December 31, 2013		66,666		$	247			280,974	$	1	$	-	$	(62,620	)	$	(62,372	)
Stock-based compensation		—			—			—		—		1,035		88			1,123
Employee stock purchase								30,358				413					413
Stock options exercised		—			—			243,828		—		229		—			229
Warrants exercised - preferred & common		—			—			92,584		—		76		—			76
Reclassification of warrant liability		—			—			—		—		22		—			22
Deemed dividend on redeemable convertible preferred stock		—			—			—		—		—		(987	)		(987	)
Conversion of preferred stock		(66,666	)		(247	)		14,259,647		14		120,484		—			120,251
Issuance of common stock in connection with initial public offering		—			—			3,529,411		3		49,841		—			49,844
Net income		—			—			—		—		—		5,307			5,307
Balance, September 30, 2014		—		$	—			18,436,802	$	18	$	172,100	$	(58,212	)	$	113,906

	Nine months ended September 30,
	2014			2013
Cash flows from operating activities
Net income	$	5,307		$	3,464
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,779			5,995
Loss on rental units		1,203			330
Loss on disposal of other fixed assets		—			85
Provision for sales returns		2,558			1,090
Provision for doubtful accounts		1,201			1,353
Provision for rental revenue adjustments		5,530			4,057
Provision for inventory obsolescence		125			92
Stock-based compensation expense		1,123			116
Deferred tax assets		(999	)		—
Increase (decrease) in fair value of preferred stock warrant liability		(36	)		202
Changes in operating assets and liabilities
Accounts receivable		(17,119	)		(9,176	)
Inventories		(3,208	)		(130	)
Deferred costs of rental revenue		(134	)		(124	)
Prepaid expenses and other current assets		(449	)		(404	)
Accounts payable and accrued expenses		1,982			2,718
Accrued payroll		834			447
Warranty reserve		363			396
Deferred revenue		1,574			867
Income tax receivable		87			—
Income tax payable		2,647			100
Net cash provided by operating activities		11,368			11,478
Cash flows from investing activities
Investment in intangible assets		(184	)		(7	)
Production of rental equipment		(10,132	)		(11,918	)
Purchases of property and equipment		(1,060	)		(2,572	)
Net cash used in investing activities		(11,376	)		(14,497	)
Cash flows from financing activities
Proceeds from borrowings		6,000			6,000
Proceeds from redeemable convertible preferred stock warrants and common stock warrants exercised		467			1,875
Proceeds from stock options exercised		229			—
Proceeds from initial public offering		56,471			—
Costs associated with initial public offering		(4,942	)		—
Employee stock purchase		413			—
Repayment of debt from investment in intangible assets		(130	)		(159	)
Repayment of borrowings		(15,861	)		(2,750	)
Net cash provided by financing activities		42,647			4,966
Net increase (decrease) in cash and cash equivalents		42,639			1,947
Cash and cash equivalents, beginning of period		13,521			15,112
Cash and cash equivalents, end of period	$	56,160		$	17,059
Supplemental disclosures of cash flow information
Cash paid during the period for interest		478			307
Cash paid during the period for income taxes		1,673			124
Non-cash transactions:
Deemed dividend on redeemable convertible preferred stock		987			5,359

The unaudited condensed financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments necessary for a fair presentation for each of the periods presented. The results of operations for interim periods are not necessarily indicative of results to be achieved for full fiscal years or other interim periods.

Inogen, Inc. (Company or Inogen) was incorporated in Delaware on November 27, 2001. The Company is a medical technology company that develops, manufactures and markets innovative oxygen concentrators used for supplemental long-term oxygen therapy by patients with chronic obstructive pulmonary disease, or COPD, and other chronic respiratory conditions. The Company’s proprietary Inogen One systems are designed to address the quality-of-life and other shortcomings of the traditional oxygen therapy model, which Inogen calls the delivery model. Traditionally, oxygen therapy patients have relied upon stationary oxygen concentrator systems in the home in conjunction with regular deliveries of oxygen tanks or cylinders for ambulatory, or mobile, use, limiting their mobility and requiring them to plan activities outside of their homes around delivery schedules and a finite oxygen supply. The Company’s Inogen One systems concentrate the air around them to offer a single source of supplemental oxygen anytime, anywhere from devices weighing approximately five to seven pounds. Inogen’s products eliminate the need for oxygen deliveries, as well as regular use of a stationary concentrator, thereby improving patient quality-of-life and fostering patient mobility.

As contemplated by the Securities and Exchange Commission (SEC) under Rule 10-01 of Regulation S-X, the accompanying financial statements and related footnotes have been condensed and do not contain certain information that will be included in the Company’s annual financial statements and footnotes thereto. For further information refer to the financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on April 1, 2014 (Annual Report).

The preparation of the Company’s condensed financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these condensed financial statements and accompanying notes. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements and other factors that management believes to be reasonable. Significant areas requiring the use of management estimates relate to inventory and rental asset valuations and write-downs, accounts receivable reserves and allowance for bad debts, returns and adjustments, stock compensation expense, impairment assessments, depreciation and amortization, income tax provision and uncertain tax positions, fair value of financial instruments, and fair values of acquired intangibles. Actual results could differ materially from these estimates.

Certain reclassifications have been made to prior years financial statements to conform to current period financial statement presentation with no effect on previously reported financial position, results of operations or cash flows.

The Company completed an initial public offering on February 20, 2014, and sold 3,529,411 shares to the public for $16.00 per share. In addition, the selling shareholders sold 981,902 shares for a combined total of 4,511,313 shares sold in the offering. The Company netted approximately $49,668 after the underwriters discount and other associated expenses. In connection with the completion of our IPO, the Company’s outstanding redeemable convertible preferred stock and non-redeemable preferred stock were all converted to common stock. As of September 30, 2014, the Company had 18,436,802 shares of common stock outstanding.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.

The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the Company’s pending adoption of ASU 2014-09 on the Company’s consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2017.

The Company generates revenue primarily from sales and rentals of its products. The Company’s products consist of its proprietary line of oxygen concentrators and related accessories. Other revenue, which is included in sales revenue on the Statements of Operations, comes from service contracts, extended warranty contracts and freight revenue for product shipments.

Revenue from product sales is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the price to the customer is fixed or determinable; and (4) collectability is reasonably assured. Revenue from product sales is recognized upon shipment of the product. Provisions for estimated returns and discounts are made at the time of shipment. Provisions for standard warranty obligations, which are included in cost of sales revenue on the Statements of Operations, are also provided for at the time of shipment.

Revenue from the sales of the Company’s services is recognized when no significant obligations remain undelivered and collection of the receivables is reasonably assured. The Company offers extended service contracts on its Inogen One concentrator line for periods ranging from 12 to 24 months after the end of the standard warranty period. Revenue from these extended service contracts is recognized in income on a straight-line basis over the contract period.

Accruals for estimated standard warranty expenses are made at the time that the associated revenue is recognized. The provisions for estimated returns, discounts and warranty obligations are made based on known claims and discount commitments and estimates of additional returns and warranty obligations based on historical data and future expectations. The Company accrued $1,172 and $809 to provide for future warranty costs at September 30, 2014 and December 31, 2013, respectively.

The Company also offers a lifetime warranty for direct-to-consumer sales. For a fixed price, the Company agrees to provide a fully functional oxygen concentrator for the remaining life of the patient. Lifetime warranties are only offered to patients upon the initial sale of oxygen equipment by the Company and are non-transferable. Product sales with lifetime warranties are considered to be multiple element arrangements within the scope of the Accounting Standards Codification (ASC) 605-25—Revenue Recognition-Multiple-Element Arrangements.

There are two deliverables when product that includes a lifetime warranty is sold. The first deliverable is the oxygen concentrator equipment which comes with a standard warranty of three years. The second deliverable is the lifetime warranty that provides for a functional oxygen concentrator for the remaining lifetime of the patient. These two deliverables qualify as separate units of accounting.

The revenue is allocated to the two deliverables on a relative selling price method. The Company has vendor-specific objective evidence of selling price for the equipment. To determine the selling price of the lifetime warranty, the Company uses its best estimate of the selling price for that deliverable as the lifetime warranty is neither separately priced nor is the selling price available through third-party evidence. To calculate the selling price associated with the lifetime warranties, management considered the profit margins of the overall business, the average estimated cost of lifetime warranties and the price of extended warranties. A significant estimate used to calculate the price and expense of lifetime warranties is the life expectancy of patients. Based on clinical studies, the Company estimates that 60% of patients will succumb to their disease within three years. Given the approximate mortality rate of 20% per year, the Company estimates on average all patients will succumb to their disease within five years. The Company has taken into consideration that when patients decide to buy an Inogen portable oxygen concentrator with a lifetime warranty, they typically have already been on oxygen for a period of time, which can have a large impact on their life expectancy from the time the Company’s product is deployed.

After applying the relative selling price method, revenue from equipment sales is recognized when all other revenue recognition criteria for product sales are met. Lifetime warranty revenue is recognized using the straight-line method during the fourth and fifth year after the delivery of the equipment which is the estimated usage period of the contract based on the average patient life expectancy.

Shipping and handling costs for sold products and rental assets, shipped to the Company’s customers are included on the Statements of Operations as part of cost of sales revenue and cost of rental revenue, respectively.

Revenue from the sales of used rental equipment is recognized upon delivery and when collectability is reasonably assured and other revenue recognition criteria are met. When a rental unit is sold, the related cost and accumulated depreciation are removed from their respective accounts, and any gains or losses are included in cost of sales revenue on the Statements of Operations.

The Company recognizes equipment rental revenue over the non-cancelable lease term, which is one month, less estimated adjustments, in accordance with ASC 840—Leases. The Company has separate contracts with each patient that are not subject to a master lease agreement with any payor. The Company evaluates the individual lease contracts at lease inception and the start of each monthly renewal period to determine if there is reasonable assurance that the bargain renewal option associated with the potential capped free rental period would be exercised. Historically, the exercise of such bargain renewal option is not reasonably assured at lease inception and most subsequent monthly lease renewal periods. If the Company determines that the reasonable assurance threshold for an individual patient is met at lease inception or at a monthly lease renewal period, such determination would impact the bargain renewal period for an individual lease. The Company would first consider the lease classification issue (sales-type lease or operating lease) and then appropriately recognize or defer rental revenue over the lease term, which may include a portion of the capped rental period. To date, the Company has not deferred any amounts associated with the capped rental period. Amounts related to the capped rental period have not been material in the periods presented.

The lease term begins on the date products are shipped to patients and are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare, private payors, and Medicaid. Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application, claim denial or account review. Accounts receivable are reduced by an allowance for doubtful accounts which provides for those accounts from which payment is not expected to be received, although product was delivered and revenue was earned. Upon determination that an account is uncollectible, it is written-off and charged to the allowance. Amounts billed but not earned due to the timing of the billing cycle are deferred and recognized in income on a straight-line basis over the monthly billing period. For example, if the first day of the billing period does not fall on the first of the month, then a portion of the monthly billing period will fall in the subsequent month and the related revenue and cost would be deferred based on the service days in the following month.

Rental revenue is recognized as earned, less estimated adjustments. Revenue not billed at the end of the period is reviewed for the likelihood of collections and accrued. The rental revenue stream is not guaranteed and payment will cease if the patient no longer needs oxygen or returns the equipment. Revenue recognized is at full estimated allowable amounts; transfers to secondary insurances or patient responsibility have no net effect on revenue. Rental revenue is earned for that month if the patient is on service on the first day of the 30-day period commencing on the recurring date of service for a particular claim, regardless if there is a change in condition or death after that date.

Included in rental revenue are unbilled amounts for which the revenue recognition criteria had been met as of period-end but were not yet billed to the payor. The estimate of unbilled rental revenue accrual is based on historical trends and estimates of future collectability.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, debt and warrants. The carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued expenses approximate fair values based on the short-term nature of these financial instruments.

The fair value of the Company’s debt approximates carrying value based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements. Imputed interest associated with the Company’s non-interest bearing debt is insignificant and has been appropriate recognized in the respective periods.

The fair value of the Company’s preferred stock warrant liability was estimated using a Monte Carlo valuation model.

ASC 820—Fair Value Measurements and Disclosures, creates a single definition of fair value, establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on assumptions that market participants would use in pricing the asset or liability. Assets and liabilities adjusted to fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Level inputs, as defined by ASC 820, are as follows:

The following table summarizes fair value measurements by level at December 31, 2013 for the liabilities measured at fair value on a recurring basis:

The following table summarizes the fair value measurements using significant Level 3 inputs, and changes therein as of nine months ended September 30, 2014.

The preferred stock warrant liability was marked to market at each reporting date and the fair value was estimated using a Monte Carlo valuation model, which takes into consideration the market values of comparable public companies, considering among other factors, the use of multiples of earnings, and adjusted to reflect the restrictions on the ability of the Company’s shares to trade in an active market.

Accounts receivable are customer obligations due under normal sales and rental terms. The Company performs credit evaluations of the customers’ financial condition and generally does not require collateral. The allowance for doubtful accounts is maintained at a level that, in management’s opinion, is adequate to absorb potential losses related to accounts receivable and is based upon the Company’s continuous evaluation of the collectability of outstanding balances. Management’s evaluation takes into consideration such factors as past bad debt experience, economic conditions and information about specific receivables. The Company’s evaluation also considers the age and composition of the outstanding amounts in determining their net realizable value.

The allowance is based on estimates, and ultimate losses may vary from current estimates. As adjustments to these estimates become necessary, they are reported in earnings in the periods that they become known. The allowance is increased by bad debt provisions charged to bad debt expense, net of recoveries, in operating expense and is reduced by direct write-offs, net of recoveries.

The Company does not allow returns from providers. Provision for sales returns applies to direct-to-consumer sales only. This reserve is calculated based on actual historical return rates under the Company’s 30-day return program and is applied to the sales revenue for direct-to-consumer sales for the last month of the quarter reported.

The Company also records an allowance for rental revenue adjustments and write-offs, which is recorded as a reduction of rental revenue and rental accounts receivable balances. These adjustments and write-offs result from contractual adjustments, audit adjustments, untimely claims filings or billings not paid due to another provider performing same or similar functions for the patient in the same period, all of which prevent billed revenue becoming realizable. The reserve is based on historical revenue adjustments as a percentage of rental revenue billed during the related period.

When recording the allowance for doubtful accounts, the bad debt expense account (general and administrative expense account) is charged, when recording allowance for sales returns, the sales returns account (contra sales revenue account) is charged, and when recording the allowance for adjustments, the rental revenue adjustments account (contra rental revenue account) is charged.

At September 30, 2014 and December 31, 2013, included in accounts receivable on the balance sheets were earned but unbilled receivables of $3,410 and $1,435, respectively.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. At times, cash account balances may be in excess of the amounts insured by the Federal Deposit Insurance Corporation (FDIC). However, management believes the risk of loss to be minimal. The Company performs periodic evaluations of the relative credit standing of these institutions and has not experienced any losses on its cash and cash equivalents and short-term investments to date.

The Company sells its products to home medical equipment providers in the United States and in foreign countries on a credit basis. No single customer represented more than 10% of the Company’s total revenue for the nine months ended September 30, 2014 and September 30, 2013. No single customer represented more than 10% of the Company’s total accounts receivable balance as of September 30, 2014, or as of December 31, 2013.

The Company also rents products directly to patients, which resulted in a customer concentration relating to Medicare’s service reimbursement programs. Medicare’s service reimbursement programs (net of patient co-insurance obligations) accounted for 78.6% and 70.8% of rental revenue for the three months ended September 30, 2014 and September 30, 2013, respectively, and based on total revenue were 26.7% and 27.4% for the three months ended September 30, 2014 and September 30, 2013, respectively. Medicare’s service reimbursement programs (net of patient co-insurance obligations) accounted for 74.3% and 73.1% of rental revenue for the nine months ended September 30, 2014 and September 30, 2013, respectively, and based on total revenue were 25.6% and 28.8% for the nine months ended September 30, 2014 and September 30, 2013, respectively. Accounts receivable balances relating to Medicare’s service reimbursement programs amounted to $3,661 or 20.3% of total accounts receivable at September 30, 2014 as compared to $2,560, or 25.0% of total accounts receivable at December 31, 2013.

The Company currently purchases raw materials from a limited number of vendors, which resulted in a concentration of three major vendors. The three major vendors supply the Company with raw materials used to manufacture the Company’s products. For the nine months ended September 30, 2014, the Company’s three major vendors accounted for 18.8%, 17.8%, and 8.0%, respectively, of total raw material purchases. For the nine months ended September 30, 2013, the Company’s three major vendors accounted for 15.7%, 14.9% and 8.6%, respectively, of total raw material purchases.

A portion of revenue is earned from sales outside the United States. Non-U.S. revenue is denominated in U.S. dollars. A breakdown of the Company’s revenue from U.S. and non-U.S. sources for the three months and nine months ended September 30, 2014 and September 30, 2013 is as follows:

Inventories are stated at the lower of cost or market. Cost is determined using a standard cost method, including material, labor and manufacturing overhead, whereby the standard costs are updated at least quarterly to reflect approximate actual costs using the first-in, first out (FIFO) method and market represents the lower of replacement cost or estimated net realizable value. The Company records adjustments at least quarterly to inventory for potentially excess, obsolete, slow-moving or impaired items. Inventories consist of the following:

Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the assets estimated useful lives as follows:

Delaware		33-0989359
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

326 Bollay Drive Goleta, California		93117
(Address of principal executive offices)		(Zip Code)

Large accelerated filer ¨		Accelerated filer ¨		Non-accelerated filer x		Smaller reporting company ¨
				(Do not check if a smaller reporting company)

	Part I – Financial Information	Page
Item 1.	Financial Statements (Unaudited)	3
	Balance Sheets as of September 30, 2014 and December 31, 2013	3
	Statements of Operations for the Three Months Ended September 30, 2014 and September 30, 2013 and Nine Months Ended September 30, 2014 and September 30, 2013	5
	Statement of Redeemable Convertible Preferred Stock for the Nine Months Ended September 30, 2014	6
	Statement of Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2014	7
	Statements of Cash Flows for the Nine Months ended September 30, 2014 and September 30, 2013	8
	Condensed Notes to the Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39
	Part II – Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 6.	Exhibits	64

Level input		Input definition
Level 1		Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2		Inputs, other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.

Level 3		Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.


	Warrant liability
Balance as of December 31, 2013	$	260
Fair value of preferred stock warrants exercised		(148	)
Change in fair value		(36	)
Reclassification of liability to additional paid in capital		(76	)
Balance as of September 30, 2014	$	—

Rental equipment		1.5-5 years
Manufacturing equipment and tooling		5 years
Computer equipment and software		3 years
Furniture and equipment