Filed pursuant to Rule 424(b)(4)
Registration No. 333-224055
Registration No. 333-224442

We are offering 6,000,000 shares of our common stock. This is our initial public offering and no public market currently exists for our common stock. The initial public offering price is $16.00 per share.

Our common stock has been approved for listing on The Nasdaq Global Select Market under the symbol "LASR."

We are an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 and applicable Securities and Exchange Commission rules, and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 15.

We have granted the underwriters an option to purchase up to an additional 900,000 shares of our common stock.

The underwriters expect to deliver the shares of common stock to purchasers on April 30, 2018.

The Securities and Exchange Commission and state regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained or incorporated by reference in this prospectus and any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we nor the underwriters have authorized anyone to provide you with any information or make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock. Our business, financial condition, operating results and prospects may have changed since that date.

Through and including May 20, 2018 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

For investors outside of the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus outside of the United States.

Unless the context indicates otherwise, as used in this prospectus, the terms "nLIGHT," "we," "us" and "our" refer to nLIGHT, Inc. and our subsidiaries. We use "nLIGHT," the nLIGHT logo, "simply brilliant," "element," "Liekki" and other marks as trademarks in the United States and other countries. This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including the section titled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the selected consolidated financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless otherwise stated or the context otherwise indicates, references to "nLIGHT," "we," "us," "our" and similar references refer to nLIGHT, Inc. and its subsidiaries taken as a whole.

Our Business

Overview

We are a leading provider of high-power semiconductor and fiber lasers. Our lasers are changing not only the way things are made but also the things that can be made. We design, develop and manufacture the critical elements of our lasers, and we believe our vertically integrated business model enables us to rapidly introduce innovative products, control our costs and protect our intellectual property. In 2017, we sold our products to over 300 customers worldwide in three primary markets: industrial, microfabrication, and aerospace and defense.

Our semiconductor lasers are the industry's most brilliant and serve as the core building block of all of our products. Our vertical integration enables us to incorporate our semiconductor lasers into our proprietary fiber lasers and also to sell our semiconductor lasers as standalone solutions. We offer differentiated high-power fiber lasers that provide our customers with significant advantages over legacy fiber lasers in the areas of programmability, serviceability and reliability. By engaging with our customers early in their system design cycle and utilizing our platform-based approach to product design, we are able to offer semiconductor and fiber laser solutions optimized to meet our customers' requirements.

Semiconductor and fiber lasers are displacing legacy lasers and non-laser energy sources across a wide range of applications in the industrial, microfabrication, and aerospace and defense markets. In the industrial market, high-power semiconductor and fiber lasers have enabled the creation of next-generation industrial systems to perform manufacturing processes such as cutting, welding and drilling, as well as advanced manufacturing techniques such as additive manufacturing. In the microfabrication market, many of the critical microscale features incorporated into products in the automotive, electronics, medical, semiconductor and other markets are made commercially viable by the precise power delivery of lasers. In the aerospace and defense market, high-power semiconductor and fiber lasers are currently used across a wide range of mission critical applications, such as defending aircraft against missiles, and are enabling next-generation defense systems.

The growth of the high-power fiber laser market has been driven by a significant reduction in cost per brilliant watt and a substantial increase in the power output of semiconductor lasers, at a rate that we believe is similar to Moore's Law for integrated circuits. The overall laser market, including semiconductor lasers and fiber lasers, was approximately $9.5 billion in 2015 according to Strategies Unlimited. The semiconductor and fiber laser portion of the market addressing industrial, microfabrication, and aerospace and defense sectors was approximately $2.3 billion in 2015 and is expected to grow to approximately $4.2 billion by 2020. Our global customers include Cincinnati Inc., DMG Mori and Suzhou Quick Laser Technology Co. in industrial, MKS Instruments and Samsung in microfabrication, and BAE and Raytheon in aerospace and defense.

facility in Lohja, Finland, and laser packaging and assembly facilities in Vancouver, Washington, Hillsboro, Oregon and Shanghai, China. We were founded in 2000 and possess an intellectual property portfolio that included over 350 issued or pending patents as of December 31, 2017.

Industry Overview

Legacy Lasers

A laser converts electrical energy into optical energy, or light, that can be concentrated and shaped to create a powerful beam that can cut, manipulate, melt and vaporize materials. The two main parts of a laser are an energy source and a gain medium. Gas and crystal lasers, named for the materials used as the gain medium, were the initial types of lasers used in industrial applications. While gas and crystal lasers are an improvement over mechanical and other non-laser techniques for material processing, they have various deficiencies, which may include lower reliability, the need for costly cooling and more frequent maintenance, lower beam quality, energy inefficiency, and lack of programmability and serviceability.

Fiber Lasers

In a fiber laser, the gain medium is an optical fiber infused with rare earth elements, and the energy source is one or more semiconductor lasers. The term semiconductor laser can describe an individual semiconductor laser chip or a product that combines an array of such chips into a more powerful device, which is typically the approach used to build a fiber laser. Semiconductor lasers vary based upon the material used as the gain medium, the spectrum of light generated, the beam shape, the power yielded, the brilliance, as well as other characteristics. Substantial improvements in the power, brilliance, cost, reliability and efficiency of semiconductor lasers have been foundational to the improved performance and cost competitiveness of fiber lasers.

Power and brilliance are critical measures of laser performance. Both laser power and laser brilliance can vary dramatically. For example, a single semiconductor laser chip used in a handheld laser pointer generates a fraction of a watt of power, whereas high-power semiconductor laser chips used in a high-power fiber laser can generate as much as 20 watts of power per chip. The output power of a high-power fiber laser, using an array of high-power semiconductor lasers amplified via specialty fiber, can be thousands of watts, or kilowatts. Laser brilliance is a measure of how much power a laser generates over a given emission area and the rate of divergence of its beam. Therefore, two lasers emitting the same power but with different emission areas or beam divergence will have different levels of brilliance. Semiconductor laser brilliance is critical for scaling power in fiber lasers as high-power fiber lasers require efficient aggregation of the output power of many semiconductor lasers into a single fiber.

Over the past few decades, the cost per brilliant watt produced by semiconductor lasers has fallen dramatically as a result of improved laser design and production techniques, and increased production volumes. This has led to the rapid adoption of fiber lasers in a variety of markets. We believe a parallel can be drawn to the proliferation of integrated circuits as their processing power increased while the cost per transistor fell. This advancement is defined as Moore's Law, which is an observation that the number of transistors in an integrated circuit doubles approximately every two years.

Fiber lasers address many of the disadvantages of legacy gas and crystal lasers. Improvements in performance and cost of production over the last decade have fueled a dramatic expansion in the use of fiber lasers in a number of markets.

Advantages of fiber lasers over legacy gas and crystal lasers include:

•: Superior beam quality. Fiber lasers can generate higher power, more precise and more stable output beams.
•: Superior flexibility. The simplicity of the architecture of a fiber laser enables an end user to optimize the laser to the precise needs of a given application by adjusting beam power, frequency and shape.

•: Lower total cost of ownership. Fiber lasers tend to be more durable, reliable, energy efficient, stable and tolerant of longer operating cycles than legacy lasers, which results in a lower total cost of ownership.
•: Smaller size and easier to operate. Fiber lasers generally are smaller than legacy lasers and can be located remotely from the workpiece by virtue of a convenient beam delivery fiber, potentially simplifying the tool and facility requirements. Fiber lasers are also easier to operate, with fewer parts and a reduced need for physical adjustments by operators.

Our Advancements in High-Power Fiber Lasers

We believe our high-power fiber lasers offer significant advancements over legacy fiber lasers, in terms of programmability, serviceability and reliability. These advantages are a function of our vertically integrated business model, proprietary semiconductor laser technology, unique high-power fiber laser architectures and advanced in-house manufacturing methods.

Programmability

We believe the programmability of our lasers is a distinctive feature that makes them well-suited for use with versatile, multi-function machine tools in a wide range of applications. The programmability of our lasers improves the speed and quality of the systems into which they are incorporated. Moreover, the programmability of our lasers enables our original equipment manufacturer, or OEM, customers to develop machine tools that can be utilized across multiple applications, thereby allowing end users to replace multiple tools inside a factory with a single, more flexible tool. Our fiber lasers incorporate proprietary control hardware and software that provide end users with significant flexibility to optimize not only output power but also the optical waveform (temporal beam shape) and the selection of the optical profile (spatial beam shape).

Serviceability

Our fiber lasers are designed to be serviced quickly on site and by our customers. Most service activities can be completed without extracting the laser from the machine tool and often without the need for our direct involvement. In contrast, end users operating machine tools built with legacy fiber lasers that require the machine tool manufacturer to coordinate the service activity with the laser provider can experience longer disruptions in their operations when the lasers need servicing. The architecture of our fiber lasers enables them to be serviced on site, generally in less than two hours, often eliminating the need for the end customers to have spare lasers in reserve. Intelligent sensors embedded in our fiber lasers provide our end users with real-time diagnostics and feedback. As a result, end users benefit from significantly higher production uptime.

Reliability

Our fiber lasers incorporate advanced components and proprietary designs that protect our lasers from operating conditions that can cause failures in legacy fiber lasers, thereby improving uptime and lowering total operating cost. Many manufacturing environments are hot, humid, dirty and crowded, characteristics that challenge older generations of fiber lasers which need external air conditioning to operate. For instance, even in extremely humid environments, our high-power fiber lasers do not require air conditioning, instead relying on a simple and inexpensive dry air purge to prevent condensation and inoperability. Historically, a failure mode for fiber lasers has been back reflection from reflective materials. Our fiber lasers incorporate proprietary back reflection suppression technology, improving their ability to process highly reflective materials used for next-generation automotive batteries, automotive parts, appliances and many other applications. Our fiber lasers are industry leaders in power stability. We consider the power stability of our fiber lasers to be a particularly important differentiator for advanced

and emerging applications, such as additive manufacturing, and in the development of versatile multifunctional machine tools.

Our Market Opportunity

The overall laser market, including semiconductor lasers and fiber lasers, was approximately $9.5 billion in 2015 and is expected to grow to approximately $14.4 billion by 2020 according to Strategies Unlimited. The semiconductor and fiber laser portion of the market addressing industrial, microfabrication, and aerospace and defense sectors was approximately $2.3 billion in 2015 and is expected to grow to approximately $4.2 billion by 2020.

Industrial

The productivity, efficiency and versatility offered by high-power fiber lasers have been critical in making them a key part of the evolution of the industrial ecosystem. High-power fiber lasers are rapidly replacing gas and other legacy lasers for a variety of industrial applications, including cutting and welding, due to their significantly faster speed, higher quality and lower cost when used across a wide range of metals. High-power fiber lasers are also enabling new applications such as metal additive manufacturing where they provide the precise power needed to fuse metal powders into intricate three-dimensional metal structures. The total addressable market for semiconductor and fiber lasers in the industrial market is expected to grow from approximately $1.0 billion in 2015 to approximately $2.5 billion by 2020.

Microfabrication

Microfabrication refers to the process of creating three-dimensional microscale structures, typically by ablating, annealing, etching and drilling. Many of the microscale features incorporated into products in the automotive, electronics, medical, semiconductor and other markets are made commercially viable by the precise power delivery of lasers. Preferences for brighter, more vibrant displays in mobile phones, tablets and televisions, and the desire for thinner products with improved battery life and energy efficiency are placing greater importance on the need for components that are smaller, more robust and less expensive, which we believe will drive demand for lasers. The addressable market for semiconductor and fiber lasers in the microfabrication market is expected to grow from approximately $0.9 billion in 2015 to approximately $1.2 billion by 2020.

Aerospace and Defense

Lasers are used today in a variety of aerospace and defense applications, such as range finding, imaging and directed energy defense systems. Directed energy defense systems utilize concentrated electrical or optical energy rather than chemical or kinetic force as a means to incapacitate, damage, disable or destroy. Compared to conventional weapons, directed energy weapons using high-power fiber lasers offer ultra-precise targeting, low cost per use and a nearly unlimited magazine. Over the past decade, directed energy technologies have improved steadily, culminating in a series of successful demonstrations of significantly higher power, multi-kilowatt systems. Systems using high-power fiber lasers have shown the highest degree of operational viability. The addressable market for semiconductor and fiber lasers in the aerospace and defense market is expected to grow from approximately $0.4 billion in 2015 to approximately $0.5 billion by 2020.

Our Competitive Strengths

We believe the following strengths will allow us to maintain and extend our leadership position:

semiconductor laser chip through packaging, is designed to deliver high-performance, high-power and reliable solutions that can be optimized to end-user needs.

Differentiated high-power fiber laser technology. Our high-power fiber lasers provide distinct advantages over other fiber lasers and legacy lasers in terms of programmability, serviceability and reliability.

Customizable high-power semiconductor and fiber laser solutions based on a scalable platform. We offer a scalable platform that is enabled by our extensive library of proprietary semiconductor and fiber laser designs, packaging options and specialty optical fibers. As a result of our platform-based approach, we are able to quickly and simply configure solutions that are optimized to the particular requirements of our OEM customers. Our lasers are designed into systems with stringent specifications for quality, performance and reliability, and our lasers are often mission critical in these applications.

Vertically integrated business model. We design, develop and manufacture the critical elements of our high-power semiconductor and fiber lasers, including semiconductor laser chips and optical fiber. We believe that being vertically integrated enables us to rapidly introduce innovative products, control our costs and protect our intellectual property. Our vertical integration also gives us the ability to sell at the level of integration our customers desire, at highly competitive price points and at attractive profit margins.

Strong relationships with our diverse customer base. Our global customer base includes companies in the industrial, microfabrication, and aerospace and defense markets. We partner with our customers in the early stages of their system design cycle and collaborate with them to develop high-power semiconductor and fiber laser solutions that meet their specific requirements. We believe our partnership-based approach creates a competitive advantage for us, as it has enabled us to create long-term relationships with our customers, many of which span over a decade.

Proven engineering and executive team. We believe our team members include many of the world's foremost experts in the areas of semiconductor and fiber laser design and manufacturing, and have been involved in pioneering semiconductor laser design, including work at Bell Labs, Nortel Networks Corporation, SDL, Inc., Xerox PARC and other leading innovators prior to joining us. Members of our management team have honed their ability to lead technology-driven organizations in competitive industries through their previous experience at industry-leading companies such as Agilent Technologies, Inc., Avago Technologies, Coherent, Inc., JDS Uniphase Corporation, McKinsey & Company and Orbotech Ltd.

Our Strategy

Our objective is to be the leading provider of high-power semiconductor and fiber lasers to the industrial, microfabrication, and aerospace and defense markets and, in the future, to leverage our core competencies to expand into other markets with similar performance requirements. The key elements of our strategy are:

Increase sales. We intend to leverage our leading position in high-power semiconductor and fiber lasers and our global footprint in key geographies to increase our sales. Continued displacement of legacy lasers and non-laser energy sources by high-power semiconductor and fiber lasers in a wide range of applications should enable us to increase sales from existing customers and to generate sales from new customers. We believe our in-country sales, marketing and production operations in China will continue to enable us to increase sales in the region. In addition, our development and production facilities in the U.S. enable us to compete effectively for U.S. government-related programs. We believe the quality and performance of our lasers and our innovative approach of tailoring our platform-based high-power semiconductor and fiber laser solutions to the specific needs of our customers will allow us to grow our market share.

Enable new applications. Our innovations are making our semiconductor and fiber lasers more powerful, programmable, reliable and affordable, which is driving their adoption in existing applications as well as enabling new ones that were not previously commercially viable. For instance, the power, precision and programmability of our lasers are enabling a new class of additive manufacturing tools in the industrial market and are supporting commercialization of next-generation directed energy defense systems in the aerospace and defense market. We expect the continued improvement in the features, performance and total cost of ownership of our lasers will drive their adoption in an expanding array of applications and end markets.

Further reduce costs of our high-power semiconductor and fiber lasers. We have a track record of reducing the cost of our high-power semiconductor and fiber lasers. We anticipate continuing to reduce the cost of our products by developing new semiconductor laser chips, semiconductor laser and fiber laser architectures, introducing new packaging technologies and increasing the use of automation in our manufacturing and packaging facilities.

Recent Developments

Preliminary First Quarter 2018 Financial Results

Certain preliminary estimates of our operating results for the three months ended March 31, 2018 are presented below. We have not yet finalized our operating results for this period, and our consolidated financial statements as of and for the three months ended March 31, 2018 are not expected to be available until after this offering is completed. Consequently, our actual operating results for the three months ended March 31, 2018 will not be available to you prior to investing in this offering.

Our actual operating results remain subject to the completion of our quarter-end closing process, which includes review by management and our audit committee. While carrying out such procedures, we may identify items that would require us to make adjustments to the preliminary estimates of our operating results set forth below. As a result, our actual operating results could be outside of the ranges set forth below and such differences could be material. Additionally, our estimates of our revenues, gross profit, gross margin percentage, income from operations, income before income taxes, net income and net income per share are forward-looking statements based solely on information available to us as of the date of this prospectus and may differ materially from our actual operating results as a result of developments that occur after the date of this prospectus. Therefore, you should not place undue reliance on these preliminary estimates of our operating results. See the section titled "Special Note Regarding Forward-Looking Statements and Industry Data."

The preliminary estimates of our financial results included below have been prepared by, and are the responsibility of, our management. Our independent auditors have not audited, reviewed or performed any procedures with respect to such preliminary estimates of our operating results. Accordingly, KPMG LLP expresses no opinion or any other form of assurance with respect thereto. The information presented herein should not be considered a substitute for the financial information to be filed with the SEC in our Quarterly Report on Form 10-Q for the three months ended March 31, 2018 once it becomes available. We have no intention or obligation to update the preliminary estimates of our operating results set forth below prior to filing our Quarterly Report on Form 10-Q for the three months ended March 31, 2018.

The following table sets forth certain estimated financial results we expect to report for the three months ended March 31, 2018 and actual financial results for the three months ended March 31, 2017:

	Three Months Ended

	March 31, 2018 (Estimated Range)	March 31, 2017 (Actual)
	(in millions, except percentages and per share amounts)
Revenues	$41.0 - $43.0	$29.9
Gross profit	$13.5 - $15.5	$9.0
Gross margin percentage	33.0% - 36.0%	30.0%
Income from operations	$3.5 - $5.0	$0.6
Income (loss) before income taxes	$3.3 - $4.9	$(0.1)
Net income (loss)	$2.0 - $4.0	$(1.2)
Net income (loss) per share, basic⁽¹⁾	$0.07 - $0.15	$(0.05)
Net income (loss) per share, diluted⁽¹⁾	$0.06 - $0.12	$(0.05)

(1): For the three months ended March 31, 2018 and 2017, basic and diluted income (loss) per share assumes the conversion of all convertible preferred stock outstanding during that period into shares of common stock.

The increase in revenues during the three months ended March 31, 2018 compared to the three months ended March 31, 2017 was due to revenue growth across all regions, primarily North America and China, driven by significant sales volume increases of our semiconductor and fiber lasers.

The increase in gross profit and gross margin percentage was driven by the increase in sales volumes combined with improvements in product costs and improved absorption of fixed costs on higher volumes.

The increase in income from operations resulted from improved gross profit on higher revenue, offset by an increase in operating expenses attributable primarily to growth in our business, new product development, and increased professional services expenses associated with preparation for our initial public offering.

The increase in income (loss) before income taxes, net income (loss) and net income (loss) per share was driven by an increase in overall profitability due to the factors described above, as well as a decrease in interest expense on lower debt outstanding under our credit facilities.

The factors that will most significantly affect our actual revenues, gross profit, gross margin, income from operations, income before income taxes, net income and net income per share within those ranges include estimates and assumptions made by management used in preparing our consolidated financial statements as described in Note 2 of our audited consolidated financial statements included elsewhere in this prospectus. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the components of results of operations and how they may fluctuate from period to period, and the description of our critical accounting policies and significant estimates. In particular, we have not yet finalized the determination of our income tax provision, which is highly dependent on the composition of our worldwide earnings and is subject to significant judgments and estimates, specifically as it relates to estimating uncertainties in the application of tax laws and their outcomes. For additional information regarding the uncertainties related to our provision for income taxes, please see the section titled "Risk Factors—We could be subject to additional income tax liabilities."

As a result of these uncertainties, notwithstanding the estimated ranges for net income for the three months ended March 31, 2018 provided above, we cannot reliably estimate net income for the three months ended March 31, 2018. The estimated increases to our revenues, gross profit and gross margin percentage, income from operations and income before income taxes for the three months ended

March 31, 2018 should not be interpreted as an indication that we will have net income for the three months ended March 31, 2018 or the magnitude of any net income or loss for the period.

Risks Associated with Our Business

Our business and ability to execute our strategy are subject to many risks that you should be aware of before you buy our common stock. We describe these risks more fully in the prospectus section titled "Risk Factors" beginning on page 15. These risks include, among others:

•: we have a history of losses, and as our operating costs increase we may not be able to generate sufficient revenues to achieve or maintain profitability in the future;
•: our revenue growth rate in recent periods may not be indicative of our future performance;
•: downturns in the markets we serve could materially adversely affect our revenues and profitability;
•: we have high levels of fixed costs and inventory levels that may materially adversely affect our gross profits and results of operations in the event that demand for our products declines or we maintain excess inventory levels;
•: the markets for our products are highly competitive;
•: we have substantial sales and operations in China, exposing us to risks inherent in doing business there;
•: our manufacturing capacity and operations may not be appropriate for future levels of demand and may materially adversely affect our gross margins;
•: we rely on a small number of customers for a significant portion of our revenues; and
•: if we are unable to protect our proprietary technology and intellectual property rights, our competitive position could be harmed and our results of operations could be materially adversely affected.

Corporate Information

We were incorporated under the name nLight Corporation in Washington in June 2000. We reincorporated in Delaware under the name nLight Photonics Corporation in August 2000 and changed our name to nLIGHT, Inc. in January 2016. Our principal executive office is located at 5408 Northeast 88th Street, Building E, Vancouver, Washington 98665. Our telephone number is (360) 566-4460. Our website address is www.nlight.net. Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this prospectus.

Emerging Growth Company Status

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including, but not limited to:

•: reduced disclosure of financial information in this prospectus, including two years of audited financial information and two years of selected financial information;
•: not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;
•: reduced disclosure obligations regarding executive compensation;
•: exemptions from the requirements of holding a non-binding advisory vote on executive compensation and golden parachute arrangements; and
•: delayed adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We may take advantage of some or all of these provisions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest to occur of: the last day of the fiscal year in which we have more than $1.07 billion in annual revenues; the date we qualify as a "large

accelerated filer," with at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies, which may make comparison of our financials to those of other public companies more difficult. In addition, the information that we provide in this prospectus may be different than the information you may receive from other public companies in which you hold equity interests. Further, it is possible that some investors will find our common stock less attractive as a result of these elections, which may result in a less active trading market for our common stock and higher volatility in our stock price.

THE OFFERING


Common stock to be offered		6,000,000 shares.
Common stock to be outstanding immediately after this offering		33,621,147 shares (or 34,521,147 shares if the underwriters exercise their option to purchase additional shares in full).
Option to purchase additional shares		We have granted the underwriters a 30-day option to purchase up to 900,000 additional shares.
Use of proceeds		We estimate that the net proceeds from our sale of shares of common stock in this offering will be approximately $87.4 million, (or approximately $100.7 million if the underwriters exercise their option to purchase additional shares in full) based upon the initial public offering price of $16.00 per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
		We intend to use the net proceeds from this offering for working capital, capital expenditures and other general corporate purposes. We may also use a portion of our net proceeds to fund potential acquisitions of, or investments in, technologies or businesses that complement our business, although we have no present commitments or agreements to enter into any such acquisitions or make any such investments. See "Use of Proceeds."
Nasdaq trading symbol		"LASR."
Risk factors		See "Risk Factors" beginning on page 15 and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

The number of shares of our common stock outstanding immediately after this offering is based on 27,621,147 shares of our common stock outstanding as of December 31, 2017, and excludes:

•: 5,368,952 shares of common stock issuable upon the exercise of outstanding options to purchase shares of our common stock, with a weighted-average exercise price of $1.09 per share;
•: 4,289,394 shares of common stock reserved for future issuance under our stock-based compensation plans, consisting of: 3,431,515 shares of common stock reserved for future issuance under our 2018 Plan, and any additional shares that become available under our 2018 Plan pursuant to provisions thereof, including provisions that automatically increase the share reserve under the plan each year, as more fully described in the section titled "Executive Compensation—Employee Benefit and Stock Plans"; and 857,879 shares of common stock reserved for future issuance under our 2018 Employee Stock Purchase Plan, or ESPP, and any additional shares that become available under our ESPP pursuant to provisions thereof, including provisions that automatically increase the share reserve under the plan each year, as more fully described in the section titled "Executive Compensation—Employee Benefit and Stock Plans"; and
•: 214,444 shares of common stock issuable upon the exercise of warrants outstanding as of December 31, 2017, at a weighted-average exercise price of $5.36 per share, after conversion of the convertible preferred stock.

We refer to our Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock herein as our "convertible preferred stock." Except as otherwise indicated, all information in this prospectus assumes:

•: a 1-for-5 reverse stock split of our common stock and convertible preferred stock, which became effective April 13, 2018;
•: the conversion of all our outstanding shares of convertible preferred stock into an aggregate of 24,641,701 shares of common stock immediately prior to the closing of this offering;
•: the automatic conversion of all outstanding warrants exercisable for shares of our convertible preferred stock as of December 31, 2017 into warrants exercisable for shares of common stock upon the completion of this offering;
•: no exercise of options or warrants outstanding as of the date of this prospectus;
•: the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, each of which will be in effect on the closing of this offering; and
•: no exercise of the underwriters' option to purchase additional shares.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth a summary of certain historical financial data as of and for the periods indicated. We derived the summary consolidated statements of operations data for the years ended December 31, 2017 and December 31, 2016 and the selected balance sheet data as of December 31, 2017 from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The summary of our consolidated financial data set forth below should be read together with the consolidated financial statements and the related notes to those statements included in this prospectus, as well as the sections titled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

	Year Ended December 31,

Consolidated Statement of Operations Data:	2017			2016
	(in thousands, except per share data)
Revenues	$	138,580		$	101,325
Cost of revenues⁽¹⁾		94,306			78,159

Gross profit		44,274			23,166

Operating expenses:
Research and development⁽¹⁾		15,123			15,239
Sales, general and administrative⁽¹⁾		19,353			17,265

Total operating expenses		34,476			32,504

Income (loss) from operations		9,798			(9,338	)
Other expense:
Interest expense, net		(1,269	)		(2,229	)
Other expense		(1,834	)		(753	)

Income (loss) before income taxes		6,695			(12,320	)
Income tax expense		4,858			1,882

Net income (loss)	$	1,837		$	(14,202	)



Less: Income allocated to preferred stockholders		(1,837	)		—

Net income (loss) attributable to common stockholders	$	—		$	(14,202	)



Net income (loss) per share, basic and diluted⁽²⁾	$	0.00		$	(5.68	)



Shares used in basic and diluted per share calculations		2,735			2,500



Select non-GAAP Financial Information (unaudited):
Adjusted EBITDA⁽³⁾	$	18,089		$	(931	)

(1): Includes stock-based compensation expense as follows:

	Year Ended December 31,

	2017		2016
	(in thousands)
Cost of revenues	$	46	$	30
Research and development		66		57
Sales, general and administrative		257		221

Total	$	369	$	308

(2): See Note 14 to our consolidated financial statements included elsewhere in this prospectus for a reconciliation between net income (loss) and net income (loss) per share.
(3): We monitor Adjusted EBITDA, a non-GAAP financial metric, to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA is useful in evaluating our operating performance.
: We define Adjusted EBITDA as net loss adjusted for income tax expense, other non-operating expense or income, net interest expense, depreciation and amortization, stock-based compensation and other special items as determined by management. We believe that Adjusted EBITDA is a meaningful measure of performance as it is commonly utilized by us and the investment community to analyze operating performance in our industry. The following table sets forth Adjusted EBITDA and a reconciliation from net loss, the most comparable GAAP measure, for the periods presented.

	Year Ended December 31,

	2017		2016
	(in thousands)
Net income (loss)	$	1,837	$	(14,202	)
Income tax expense		4,858		1,882
Other expense		1,834		753
Interest expense, net		1,269		2,229
Depreciation and amortization		7,922		8,099
Stock-based compensation		369		308

Adjusted EBITDA	$	18,089	$	(931	)

: Adjusted EBITDA as a non-GAAP financial measure reflects an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliation to the corresponding GAAP financial measure included in the table above, may provide a more complete understanding of factors and trends affecting our business. This non-GAAP financial measure should not be relied upon to the exclusion of GAAP financial measures.
: We believe that the non-GAAP measure disclosed herein is only useful as an additional tool to help management and investors make informed decisions about our financial and operating performance. By definition, non-GAAP measures do not give a full understanding of our performance. To be useful, they must be used in conjunction with the comparable GAAP measures. In addition, non-GAAP financial measures are not standardized. It may not be possible to compare our financial measures with other companies' non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements and the notes thereto in their entirety and not to rely on any single financial measure.

	As of December 31, 2017

Select Consolidated Balance Sheet Data:	Actual			Pro Forma⁽¹⁾			Pro Forma As Adjusted⁽²⁾
	(in thousands)
Cash and cash equivalents	$	36,687		$	36,687		$	124,043
Working capital		55,689			55,689			143,045
Total assets		110,148			110,148			197,504
Total debt, including current portion		17,471			17,471			17,471
Convertible preferred stock		12			—			—
Common stock		2			14			15
Accumulated other comprehensive loss		(719	)		(719	)		(719	)
Accumulated deficit		(118,669	)		(118,669	)		(118,669	)
Total liabilities and stockholders' equity		110,148			110,148			197,504

(1): Reflects the (a) automatic conversion of all outstanding shares of our convertible preferred stock as of December 31, 2017 into an aggregate of 24,641,701 shares of common stock, which conversion will occur immediately prior to the closing of this offering, as if such conversion had occurred on December 31, 2017; and (b) the conversion of the warrants to purchase 214,444 shares of our convertible preferred stock into warrants to purchase 214,444 shares of common stock.
(2): Reflects the pro forma adjustments set forth in the immediately preceding note and (a) the sale and issuance by us of 6,000,000 shares of common stock in this offering at the initial price to public of $16.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses, and (b) the filing of our amended and restated certificate of incorporation, which will be in effect on the closing of this offering.

Investing in our common stock involves a high degree of risk. Before making an investment decision, you should carefully consider the risks and uncertainties described below, which we believe are the material risks associated with our business and this offering. Our business, financial condition, results of operations and growth prospects could be materially adversely affected by any of these risks. In that event, the trading price of our common stock could decline as a result of any of these risks materializing, and you may lose part of or all of your investment. In assessing these risks, you should also refer to all of the other information contained in this prospectus, including our consolidated financial statements and related notes. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements and Industry Data."

We have a history of losses, and as our operating costs increase we may not be able to generate sufficient revenues to achieve or maintain profitability in the future.

We have incurred net losses each year since our inception in 2000 through 2016, and only first became profitable in 2017. Although we had net income of $1.8 million on 2017, we had a net loss of $14.2 million in 2016. We had an accumulated deficit of $118.7 million as of December 31, 2017.

We expect our operating costs to continue to increase in future periods as we expend substantial financial and other resources on, among other things, business and headcount expansion in operations, sales and marketing, research and development, and administration as a public company. These expenditures may not result in additional revenues or the growth of our business. If we fail to continue to grow revenues or to sustain profitability while our operating costs increase, our business, financial condition, results of operations and growth prospects will be materially adversely affected and the market price of our common stock may decline.

Our revenue growth rate in recent periods may not be indicative of our future performance.

In recent periods, we have experienced substantial levels of revenue growth. However, our historical revenue growth rate may not be indicative of future growth, and we may not achieve similar revenue growth rates in future periods. You should not rely on our revenues for any prior quarterly or annual periods as an indication of our future revenues or revenue growth. Our results of operations may vary as a result of a number of factors, including our ability to execute on our business strategy and expand our manufacturing capacity, the general economic conditions and the legal and regulatory environment in the United States, China and globally, as well as other factors that are outside of our control. If we are unable to maintain consistent revenues or revenue growth, our stock price could decline.

Downturns in the markets we serve could materially adversely affect our revenues and profitability.

Our results of operations may vary based on the impact of changes in the industries we serve or in the global economy. The revenue growth of our business substantially depends on demand for our products in the industrial and microfabrication markets. For our products sold to the industrial market, we believe demand is largely based on general economic conditions, primarily in China and North America. Adverse changes in the global economy have occurred and may occur in the future as a result of declining or flat global or regional economic conditions, fluctuations in currency and commodity prices, wavering confidence, unemployment, declines in stock markets, contraction of credit availability or other factors affecting economic conditions generally. We cannot predict the timing, strength or duration of any economic slowdown or recovery, whether global, regional or within specific markets.

For the microfabrication market, a portion of our revenues depends in part on the demand for our products from semiconductor equipment companies. The semiconductor equipment market has

historically been characterized by sudden and severe cyclical variations in product supply and demand, which have often severely affected the demand for manufacturing equipment, including laser-based tools and systems. The timing, severity and duration of these market cycles are difficult to predict, which limits our ability to predict our business prospects and financial results in this market and we may not be able to respond effectively to these cycles.

During industry downturns in the past, our revenues from this market declined suddenly and significantly, and this is likely to occur again in the event of industry downturns in the future. Our ability to rapidly and effectively reduce our cost structure in response to such downturns is limited by the fixed nature of many of our expenses in the near term and by our need to continue our investment in next-generation product technology and to support and service our products. In addition, due to the relatively long manufacturing lead times for some of the systems and subsystems we sell to this market, we may incur expenditures or purchase raw materials or components for products we cannot sell. Conversely, when upturns in this market occur, we must be able to rapidly and effectively increase our manufacturing capacity to meet increases in customer demand that may be extremely rapid, and if we fail to do so we may lose business to our competitors and our relationships with our customers may be harmed.

We have high levels of fixed costs and inventory levels that may materially adversely affect our gross profits and results of operations in the event that demand for our products declines or we maintain excess inventory levels.

We conduct our own manufacturing operations and have a high fixed cost base, including significant costs for the employees in our manufacturing operations. We may not be able to adjust our production levels or fixed costs quickly enough or sufficiently to adapt to rapidly changing market conditions. Gross profit, in absolute dollars and as a percentage of revenues, is impacted by our volumes, product sales mix, the corresponding absorption of fixed manufacturing overhead expenses, production costs and manufacturing yields. In addition, because we design and manufacture our key components, insufficient demand for our products will subject us to the risks of high inventory carrying costs and increased inventory obsolescence. If our capacity and production levels are not properly sized in relation to expected demand, we may need to record write-downs for excess or obsolete inventory. For example, we typically increase our inventory levels in the period leading up to Chinese New Year, which occurs during our first fiscal quarter, in anticipation of increased sales to our Chinese customers after completion of the holiday. If these anticipated sales do not occur, we may need to record write-downs for excess inventory.

The markets for our products are highly competitive. If we fail to compete successfully, our business, financial condition, results of operations and growth prospects will be materially adversely affected.

The industries in which we operate have significant price and technological competition. We compete not only with companies providing semiconductor and fiber lasers, but with companies offering conventional laser or non-laser solutions for the applications we target. Some of our competitors are larger and have substantially greater manufacturing, financial and research and development resources and larger installed customer bases than we do. Certain of these competitors also have higher sales volume than we do, which can enable such competitors to lower the prices of their products. To compete, we may be forced to lower our prices, which could negatively impact our revenues and gross margins. Consolidation in our industry could intensify the competitive pressures that we face. Our competitors worldwide include BWT Beijing Ltd., Coherent, Inc., II-VI Incorporated, IPG Photonics Corporation, Lumentum Holdings Inc., Maxphotonics Co., Ltd., Raycus Fiber Laser Technologies Co. Ltd. and Trumpf GmbH + Co. KG.

We also compete with widely used non-laser production methods, such as plasma cutting, water-jet cutting and resistance welding. We believe that competition will be particularly intense from makers of CO2, YAG and disc lasers, as makers of these laser solutions may lower their prices in order to maintain market share and have committed significant research and development resources to pursue opportunities related to these technologies. If manufacturers of these non-laser and legacy laser solutions offer

significantly lower prices than we do for our products, customers may choose to purchase their products instead of ours, despite any technical or performance advantage our products may offer.

Our OEM customers' internal production of laser technologies presents additional competitive pressure. To the extent our OEM customers move towards using such in-house technologies, we may need to lower our prices to remain competitive, otherwise our market share and revenues may be materially adversely affected.

To be competitive, we believe that we will be required to continue to invest significantly in research and development and manufacturing facilities. We may not have sufficient resources to continue to make these investments and we may not be able to make the technological advances or price adjustments necessary to compete successfully. Any failure to compete successfully will materially adversely affect our business, financial condition, results of operations and growth prospects.

Our inability to manage risks associated with our international customers and operations could materially adversely affect our business.

Approximately 66% of our revenues were to customers outside of North America in 2017. We anticipate that foreign revenues, particularly revenues from Asia, will continue to account for a significant portion of our revenues in the foreseeable future. Our products are sold in over 30 countries. Our principal markets outside of North America include China, South Korea, Japan and other Asian countries, Germany and other European countries. We have offices outside of the United States in Lohja, Finland, Shanghai, China and Seoul, South Korea. We have substantial tangible assets outside of the United States, particularly in China.

Our foreign operations and revenues are subject to a number of risks, including the impact of recessions and other economic conditions in economies outside the United States, unexpected changes in regulatory requirements, certification requirements, environmental regulations, reduced protection for intellectual property rights in some countries, potentially adverse tax consequences, political and economic instability, import/export regulations, tariffs and trade barriers, compliance with applicable United States and foreign anti-corruption laws, cultural and management differences, reliance in some jurisdictions on third-party revenues from channel partners, preference for locally produced products and shipping, other logistics complications and longer accounts receivable collection periods.

Our business could also be impacted by international conflicts, terrorist and military activity, civil unrest and pandemic illness which could cause a slowdown in customer orders, cause customer order cancellations or negatively impact availability of supplies or limit our ability to timely service our installed base of products. Political, economic and monetary instability and changes in governmental regulations or policies, including trade tariffs and protectionism, could materially adversely affect both our ability to effectively operate our foreign offices and the ability of our foreign suppliers to supply us with required materials or services. Any interruption or delay in the supply of our required components, products, materials or services, or our inability to obtain these components, materials, products or services from alternate sources at acceptable prices and within a reasonable amount of time, could impair our ability to meet scheduled product deliveries to our customers and could cause customers to cancel orders.

Our failure to manage the foregoing risks associated with our operations in Finland, China and South Korea and our other existing and potential future international business operations could materially adversely affect our business, financial condition, results of operations and growth prospects.

We have substantial sales and operations in China, which exposes us to risks inherent in doing business there.

Our business operations in China and our sales to Chinese customers are critical to our success. As of March 31, 2018, we had approximately 490 employees at our Shanghai facility where we have high-volume packaging and sales operations. Moreover, in 2017, approximately 40% of our revenues were derived from China. As a result, downturns in the Chinese economy could materially adversely affect our results of

operations. The Chinese economy differs from the economies of other developed countries in many respects, including the level of government involvement, level of development, growth rate and control of foreign exchange and allocation of resources. The Chinese economy has been transitioning from a planned economy to a more market-oriented economy. Despite reforms, the government continues to exercise significant control over China's economic growth by way of the allocation of resources, control over foreign currency-denominated obligations and monetary policy and provision of preferential treatment to particular industries or companies. We cannot predict the future economic policies of the Chinese government or their effect on the regional or global economy and we cannot predict other governments' economic policies toward China. For example, the United States or China may impose tariffs or other restrictions on items imported or exported between the United States and China. These or other events may lead to a significant reduction in demand for our products.

The political, legal and regulatory climate in China, both nationally and regionally, is fluid and unpredictable, and operating in China exposes us to political and legal risks. Our ability to operate in China may be materially adversely affected by changes in Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, environmental regulations, land use rights, intellectual property, currency controls, network security, employee benefits and overtime policies and other matters. Our operations in China are subject to numerous laws, regulations, rules and specifications relating to human health and safety and the environment. Applicable laws, rules and regulations often lack clarity and it is difficult to predict how any of these laws, rules and regulations will be enforced. If we or our employees or agents violate, or are alleged to have violated, any of these laws, rules and regulations, we or our employees could be subject to civil or criminal penalties, damages or fines, or our employees or agents could be detained, imprisoned or prevented from entering China, any of which could materially adversely affect our results of operations.

Our manufacturing capacity and operations may not be appropriate for future levels of demand and may materially adversely affect our gross margins.

When market demand increases, we must be able to rapidly and effectively increase our manufacturing capacity to meet increases in customer demand, and if we fail to do so we may lose business to our competitors and our relationships with our customers may be harmed. To maintain our competitive position and to meet anticipated demand for our products, we have invested significantly in the expansion and automation of our manufacturing and operations throughout the world and may continue to do so in the future. If the demand for our products does not increase or if our revenues decrease from current levels, we may have significant excess manufacturing capacity and under-absorption of our fixed costs, which could in turn materially adversely affect our gross margins and profitability.

In connection with any expansion, we may incur cost overruns, construction delays, labor difficulties or regulatory issues which could cause our capital expenditures to be higher than what we currently anticipate, possibly by a material amount, which would in turn adversely impact our results of operations. Expansion activities can also cause disruptions to existing manufacturing capabilities. Moreover, we may experience higher costs due to yield loss, production inefficiencies and equipment problems until any operational issues associated with the addition of new equipment or opening of new manufacturing facilities are resolved.

We rely on a small number of customers for a significant portion of our revenues, and if we lose any of these customers or they significantly curtail their purchases of our products, our results of operations could be materially adversely affected.

We rely on a few customers for a significant portion of our revenues. In the aggregate, our top ten customers accounted for approximately 61% and 60% of our revenues in 2017 and 2016, respectively. Suzhou Quick Laser Technology Co., Ltd accounted for 14% and 11% of our revenues in 2017 and 2016, respectively, and Raytheon Company accounted for 10% of our revenues in 2016. We generally do not

enter into long-term purchase agreements with our customers obligating them to purchase our products. Our business is characterized by short-term purchase orders issued by our customers, which are likely to be favorable to those customers. If any of our principal customers discontinues its relationship with us, develops its own products instead of using ours, replaces us as a vendor for certain products or suffers downturns in its business resulting in a cancellation of orders or an inability to place new orders, then our business, financial condition, results of operations and growth prospects could be materially adversely affected.

If we are unable to protect our proprietary technology and intellectual property rights, our competitive position could be harmed and our results of operations could be materially adversely affected.

Our success depends in part upon our ability to obtain, maintain and enforce patents, trade secrets, trademarks and other intellectual property rights and to operate without infringing on or otherwise violating the proprietary rights of others or having third parties infringe, misappropriate or circumvent the rights we own or license. We rely on a variety of intellectual property rights, including patents, copyrights, trademarks, trade secrets, technical know-how and other unpatented proprietary information to protect our products, product development and manufacturing activities from unauthorized copying by third parties.

Our patents do not cover all of our technologies, systems, products and product components and our competitors or others may design around our patented technologies. Some of our know-how or technology is not patented or patentable and may constitute trade secrets. To protect our trade secrets, we have a policy of requiring our employees, consultants, advisors and other collaborators who contribute to our material intellectual property to enter into confidentiality agreements. We also rely on customary contractual protections with our suppliers and customers, and we implement security measures intended to protect our trade secrets, know-how or other proprietary information. However, we cannot guarantee we have entered into appropriate agreements with all parties that have had access to our trade secrets, know-how or other proprietary information. We also cannot assure you that those agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure. Our trade secrets, know-how or other proprietary information could be obtained by third parties as a result of breaches of our physical or electronic security systems or our suppliers, employees or consultants could assert rights to our intellectual property.

We have significant international operations and we are subject to foreign laws which differ in many respects from U.S. laws. Effective intellectual property protection may be unavailable or more limited in foreign jurisdictions in which we operate, such as China, relative to those protections available in the United States. Although we typically enter into confidentiality agreements with our employees who contribute to our material intellectual property to protect our proprietary information, our ability to enforce such agreements in foreign jurisdictions is uncertain. In the past, certain of our employees have been hired by our competitors. These former employees are contractually prohibited from misappropriating our confidential information, including trade secrets; however, we cannot be certain that such contractual obligations will be honored. While we monitor our competitors' activities for evidence of infringement of our proprietary rights, we cannot be certain that such infringement will be detected. If we pursue litigation to assert our intellectual property rights, an adverse decision in any legal action could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise materially adversely affect our business, financial condition or results of operations.

Monitoring unauthorized use of our intellectual property is difficult and costly. Unauthorized use of our intellectual property may have already occurred or may occur in the future. The steps that we take to acquire ownership of our employees' inventions and trade secrets in foreign countries may not have been effective under all such local laws, which could expose us to potential claims or the inability to protect intellectual property developed by our employees. Furthermore, any changes in, or unexpected interpretations of, the trade secret and other intellectual property laws in any country in which we operate

may materially adversely affect our ability to enforce our trade secret and intellectual property positions. Our failure to identify unauthorized use or otherwise adequately protect our intellectual property could jeopardize our competitive advantage and materially adversely affect our business. Moreover, any litigation in connection with unauthorized use of our intellectual property could be time consuming, and we could be forced to incur significant costs and divert our attention and the efforts of our employees, which could, in turn, result in lower revenues and higher expenses, and we may not be successful in enforcing our intellectual property rights.

Intellectual property claims could result in costly litigation and harm our business.

There has been significant litigation involving intellectual property rights in many technology-based industries, including our own. We continue to face risks and uncertainties in connection with any patent litigation, including the risk that patents issued to others may harm our ability to do business; that there could be existing patents of which we are unaware that could be pertinent to our business; and that it is not possible for us to know whether there are patent applications pending that our products might infringe upon, since patent applications often are not disclosed until a patent is issued or published. Moreover, the frequency with which new patents are granted and the diversity of jurisdictions in which they are granted make it impractical and expensive for us to monitor all patents that may be relevant to our business.

From time to time, we have been notified of allegations and claims that we may be infringing patents or otherwise violating intellectual property rights owned by third parties. In the future, we may be a party to litigation as a result of an alleged infringement, misappropriation, or other violation of others' intellectual property, whether through direct claims or by way of indemnification claims of our customers or suppliers. If any pending or future intellectual property-related litigation proceedings result in an adverse outcome then we could be required to:

In addition, intellectual property lawsuits can be brought by third parties against our customers and end-users that incorporate our products into their systems or processes. Because we generally indemnify customers against third-party infringement claims relating to our products, we may incur liabilities in connection with lawsuits against our customers. Any such lawsuits, whether or not they have merit, could be time-consuming to defend, damage our reputation and result in substantial and unanticipated costs.

Having to defend any such lawsuits, and any adverse consequences that might arise, could materially adversely affect our business, financial condition, results of operations and growth prospects.

If we are unable to develop new products, applications and end markets for our high-performance lasers and increase our market share in existing applications, our business, financial condition, results of operations and growth prospects will be materially adversely affected.

Any future success will depend in part on our ability to continue to generate sales of semiconductor lasers and fiber lasers in applications where legacy lasers have been used, or in new and developing markets and applications for lasers where they have not been used previously. As semiconductor and fiber lasers reach higher levels of penetration in core materials processing applications, the development of new

applications, end markets and products outside our core applications becomes more important to our growth.

Our current and potential customers may have substantial investment in, and know-how related to, their existing laser and non-laser technologies. They may perceive risks relating to the reliability, quality, usefulness and profitability of integrating semiconductor lasers or fiber lasers in their systems when compared to other laser or non-laser technologies available in the market or that they manufacture themselves. Although we believe that semiconductor lasers and fiber lasers generally exhibit superior performance compared to other lasers or tools, customers may be reluctant to change from incumbent suppliers or cease using their own solutions, or we may miss the design and procurement cycles of our customers. Many of our target markets, such as industrial and aerospace and defense, have historically been slow to adopt new technologies. These markets often require long testing and qualification periods or lengthy government approval processes before adopting new technologies.

Introduction of new products and product enhancements will require that we effectively transfer production processes from research and development to manufacturing and coordinate our efforts with those of our suppliers to achieve increased production volume rapidly. If we are unable to implement our strategy to develop new applications and end markets for our products or develop new products, our business, financial condition, results of operations and growth prospects could be materially adversely affected. In addition, any newly developed or enhanced products may not achieve market acceptance or may be rendered obsolete or less competitive by the introduction of new products by other companies.

Fluctuations in our quarterly results of operations may increase the volatility of our stock price and may be difficult to predict.

We have experienced, and expect to continue to experience, fluctuations in our quarterly results of operations. We believe that fluctuations in quarterly results may cause the market price of our common stock to increase or decrease, perhaps substantially. In addition, we experience seasonality in our results of operations with our first quarter typically impacted by lower demand from our Chinese customers during Chinese New Year. Factors which have had or may in the future have an influence on our results of operations in a particular quarter include:

A substantial portion of our operating expenses are fixed for the short-term, and as a result fluctuations in revenues or unanticipated expenses can have a material and immediate impact on our profitability. In addition, we often recognize a substantial portion of our revenues in the last month of each fiscal quarter. Our expenses for any given quarter are typically based on expected revenues, and if revenues are below expectations in any given quarter, the adverse impact of the shortfall on our results of operations may be magnified by our inability to adjust spending quickly enough to compensate for the shortfall. We also base our manufacturing on our forecasted product mix for the quarter. If the actual product mix varies significantly from our forecast, we may not be able to fill some orders during that quarter, which would result in delays in the shipment of our products. Accordingly, variations in timing of sales, particularly for our higher priced, higher margin products, can cause significant fluctuations in quarterly results of operations.

Due to these and other factors, particularly varying product mix from quarter to quarter, we believe that quarter-to-quarter and year-to-year comparisons of our historical results of operations may not be meaningful. You should not rely on our results for any quarter or year as an indication of our future performance. Our results of operations in future quarters and years may be below public market analysts' or investors' expectations, which would likely cause the price of our stock to fall, perhaps significantly. In addition, over the past several years, U.S. and global equity markets have experienced significant price and volume fluctuations that have affected the stock prices of many technology companies both in and outside our industry. There has not always been a direct correlation between this volatility and the performance of particular companies subject to these stock price fluctuations. These factors, as well as general economic and political conditions or investors' concerns regarding the credibility of corporate financial statements, may materially adversely affect the market price of our stock in the future.

Products in the laser industry are experiencing declining average selling prices, and any future success depends in part on our ability to increase our volumes and decrease our costs to offset potential declines in the average selling prices of our products.

Products in the laser industries generally, and our products specifically, are experiencing and may in the future continue to experience a significant decline in average selling prices, or ASPs, on maturing products as a result of increased competition and price pressures from customers. As competing products become more widely available, the ASPs of our products may decrease. Due to the fixed cost of production, the average cost per unit of our products typically declines as our production volumes rise. For this reason, we may decide to offer products at ASPs that result in low initial gross margins to us with an intention to drive sales and production volumes higher, in turn lowering our average cost per unit. Because of these factors, we have experienced and we may continue to experience fluctuations in our results of operations on a quarterly or annual basis. If the ASPs of our products decline and we are unable to increase our unit volumes, introduce new or enhanced products with higher ASPs or reduce manufacturing costs to offset anticipated decreases in the prices of our existing products, our gross margins could decline, which in turn could materially adversely affect our business, financial condition, results of operations and growth prospects.

We participate in markets that are subject to rapid technological change and require significant research and development expenses to develop and maintain products that are able to achieve market acceptance.

The markets for our products are characterized by rapid technological change, frequent product introductions, substantial capital investment, volatility of product supply and demand, changing customer requirements and evolving industry standards. Our future performance will depend in part on the

successful development, introduction and market acceptance of new and enhanced products that address these changes as well as current and potential customer requirements. We expect that new technologies will emerge as competition and our customers' need for higher and more cost-effective tools increase. The introduction of new and enhanced products may cause our customers to defer or cancel orders for existing products. To the extent customers defer or cancel orders for existing products due to a slowdown in demand or in the expectation of a new product release, or if there is any delay in development or introduction of our new products or enhancements of our products, our business, financial condition, results of operations and growth prospects would be materially adversely affected. We also may not be able to develop the underlying core technologies necessary to create new products and enhancements, or to license these technologies from third parties. Product development delays may result from numerous factors, including:

The development of new, technologically advanced products is a complex and uncertain process that requires the accurate prediction of technological and market trends, as well as the investment of significant research and development expenses. Further, we typically invest substantial resources in advance of material sales of our products to our customers. Our research and development costs were $15.1 million in 2017. We cannot assure you that our expenditures for research and development will result in the introduction of new products or, if such products are introduced, that those products will achieve sufficient market acceptance or generate revenues to offset the costs of development. Ramping of production capacity also entails risks of delays which can limit our ability to realize the full benefit of the new product introduction. We cannot assure you that we will be able to identify, develop, manufacture, market or support new or enhanced products successfully, if at all, or on a timely basis. Further, we cannot assure you that our new products will gain market acceptance or that we will be able to respond effectively to product announcements by competitors, technological changes or emerging industry standards. Many of these factors are beyond our control. Any failure to respond to technological change would materially adversely affect our business, financial condition, results of operations and growth prospects.

Additionally, our product offerings may become obsolete given the frequent introduction of alternative technologies. In the event either our customers or our products fail to gain and maintain market acceptance, it would likely materially adversely affect our business, financial condition, results of operations and growth prospects.

Reliance on customers in the aerospace and defense industry for a significant portion of our revenues could materially adversely affect our business, financial condition, results of operations and growth prospects.

In 2017, we derived approximately 15% of our revenues from customers in the aerospace and defense industry. From time to time, we have experienced declining aerospace and defense-related revenues. The aerospace and defense market is largely dependent upon government budgets, in particular defense budgets, which are driven by numerous factors, including geopolitical events, macroeconomic conditions and the ability of the U.S. government to enact relevant legislation, such as appropriations bills and accords on the debt ceiling. As a result, our future revenues are subject in part to the uncertainties of governmental budgeting and appropriations and national defense policies and priorities, including sequestration impacts similar to those experienced under the Budget Control Act of 2011, or the BCA, constraints of the budgetary process and timing and potential changes to these policies and priorities. Future spending levels are subject to a wide range of outcomes, depending on Congressional action, all of

which are beyond our control. Moreover, no assurance can be given that an increase in defense spending will be allocated to programs that would benefit our business.

Many of our customers in the defense industry are subcontractors that must negotiate our proposals with the U.S. government. Our continuing relationship and the ability of these customers to pay for our products is dependent on the U.S. government's decision to accept or reject our customers' terms, which can be delayed for a substantial period of time and is largely outside of our control. Such delays could result in decreased revenues and could materially adversely harm our results of operations in any given period.

Our agreements with the U.S. government and suppliers to the U.S. government subject us to unique risks.

We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. government contracts. The U.S. government contracting party may require us to increase production of certain solutions sold to the U.S. government due to changes in U.S. national security strategy and/or priorities or other reasons, in which case we may be required to decrease production of other products or sales to other customers to meet the requirements of the U.S. government. In addition, the U.S. government routinely retains rights to intellectual property developed in connection with a government contract. The U.S. government could exercise these rights in certain circumstances in the future, which could have the effect of decreasing the benefit we are able to realize commercially from such intellectual property.

U.S. government agencies, including the Defense Contract Audit Agency, the Defense Contract Management Agency and various agency Inspectors General, routinely audit and investigate government contractors. These agencies review a contractor's performance under its contracts, its cost structure, its business systems and compliance with applicable laws, regulations and standards. The U.S. government has the ability to decrease or withhold certain payments when it deems systems subject to its review to be inadequate. Additionally, any costs found to be misclassified may be subject to repayment. We have unaudited and unsettled incurred cost claims related to past years, which places risk on our ability to issue final billings on contracts for which authorized and appropriated funds may be expiring.

If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines and suspension, or prohibition from doing business with the U.S. government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us. Similar government oversight exists in most other countries where we conduct business. Any such imposition of penalties, or the loss of such government contracts, could materially adversely affect our business, financial condition, results of operations and growth prospects.

We are exposed to foreign currency risk, which may materially adversely affect our revenues, cost of revenues and operating margins and could result in exchange losses.

We conduct our business and incur costs in the local currency of most countries in which we operate. In 2017, our revenues outside North America represented approximately 66% of our revenues. We incur currency transaction risk whenever one or more of our operating subsidiaries enter into a transaction using currencies different than their functional currency. Changes in exchange rates can also affect our results of operations when the value of revenues and expenses of foreign subsidiaries are translated to U.S. dollars. We do not actively hedge our foreign currency exposure and we cannot accurately predict the impact of future exchange rate fluctuations on our results of operations. Further, given the volatility of exchange rates, we may not be able to effectively manage our currency risks, and any volatility in currency exchange rates may increase the price of our products in local currency to our foreign customers or increase the manufacturing cost of our products, which could decrease demand for our products in such markets. Any

of the foregoing could materially adversely affect our business, financial condition, results of operations and growth prospects.

The long sales cycles for our products may cause us to incur significant expenses without offsetting revenues.

Our products represent a large investment for our customers and they typically expend significant effort in evaluating, testing and qualifying our products before making a decision to purchase them, resulting in a lengthy initial sales cycle. While our customers are evaluating our products and before they place an order with us, we may incur substantial sales and marketing and research and development expenses to customize our products to the customers' needs. We may also expend significant management efforts, increase manufacturing capacity and order long lead-time components or materials prior to receiving an order. Even after this evaluation process, a potential customer may not purchase our products. As a result, these long sales cycles may cause us to incur significant expenses without receiving revenues to offset such expenses soon thereafter or at all. This, in turn, can materially adversely affect our business, financial condition, our results of operations and growth prospects.

Because we lack long-term purchase commitments from our customers, our revenues can be difficult to predict, which could lead to excess or obsolete inventory and materially adversely affect our results of operations.

We generally do not enter into long-term agreements with our customers obligating them to purchase our products. Our business is characterized by short-term purchase orders and shipment schedules and, in some cases, orders may be canceled or delayed without penalty. As a result, it is difficult to forecast our revenues and to determine the appropriate levels of inventory required to meet future demand. This could lead to increased inventory levels and increased carrying costs and risk of excess or obsolete inventory due to unanticipated reductions in purchases by our customers. Write-downs have been recorded as a result of changes in demand or uncertainties related to the recoverability of the value of inventories due to technological and product changes. If we are unable to accurately forecast the demand for our products, fail to accurately forecast the timing of such demand, or are unable to consistently negotiate acceptable purchase order terms with customers, we could incur significant expenses, and our business, financial condition, results of operations and growth prospects may be materially adversely affected.

If we fail to effectively manage our growth or, alternatively, our spending during downturns, our business could be disrupted, which could materially adversely affect our results of operations.

Growth in revenues, combined with the challenges of managing geographically dispersed operations, can place a significant strain on our management systems and resources, and our anticipated growth in future operations could continue to place such a strain. The failure to effectively manage our growth could disrupt our business and materially adversely affect our results of operations. Our ability to successfully offer our products and implement our business plan in evolving markets requires an effective planning and management process. Even if executed successfully, our expansion may not deliver the anticipated increase in revenues and other benefits to compensate for the expenses incurred. This could materially adversely affect our business, financial condition, results of operations and growth prospects. In economic downturns, we must effectively manage our spending and operations to ensure that our competitive position during the downturn, as well as our future opportunities when the economy improves, remains intact. The failure to effectively manage our spending and operations could disrupt our business and materially adversely affect our results of operations.

The estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

Market opportunity estimates and growth forecasts included in this prospectus are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.

Similarly, the continued pace of reduction in cost per brilliant watt and increase in power output of semiconductor lasers is based on assumptions and prior experience, and may not continue at the same rate, which could materially adversely affect the growth of high-power fiber lasers generally, and our growth specifically. Even if the markets in which we compete meet the size estimates and growth forecasted in this prospectus, and even if semiconductor lasers continue to become less expensive and more powerful, our business could fail to grow for a variety of reasons, which would adversely affect our results of operations. For more information regarding the estimates of market opportunity and the forecasts of market growth included in this prospectus, see the section titled "Special Note Regarding Forward-Looking Statements and Industry Data."

We depend upon internal production and on outside single or limited-source suppliers for many of our key components and raw materials, including cutting-edge optics and materials. Any interruption in the supply of these key components and raw materials could materially adversely affect our business, financial condition, results of operations and growth prospects.

We rely exclusively on our own production capabilities to manufacture certain of our key components, such as semiconductor lasers, specialty optical fibers and optical components. Certain of our components, such as our semiconductor lasers, which are manufactured at our Vancouver, Washington facility, and our active fibers, which are manufactured at our Lohja, Finland facility, rely on processes and equipment that cannot be easily moved or replaced. If our manufacturing activities were obstructed or hampered significantly at these, or our other facilities, it could take a considerable length of time, at an increased cost, for us to resume manufacturing, which could materially harm our business and results of operations.

Also, we purchase certain raw materials and components, which are key elements to manufacture our products, from single- or limited-source suppliers. We generally do not have guaranteed supply arrangements with our suppliers. Some of our suppliers are relatively small private companies that may discontinue their operations at any time and may be particularly susceptible to prevailing economic conditions. Some of our suppliers are also our competitors. Our key suppliers may not have the ability to increase their production in line with our customers' demands. This can become acute during times of high growth in our customers' businesses. As a result, we experienced, and may in the future experience, longer lead times or delays in fulfillment of our orders. Furthermore, other than our current suppliers, there may be a limited number of entities from which we could obtain these supplies. We do not anticipate that we would be able to purchase these materials that we require in a short period of time or at the same cost from other sources in commercial quantities or that have our required performance specifications. In addition, if quality issues arise with these outsourced materials and go undetected by us, the use of such defective materials in our products could compromise their quality and harm our reputation.

For certain long lead-time supplies or in order to lock in pricing, we may be obligated to place purchase orders which are not cancelable or otherwise assume liability for a large amount of the ordered supplies, which limits our ability to adjust down our inventory liability in the event of market downturns or other customer cancellations or rescheduling of their purchase orders for our products. Some of our products require designs and specifications which are at the cutting-edge of available technologies. Our and our customers' designs and specifications frequently change to meet rapidly evolving market demands. Accordingly, certain of our products require components and supplies which may be technologically difficult and unpredictable to manufacture. By their very nature, these types of components may only be available by a single supplier. These characteristics place further pressure on the timely delivery of such components. Any interruption or delay in the supply of any of these components or materials, or the inability to obtain these components and materials from alternate sources at acceptable prices and within a reasonable amount of time, could materially adversely affect our ability to meet customer orders. If our suppliers face financial or other difficulties, do not maintain sufficient inventory on hand or if there are significant changes in demand for the components and materials we obtain from them, they could limit the availability of these components and materials to us. Any of the foregoing could materially adversely affect our business, financial condition, results of operations and growth prospects.

We depend on our OEM customers and system integrators to incorporate our products into their systems.

Our revenues depend in part on our ability to maintain existing and secure new OEM customers. Our revenues also depend in part upon the ability of our current and potential OEM customers and system integrators to incorporate our products into their systems, and to sell such systems successfully. The commercial success of these systems depends to a substantial degree on the efforts of these OEM customers and system integrators to develop and market products that incorporate our technologies. Relationships and experience with traditional laser makers, limited marketing resources, reluctance to invest in research and development and other factors affecting these OEM customers and third-party system integrators could have a substantial impact upon demand for our products, and in turn upon our revenues and financial results. If OEM customers or integrators are not able to adapt existing tools or develop new systems to take advantage of the features and benefits of lasers, or if they perceive us to be an actual or potential competitor, then the opportunities to expand our revenues and increase our margins may be severely limited or delayed. In addition, some of our OEM customers are developing their own laser sources. If they are successful, this may reduce our revenues from these customers.

Failure to effectively maintain and expand our field service and support organization could materially adversely affect our business, financial condition, results of operations and growth prospects.

It is important for us to provide rapid, responsive service directly to our customers throughout the world and to maintain and expand our own personnel resources to provide these services. Any actual or perceived lack of adequate field service in the locations where we sell or try to sell our products may negatively impact our sales efforts and, consequently, our revenues. This requires us to recruit and train additional qualified field service and support personnel as well as maintain effective and highly trained organizations that can provide service to our customers in various countries. We may not be able to attract and train additional qualified personnel to expand our direct support operations successfully, in a cost-effective manner or at all. We also may not be able to find and engage additional qualified third-party resources to supplement and enhance our direct support operations. Further, we may incur significantly higher costs in providing these field and support services if competition for or unavailability of these services is limited. Failure to implement and manage our support operation effectively could materially adversely affect our relationships with our customers, as well as our business, financial condition, results of operations and growth prospects.

Our products could contain defects, which may reduce sales of those products, harm market acceptance of our high performance laser products or result in claims against us.

The manufacture of our high-performance lasers involves highly complex and precise processes. Despite testing by us and our customers, errors have been found in our products and may be found in the future. In addition, some of our products are combined with products from other vendors, which may contain defects. As a result, should problems occur, it may be difficult to identify the source of the problem. Our products are typically sold with warranty provisions that require us to remedy deficiencies in quality or performance over a specified period of time at no cost to our customers. Reserves for estimated warranty claims are recorded during the period of sale. The determination of such reserves requires us to make estimates of failure rates and expected costs to repair or replace the products under warranty. We typically establish warranty reserves based on historical warranty costs for each product line. If actual return rates and/or repair and replacement costs differ significantly from our estimates, adjustments to cost of revenues may be required in future periods, which could materially adversely affect our results of operations. These defects may cause us to incur significant warranty, support and repair costs, incur additional costs related to a recall, divert the attention of our engineering personnel from our product development efforts and harm our relationships with our customers. These problems could result in, among other things, loss of revenues or a delay in revenue recognition, loss of market share, harm to our reputation or a delay or loss of market acceptance of our laser products. Defects, integration issues or other performance problems in our products could also result in personal injury or financial or other

damages to our customers, which in turn could damage market acceptance of our products. Our customers could also seek damages from us for their losses. A product liability claim brought against us, even if unsuccessful, could be time-consuming and costly to defend, and could harm our reputation. We cannot assure investors that our product liability insurance would adequately protect our assets from the financial impact of defending a product liability claim. Any product liability claim brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing insurance coverage in the future.

We may experience lower than expected manufacturing yields, which would adversely affect our gross margins.

The manufacture of semiconductor lasers and their packaging is a highly complex process. Manufacturers often encounter difficulties in achieving acceptable product yields from laser and packaging operations. We have from time to time experienced lower than anticipated manufacturing yields for our lasers. If we do not achieve planned yields, our product costs could increase, resulting in lower gross margins, and key component availability would decrease, which could result in delays in fulfilling customer orders or rolling out new product lines.

A breach of our information technology and security systems could materially adversely affect our business.

We use information technology and security systems to maintain our facility's physical security and to protect our proprietary and confidential information, including that of our customers, suppliers and employees. Accidental or willful security breaches or other unauthorized access to our facilities or information systems, or viruses, loggers, or other malfeasant code in our data or software, could compromise this information. The consequences of such loss and possible misuse of our proprietary and confidential information could include, among other things, unfavorable publicity, damage to our reputation, difficulty marketing our products, customer allegations of breach-of-contract, litigation by affected parties and possible financial liabilities for damages, any of which could materially adversely affect our business, financial condition, reputation and relationships with customers and partners. We also rely on a number of third-party "cloud-based" providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services and some financial functions, and we are therefore dependent on the security systems of these providers. Any security breaches or other unauthorized access to our service-providers' systems or viruses, loggers or other malfeasant code in their data or software could expose us to information loss and misappropriation of confidential information. Because the techniques used to obtain unauthorized access to or sabotage security systems change frequently and are often not recognized until after an attack, we may be unable to anticipate the techniques or implement adequate preventative measures, thereby exposing us to material adverse effects on our business, financial condition, results of operations and growth prospects.

Our business could be materially adversely affected if one or more members of our executive management team or key personnel departed.

Any future success is substantially dependent on the continued contributions of our executive officers, including Scott Keeney, our president and chief executive officer. We are also dependent on key technologists, and other key engineering, sales, marketing, manufacturing and support personnel, any of whom may leave, which could harm our business and reputation in the market. Our business requires engineering staff with experience in several disciplines, including physics, optics, materials sciences, chemistry and electronics. We will need to continue to recruit and retain highly skilled engineers for certain functions.

Any future success also depends in part on our ability to identify, attract, hire, train, retain and motivate highly skilled research and development, managerial, operations, sales, marketing and customer service personnel. We are continually recruiting such personnel. However, competition for such personnel can be strong and we can provide no assurance that we will be successful in attracting or retaining such

personnel now or in the future. In addition, particularly in the high-technology industry, the value of stock options, restricted stock units, grants or other share-based compensation is an important element in the retention of employees. Declines in the value of our common stock after our initial public offering could materially adversely affect our ability to retain employees and we may have to take additional steps to make the equity component of our compensation packages more appealing to attract and retain employees. These steps could result in dilution to stockholders.

If we fail to attract, integrate and retain the necessary personnel, our ability to extend and maintain our scientific expertise and grow our business could suffer significantly. The loss of any key employee, the failure of any key employee to adequately perform in his or her current position, our inability to attract, train and retain skilled employees as needed or the inability of our key employees to expand, train and manage our employee base as needed, could materially adversely affect our business, financial condition, results of operations and growth prospects.

We have never operated as a public company. Our chief financial officer joined us in January 2018 and is the only member of our management team who has prior experience as an executive officer of a public company. Our entire management team, as well as other company personnel, will need to devote substantial time to compliance, and may not effectively or efficiently manage our transition into a public company. If we are unable to effectively comply with the regulations applicable to public companies or if we are unable to produce accurate and timely financial statements, which may result in material misstatements in our financial statements or possible restatement of financial results, our stock price may be materially adversely affected, and we may be unable to maintain compliance with the listing requirements of The Nasdaq Stock Market. Any such failures could also result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities, harm to our reputation and diversion of financial and management resources from the operation of our business, any of which could materially adversely affect our business, financial condition, results of operations and growth prospects.

As a consequence of becoming a public company, we will be subject to additional regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to maintain an effective system of internal controls then we may not be able to accurately report our consolidated financial results or prevent fraud.

As a public company, we will be subject to the SEC's rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide, beginning with our second annual report on Form 10-K, an annual management report on the effectiveness of internal controls over financial reporting. In addition, we will be subject to the reporting requirements of the Exchange Act, the listing requirements of The Nasdaq Stock Market, and other applicable securities rules and regulations. As a consequence, and particularly after we cease to be an "emerging growth company," we will incur greater legal, accounting and other expenses than we incur as a private company, including costs associated with public company reporting requirements. We also anticipate that we will incur costs associated with relatively recently adopted corporate governance requirements, including requirements of the SEC and The Nasdaq Stock Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Our operations are conducted in a limited number of locations. Any disruption at our facilities could delay revenues or increase our expenses.

An earthquake, fire, flood or other natural or manmade disaster could disable our facilities, disrupt operations or cause catastrophic losses. Our major manufacturing facilities are located in Vancouver, Washington; Hillsboro, Oregon; Shanghai, China; and Lohja, Finland. Some of our facilities, such as our headquarters and key manufacturing and development facilities in Vancouver, Washington, are located in areas with a known history of seismic and volcanic activity. We also have facilities in areas with a known history of flooding, such as our location in Shanghai, China, and there is a risk of flooding and snowstorms at our location in Lohja, Finland. A loss at any of these or other of our or our suppliers' facilities could disrupt operations, delay production and shipments, reduce revenues and generate potentially significant expenses to repair or replace damaged facilities. The insurance we maintain against earthquakes, floods and other natural or manmade disasters may not be adequate to cover our losses in any particular case.

We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of certain products, technologies and software. We must export our products in compliance with U.S. export controls, including the Commerce Department's Export Administration Regulations, the State Department's International Traffic in Arms Regulations, or ITAR, and various economic and trade sanctions established by the Treasury Department's Office of Foreign Assets Controls. We may not always be successful in obtaining necessary export licenses, and our failure to obtain required import or export approval for our products or limitations on our ability to export or sell our products imposed by these laws may harm our international and domestic revenues. Noncompliance with these laws could have negative consequences, including government investigations, penalties and reputational harm.

In addition, compliance with the directives of the Directorate of Defense Trade Controls, or DDTC, may result in substantial expenses and diversion of management attention. Any failure to adequately address the directives of DDTC could result in civil fines or suspension or loss of our export privileges, any of which could materially adversely affect our business, financial condition, results of operations and growth prospects.

Changes in our products or changes in export, import and economic sanctions laws and regulations may delay our introduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the export or import of our products to or from certain countries altogether. We are aware of proposed tariffs that the U.S. Government may impose on certain items imported from China and potential tariffs imposed by China on import of items from the United States. If the tariffs are imposed by the United States and/or China, those tariffs could have a material impact on the cost of our products and decrease our ability to sell our products to existing or potential customers and harm our ability to compete internationally. Further, it is possible that additional sanctions or restrictions may be imposed by the United States on items imported into the United States from China and any such measures could further adversely affect our ability to sell our products to existing or potential customers and harm our ability to compete internationally and grow our business. Any change

in export or import regulations or legislation, shift or change in enforcement, or change in the countries, persons or technologies targeted by these regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations. In such event, our business, financial condition, results of operations and growth prospects could be materially adversely affected.

We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.

We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, the Proceeds of Crime Act 2002 and possibly other anti-corruption, anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making, offering, soliciting or accepting improper payments or other benefits to or from government officials and others in the public and private sectors. We can be held liable for the corrupt or other illegal activities of our employees, representatives, contractors, business partners and agents, even if we do not explicitly authorize or have actual knowledge of such activities. China also strictly prohibits bribery of government officials and commercial bribery. Our operations in China create the risk of unauthorized payments or offers of payments by our employees, consultants, sales agents or distributors, even though they may not always be subject to our control.

While we have policies and procedures in this area, we cannot guarantee that improprieties committed by our employees or third parties will not occur. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension or debarment from contracting with certain persons, the loss of export privileges, whistleblower complaints, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, financial condition, results of operations and growth prospects could be materially adversely affected. In addition, responding to any action will likely result in a materially significant diversion of management's attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even require us to appoint an independent compliance monitor, which can result in added costs and administrative burdens. Any investigations, actions or sanctions or other previously mentioned harm could materially adversely affect our business, financial condition, results of operations and growth prospects.

Changes in U.S. or foreign tax law may materially adversely affect our business, financial condition, results of operations and growth prospects.

The Tax Cuts and Jobs Act, or 2017 Tax Act, was recently enacted into law, bringing about extensive changes to the U.S. corporate tax system. The 2017 Tax Act includes changes that reduce U.S. corporate tax rates, change how U.S. multinational corporations, like us, are taxed on international earnings, repeal domestic manufacturing deduction, accelerate tax revenue recognition, allow capitalization of research and development expenditures, place additional limitations on executive compensation and limitations on the deductibility of interest. Certain aspects of the new tax law are currently unclear or undeveloped and we are unable to predict what effects such legislation might have on our future liability for U.S. corporate tax. Due to the large and expanding scale of our international business activities, any changes in the U.S. or foreign taxation of such activities may increase our worldwide effective tax rate and the amount of taxes we pay and seriously harm our business.

Additionally, under the applicable laws and regulations in China, arrangements and transactions among related parties may be subject to audit or challenge by the Chinese tax authorities. We would be subject to adverse tax consequences if the Chinese tax authorities were to determine that the transactions with or between our subsidiaries were not executed on an arm's-length basis, and as a result the Chinese tax authorities could require that our Chinese subsidiaries adjust their taxable income upward for Chinese tax purposes. Such an adjustment could materially adversely affect us by increasing our tax expenses.

We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially different than the treatment reflected in our historical income tax provisions and accruals, which could materially adversely affect our business, financial condition, results of operations and growth prospects.

We are subject to income taxes in the United States and certain other foreign jurisdictions. Judgment is required in evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in foreign currency exchange rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation could have a material adverse effect on our operating results or cash flows in the period or periods for which that determination is made.

Our international operations subject us to potential adverse tax consequences.

We generally conduct our international operations through wholly-owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. We believe that our financial statements reflect adequate reserves to cover such a contingency, but there can be no assurances in that regard.

Our reported financial results may be materially adversely affected by changes in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States, or GAAP, are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

In particular, in May 2014, the FASB issued FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of ASU 2014-09 is that an entity should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which

the entity expects to be entitled in exchange for those goods or services. As an "emerging growth company" the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act with respect to ASU 2014-09. We expect ASU 2014-09 to apply to us for reporting periods beginning in 2019.

While we continue to assess the potential impacts of ASU 2014-09 and anticipate it could have an impact on our consolidated financial statements, we do not know or cannot reasonably estimate the quantitative impact on our financial statements at this time.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and may materially adversely affect our business, financial condition, results of operations and growth prospects.

We are subject to a variety of federal, state, local and foreign environmental regulations relating to the use, storage, discharge and disposal of hazardous chemicals used during our manufacturing process or requiring design changes or recycling of products we manufacture. We could incur costs, fines and civil or criminal sanctions, third-party property damage or personal injury claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws. Liability under environmental laws can be joint and several and without regard to comparative fault. Compliance with current or future environmental laws and regulations could restrict our ability to expand our facilities or require us to acquire additional expensive equipment, modify our manufacturing processes or incur other significant expenses in order to remain in compliance with such laws and regulations. At this time, we do not believe the costs to maintain compliance with current environmental laws to be material. If such costs were to become material in the future, whether due to unanticipated changes in environmental laws or their interpretations, unanticipated changes in our operations or other unanticipated changes, we may be required to dedicate additional staff or financial resources in order to maintain compliance. There can be no assurance that violations of environmental laws or regulations will not occur in the future as a result of the lack of, or failure to obtain, permits, human error, accident, equipment failure or other causes.

Results of future litigation could materially adversely affect our business, financial condition, results of operations and growth prospects.

From time to time, we have been subject to litigation. The outcome of any litigation, regardless of its merits, is inherently uncertain. Future litigation could result in significant damages payable by us, and could harm our reputation. Even if we are successful in our defense, such litigation could still result in a diversion of management's attention and our resources and we may be required to incur significant expenses defending against these claims. We cannot predict our future commitments with respect to any matters encountered in the future, or their eventual outcome. Where we can make a reasonable estimate of the liability relating to pending litigation and determine that it is probable, we record a related liability. As additional information becomes available, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to litigation, the amount of our estimates could be wrong. Any adverse determination related to litigation could require us to change our technology or our business practices, pay monetary damages or fines, or enter into royalty or licensing arrangements, which could materially adversely affect our cash flows, harm our reputation, or otherwise materially adversely affect our business, financial condition, results of operations and growth prospects.

The outcome of any government inquiries and investigations involving our business is unpredictable and an adverse decision in any such matter could materially adversely affect our business, financial condition, results of operations and growth prospects.

We have been involved in certain disputes and have also received requests for information from government authorities. For example, we entered into a civil settlement agreement with the U.S. Department of Justice in March 2015 concerning a matter related to our eligibility for certain contracts

awarded to us under the Small Business Innovation Research, or SBIR, Program. We have also received information requests from the Criminal Division of the U.S. Attorney's Office related to our SBIR eligibility and the Criminal Division has interviewed certain of our current and past employees. We have responded to the U.S. Attorney's requests with a production of documents. Although we have not received further inquiries from the Criminal Division since 2015, the Criminal Division has contacted certain of our former employees as recently as June 2017 and the inquiry may be ongoing, and we do not know when it will conclude or whether the Criminal Division will pursue claims against us or our employees. If the Criminal Division or a federal court determines that we or our employees are criminally liable, our business, financial condition, results of operations and growth prospects could be materially adversely affected.

Acquisitions could result in operating difficulties and may materially adversely affect our business, financial condition, results of operations and growth prospects.

We have evaluated, and expect to continue evaluating, potential strategic transactions, and we may pursue one or more transactions, including acquisitions. We have limited experience executing acquisitions. Any transaction could be material to our business, financial condition, results of operations and growth prospects. Integrating an acquired company, business or technology may create unforeseen operating difficulties and expenditures. Acquisition-related risks include:

Foreign acquisitions involve additional risks beyond those above, including related to integrating operations across different cultures and languages, currency risks and the economic, political and regulatory risks associated with other countries. Also, the anticipated benefit of any acquisition, domestic or foreign, may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, debt incurrence, contingent liabilities or amortization expenses or goodwill write-offs, any of which could materially adversely affect our business, financial condition, results of operations and growth prospects. Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all.

Our debt obligations contain restrictions that impact our business and expose us to risks that could materially adversely affect our liquidity and financial condition.

In March 2018, we entered into an amended and restated loan facility, or loan facility, with Pacific Western Bank, as lender. This loan facility imposes certain covenants and restrictions on our business and our ability to obtain additional financing. As of December 31, 2017, we had $13.5 million outstanding principal amount under the term loan and $3.7 million outstanding principal amount under the revolving loan facility.

Our loan facility also contains affirmative covenants, including a minimum revenue covenant and a maximum capital expenditures covenant. The facility contains events of default, including, among others, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-defaults to other indebtedness, judgment defaults, bankruptcy and insolvency defaults and a change of control default.

If we experience a decline in cash flow due to any of the factors described in this "Risk Factors" section or otherwise, we could have difficulty paying interest and principal amounts due on our indebtedness and meeting the financial covenants set forth in our loan facility. If we are unable to generate sufficient cash flow or otherwise obtain the funds necessary to make required payments under our loan facility, or if we fail to comply with the requirements of our indebtedness, we could default under our loan facility. Any default that is not cured or waived could result in the acceleration of the obligations under the loan facility, an increase in the applicable interest rate under the loan facility, and would permit our lender to exercise remedies with respect to all of the collateral that is securing the loan facility, which includes substantially all of our assets. Any such default could materially adversely affect our liquidity and financial condition.

Even if we comply with all of the applicable covenants, the restrictions on the conduct of our business could materially adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that may be beneficial to the business. Even if the loan facility were terminated, additional debt we could incur in the future may subject us to similar or additional covenants, which could place restrictions on the operation of our business.

Our ability to use net operating losses to offset future taxable income may be limited.

As of December 31, 2017, we had U.S. federal and state net operating loss carryforwards, or NOLs, of $104.5 million and $13.7 million, respectively and federal and state research development credit carryforwards of $4.2 million and $0.1 million, respectively, which we may use to reduce future taxable income or offset income taxes due. The NOLs and credit carryforwards start expiring in 2020 and 2018, respectively. Insufficient future taxable income will adversely affect our ability to deploy these NOLs and credit carryforwards. In addition, under Section 382 of the U.S. Internal Revenue Code, or the Code, a corporation that experiences a more-than 50% ownership change over a three-year testing period is limited in its ability to use its pre-change NOLs and other tax assets to offset future taxable income or income taxes due. Our existing NOLs and credit carryforwards are subject to limitations arising from previous ownership changes. Our ability to use our NOLs and credit carryforwards could be further limited by Section 382 of the Code if we undergo an ownership change in connection with or after this offering. Future changes in our stock ownership, the causes of which may be outside our control, could result in an ownership change under Section 382 of the Code. Our NOLs may also be impaired under state law. As a result of these limitations, we may not be able to utilize a material portion of, or possibly any of, the NOLs and credit carryforwards, which could materially adversely affect our cash flows if we attain profitability.

The market price of our common stock may be volatile, and the value of your investment could decline significantly.

There has been no public market for our common stock prior to this offering. The initial price to public for our common stock has been determined through negotiations between us and the underwriters, and the negotiated price may not be indicative of the market price of the common stock after the offering. Investors who purchase common stock in this offering may not be able to sell their shares at or above the initial price to public. The lack of an active market may impair investors' ability to sell their shares at the time they wish to sell them or at a price that they consider reasonable, may reduce the market value of their shares and may impair our ability to raise capital. Securities of companies similar to ours experience significant price and volume fluctuations. The following factors, in addition to other risks described in this prospectus, may have a significant effect on our common stock price:

The stock market in general, and market prices for the securities of technology companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. In several recent situations when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and materially adversely affect our results of operations.

If securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have, and may never obtain, research coverage by securities and industry analysts. We do not have any control over these analysts. If no or few analysts commence research coverage of us, or one or more of the analysts who cover us issues an

adverse opinion about our company, our stock price would likely decline. If one or more of these analysts ceases research coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Our stock price could decline as a result of sales of a large number of shares of our common stock after this offering or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon the closing of this offering, 33,621,147 shares (34,521,147 shares if the underwriters exercise in full their option to purchase additional shares) of our common stock will be outstanding, based on our shares outstanding as of December 31, 2017. All shares of common stock to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act unless held by our "affiliates," as that term is defined in Rule 144 under the Securities Act. The resale of the remaining 27,612,899 shares of our common stock, or approximately 82.1% of our outstanding shares after this offering, is currently prohibited or otherwise restricted as a result of securities law provisions, market standoff agreements entered into by our stockholders with us or lock-up agreements entered into by our stockholders with the underwriters; however, subject to applicable securities law restrictions, these shares will be able to be sold in the public market beginning 180 days after the date of this prospectus. In addition, the shares subject to outstanding options and warrants, of which options and warrants to purchase 5,368,952 shares and 214,444 shares, respectively, were outstanding as of December 31, 2017, and the shares reserved for future issuance under our stock option and equity incentive plans will become available for sale immediately upon the exercise of such options and the expiration of any applicable market stand-off or lock-up agreements, and Rule 144 and Rule 701 under the Securities Act. For more information see the section titled "Shares Eligible for Future Sale."

Upon the closing of this offering, the holders of 25,555,829 shares (including the shares underlying warrants described in the section titled "Shares Eligible for Future Sale—Warrants"), or approximately 75.5% of our common stock, will have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders, based on our shares outstanding as of December 31, 2017. We also intend to register the offer and sale of all shares of common stock that we may issue under our equity compensation plans. Once we register the offer and sale of shares for the holders of registration rights and shares to be issued under our equity incentive plans, they can be freely sold in the public market upon issuance, subject to the lock-up agreements and the restrictions of Rule 144 under the Securities Act in the case of our affiliates, described in the section titled "Shares Eligible For Future Sale."

In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, commercial relationship, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.

Our executive officers, directors and principal stockholders, together with their respective affiliates, beneficially owned approximately 81% of our common stock as of March 31, 2018, and we expect that upon completion of this offering, that same group will beneficially own approximately 67% of our capital stock. Accordingly, after this offering, our executive officers, directors and principal stockholders will be able to determine the composition of our board of directors, retain the voting power to approve all matters requiring stockholder approval, including mergers and other business combinations, and continue to have

significant influence over our operations. This concentration of ownership could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could materially adversely affect our stock price and may prevent attempts by our stockholders to replace or remove our board of directors or management.

We have broad discretion to use the net proceeds from this offering, and our investment of these proceeds may not yield a favorable return. We may invest the proceeds of this offering in ways you disagree with.

Our management has broad discretion as to how to spend and invest the proceeds from this offering, and we may spend or invest these proceeds in ways with which our stockholders may disagree. Accordingly, investors will need to rely on our judgment with respect to the use of these proceeds. We intend to use the proceeds from this offering for working capital, capital expenditures and other general corporate purposes, including the costs associated with being a public company. We could spend the proceeds from this offering in ways that our stockholders may not agree with or that do not yield a favorable return. You will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition, results of operations and growth prospects could be materially adversely affected, and the market price of our common stock could decline.

We are an "emerging growth company," and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups, or JOBS, Act enacted in April 2012, and, for as long as we continue to be an "emerging growth company," we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to "emerging growth companies," including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an "emerging growth company" for up to five years following the closing of this offering, although, if we have more than $1.07 billion in annual revenues, if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of any year, or we issue more than $1.0 billion of non-convertible debt over a three-year period before the end of that five-year period, we would cease to be an "emerging growth company" as of the following December 31. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile.

As an "emerging growth company," the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors.

Delaware and Washington law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect at the closing of this offering could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

Anti-takeover provisions in our charter documents and under Delaware and Washington law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management or board of directors and adversely affect our stock price.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws will:

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder. Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain circumstances now or in the future. These provisions prohibit a "target corporation" from engaging in any of a broad range of business combinations with any stockholder constituting an "acquiring person" for a period of five years following the date on which the stockholder became an "acquiring person." See the section titled "Description of Capital Stock—Anti-Takeover Effects of Delaware and Washington Law and Our Certificate of Incorporation and Bylaws" for additional information.

Our amended and restated bylaws will provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, or our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be a state or federal court located within the State of Delaware, in all cases subject to the court having jurisdiction over indispensable parties named as defendants.

Our amended and restated bylaws will also provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. These exclusive-forum provisions may limit a stockholder's ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find either exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

This prospectus contains forward-looking statements that are based on management's beliefs and assumptions and on information currently available to management. Some of the statements under "Prospectus Summary," "Use of Proceeds," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and elsewhere in this prospectus contain forward-looking statements. In some cases, you can identify forward-looking statements by the following words: "ability," "anticipate," "attempt," "believe," "can be," "continue," "contemplate," "could," "depend," "enable," "estimate," "expect," "extend," "grow," "if," "intend," "likely," "may," "objective," "ongoing," "plan," "possible," "potential," "predict," "project," "propose," "rely," "should," "target," "will," "would" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

These statements speak only as of the date of this prospectus and involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this prospectus include, but are not limited to, statements about:

You should refer to the "Risk Factors" section of this prospectus for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, which although we believe such

information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This prospectus contains market data and industry forecasts that were obtained from industry publications. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party information. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise.

This prospectus contains statistical data, estimates and forecasts that are based on independent industry publications or reports or other publicly available information, as well as other information based on our internal sources and good-faith estimates derived from management's knowledge of the industry and other information currently available to us. This information involves a number of assumptions and limitations, is subject to risks and uncertainties and is subject to change based on various factors, including those discussed in the section titled "Risk Factors" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

The sources of certain statistical data, estimates, and forecasts contained in this prospectus are:

We estimate that the net proceeds to us from our sale of the shares of common stock in this offering will be approximately $87.4 million, or approximately $100.7 million if the underwriters' option to purchase additional shares is exercised in full, based upon the initial public offering price of $16.00 per share and after deducting underwriting discounts and commissions and estimated offering expenses. We anticipate that we will use the net proceeds from this offering for working capital, capital expenditures and other general corporate expenses. We may also use a portion of our net proceeds to fund potential acquisitions of, or investments in, complementary technologies or businesses, although we have no present commitments or agreements to enter into any such acquisitions or to make any such investments. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business.

The expected use of net proceeds of this offering represents our current intentions based upon our present plans and business conditions. We cannot specify with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering. Pending such uses, we plan to invest the net proceeds of this offering in short-term, investment grade, interest-bearing securities, such as direct or guaranteed obligations of the U.S. government.

We have never declared or paid any cash dividends on our common stock or any other securities. We anticipate that we will retain all available funds and any future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the foreseeable future. In addition, our credit facilities materially restrict, and future debt instruments may materially restrict, our ability to pay dividends on our common stock. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of our current or then-existing debt instruments and other factors our board of directors deems relevant.

You should read the information in this table together with our consolidated financial statements and related notes to those statements, as well as the sections titled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," appearing elsewhere in this prospectus.

	As of December 31, 2017

	Actual			Pro Forma			Pro Forma as Adjusted
	(in thousands, except per share amounts)
Cash and cash equivalents	$	36,687		$	36,687		$	124,043



Total debt, including current portion		17,471			17,471			17,471
Stockholders' equity:
Convertible preferred stock, $0.0001 par value per share; 129,477,812 shares authorized, 24,641,701 shares issued and outstanding, actual; 129,477,812 shares authorized, no shares issued or outstanding, pro forma; no shares authorized, no shares issued or outstanding, pro forma as adjusted		12			—			—
Preferred stock, $0.0001 par value per share; no shares authorized, issued or outstanding, actual and pro forma; 5,000,000 shares authorized, no shares issued or outstanding pro forma as adjusted		—			—			—
Common stock, $0.0001 par value per share; 190,000,000 shares authorized, 2,979,446 shares issued and outstanding, actual; 190,000,000 shares authorized, 27,621,147 shares issued and outstanding, pro forma; and 190,000,000 shares authorized, 33,621,147 shares issued and outstanding, pro forma as adjusted		2			14			15
Additional paid-in capital		180,657			180,657			268,012
Accumulated other comprehensive loss		(719	)		(719	)		(719	)
Accumulated deficit		(118,669	)		(118,669	)		(118,669	)

Total stockholders' equity		61,283			61,283			148,639

Total debt and stockholders' equity	$	78,754		$	78,754		$	166,110

The number of shares of our common stock outstanding immediately after this offering is based on 27,621,147 shares of our common stock outstanding as of December 31, 2017 and excludes:

If you invest in our common stock, you will experience immediate and substantial dilution in the pro forma net tangible book value of your shares of common stock. Dilution in pro forma net tangible book value represents the difference between the price to public per share of our common stock and the pro forma as adjusted net tangible book value per share, as adjusted to give effect to this offering.

Pro forma net tangible book value represents our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding as of December 31, 2017, assuming the conversion of all of our outstanding shares of convertible preferred stock into common stock. Our pro forma net tangible book value as of December 31, 2017 was $57.3 million, or $2.08 per share. After giving further effect to the sale and issuance of 6,000,000 shares of common stock in this offering at the initial public offering price of $16.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2017 would have been approximately $144.7 million, or $4.30 per share. This represents an immediate increase in pro forma net tangible book value of $2.22 per share to existing stockholders and an immediate dilution of $11.70 per share to new investors purchasing common stock in this offering.

The following table illustrates this dilution on a per share basis to new investors:

If the underwriters exercise in full their option to purchase 900,000 additional shares of common stock in this offering, the pro forma as adjusted net tangible book value per share after the offering would be $4.58 per share, the increase in the pro forma net tangible book value per share to existing stockholders would be $0.28 per share, and the pro forma dilution to new investors purchasing common stock in this offering would be $11.42 per share.

The following table summarizes, on a pro forma basis as of December 31, 2017, the differences between the number of shares of common stock purchased from us, the total consideration and the weighted-average price per share paid by existing stockholders and by investors participating in this offering at the initial public offering price of $16.00 per share, before deducting underwriting discounts and commissions and estimated offering expenses:

If all options to purchase shares of common stock and warrants outstanding as of December 31, 2017 were exercised in full, (i) the number of shares purchased by the existing stockholders would increase 5,583,396 or 2.5% of the total number of shares of common stock purchased from us, (ii) the total consideration paid to us by existing stockholders would increase $6,990,901 or 0.9% of the total consideration paid to us in the offering, and (iii) the average price per share paid by existing stockholders

would decrease by $0.87 per share. The percent of the total number of shares purchased from us attributable to investors participating in this offering would decrease by 2.5%, and the percent of the total consideration paid to us attributable to investors participating in the offering would decrease by 0.9%.

The number of shares of our common stock outstanding immediately after this offering is based on 27,621,147 shares of our common stock outstanding as of December 31, 2017 and excludes:

The following table sets forth a summary of our historical financial data as of and for the periods indicated. We derived the selected consolidated statement of operations data for the years ended December 31, 2017 and December 31, 2016 and the selected consolidated balance sheet data as of December 31, 2017 and December 31, 2016 from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The selected consolidated financial data set forth below should be read together with the audited consolidated financial statements and the related notes to those statements included in this prospectus, as well as the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations."

	Year Ended December 31,

Consolidated Statement of Operations Data:	2017			2016
	(in thousands, except per share data)
Revenues	$	138,580		$	101,325
Cost of revenues⁽¹⁾		94,306			78,159

Gross profit		44,274			23,166

Operating expenses:
Research and development⁽¹⁾		15,123			15,239
Sales, general and administrative⁽¹⁾		19,353			17,265

Total operating expenses		34,476			32,504

Income (loss) from operations		9,798			(9,338	)
Other expense:
Interest expense, net		(1,269	)		(2,229	)
Other expense		(1,834	)		(753	)

Income (loss) before income taxes		6,695			(12,320	)
Income tax expense		4,858			1,882

Net income (loss)	$	1,837		$	(14,202	)



Less: Income allocated to preferred stockholders		(1,837	)		—

Net income (loss) attributable to common stockholders	$	—		$	(14,202	)



Net income (loss) per share, basic and diluted⁽²⁾	$	0.00		$	(5.68	)



Shares used in basic and diluted per share calculations		2,735			2,500



Select non-GAAP Financial Information (unaudited):
Adjusted EBITDA⁽³⁾	$	18,089		$	(931	)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with our consolidated financial statements and the related notes to those statements included elsewhere in this prospectus. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under "Risk Factors" and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.

We are a leading provider of high-power semiconductor and fiber lasers. Our lasers are changing not only the way things are made but also the things that can be made. We design, develop and manufacture the critical elements of our lasers, and we believe our vertically integrated business model enables us to rapidly introduce innovative products, control our costs and protect our intellectual property. We function through a single operating segment and, in 2017, sold our products to over 300 customers worldwide in three primary markets: industrial, microfabrication, and aerospace and defense.

We design, develop and manufacture the critical elements of our high-power semiconductor and fiber lasers and control and execute nearly all steps of the manufacturing process. We maintain our corporate headquarters in Vancouver, Washington. Our Vancouver facility includes semiconductor laser fabrication and packaging, fiber laser operations, corporate offices, sales and marketing, customer support, research and development, finance, accounting and administrative functions. Our Hillsboro, Oregon facility is primarily dedicated to high-precision packaging and activities for our aerospace and defense customers. We produce optical fiber products and perform research and development at our Lohja, Finland facility. We operate high-volume packaging and sales and service for our Chinese customers from our Shanghai, China facility.

Due to our vertically integrated business model, we maintain a relatively high fixed manufacturing overhead. Our gross margin is therefore significantly affected by our sales volume, product mix, utilization of capacity and absorption of fixed manufacturing overhead expenses. We expect to continue to reduce the cost of our products by developing new semiconductor laser and fiber laser architectures, introducing new packaging technologies and increasing the use of automation in our manufacturing and packaging facilities.

We sell our products throughout the world primarily through our direct sales organization and also through our network of distributors and sales representatives. We sell our products to customers that build their own systems which either incorporate our products or use our products as an energy or light source. Our sales cycle varies substantially, ranging from a period of a few weeks to as long as one year or more, but is typically several months.

We sell our products worldwide. Based on customer location, we generated approximately 66% and 64% of our revenues outside of North America, including approximately 40% and 38% from China, in 2017 and 2016, respectively. China is the largest geographic market for lasers globally. We established our operations in China in 2004 and believe our sales, marketing and production operations in China will continue to enable us to increase revenues from new and existing customers. We believe that our innovative approach of tailoring our platform-based high-power semiconductor and fiber laser solutions to the specific needs of our customers will allow us to grow our market share with existing customers and attract new customers worldwide.

We had revenues of $138.6 million and $101.3 million, net income (loss) of $1.8 million and $(14.2) million and an Adjusted EBITDA of $18.1 million and $(0.9) million in 2017 and 2016, respectively. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted

EBITDA to net income (loss), the most comparable GAAP measure, see "—Non-GAAP Financial Information."

In order to continue to grow our revenues, we must continue to achieve design wins for our semiconductor and fiber lasers. We consider a design win to occur when a customer notifies us that it has selected one of our products to be incorporated into a product or system under development by such customer. For the foreseeable future, our operations will continue to depend upon capital expenditures by customers in the industrial and microfabrication markets, which, in turn, depend upon the demand for these customers' products or services. In addition, in the aerospace and defense market, our business depends in large part on continued investment by the U.S. government and its allies in laser technology, primarily for defense and navigation systems.

We invest heavily in the development of our semiconductor and fiber laser technologies to provide solutions to our current and future customers. We anticipate that we will continue to invest in research and development to achieve our technology and product roadmap. Our product development is targeted to specific sectors of the market where we believe the power and performance requirements of our products can provide the most benefit. We believe our close coordination with our customers regarding their future product requirements enhances the efficiency of our research and development expenditures.

Our gross profit, in absolute dollars and as a percentage of revenues, is impacted by our product sales mix, sales volumes, production volumes, the corresponding absorption of manufacturing overhead expenses, production costs and manufacturing yields. Our product sales mix can affect gross profits due to variations in profitability related to product configurations and cost profiles, customer volume pricing, availability of competitive products in various markets, and new product introductions, among other factors. Capacity utilization affects our gross margin because we have a high fixed cost base due to our vertically integrated business model. Increases in sales and production volumes drive favorable absorption of fixed costs, improved manufacturing efficiencies and lower production costs. Our gross margins have been improving. Gross margin for 2017 increased to 31.9% from 22.9% in 2016. We believe that introducing new and higher value products, increasing the sales of our existing products and our capacity utilization, expanding into new applications and reducing our manufacturing costs will enable us to continue to grow our revenues and gross margin.

We have made, and intend to continue to make, substantial investments in infrastructure that will impact our cost of revenues, operating expenses and capital expenditures. We intend to continue investing to support growth at our existing facilities in order to meet the demands of our customer base. In addition, we intend to expand existing and establish new facilities in the future to accommodate our growth at various locations around the world. We expect to incur substantial costs in connection with such expansion efforts, including leasehold improvements and equipment costs.

Our quarterly revenues can fluctuate with general economic trends, holidays in foreign countries such as Chinese New Year in the first quarter of our fiscal year, the timing of capital expenditures by our customers and general economic trends. In addition, as is typical in our industry, we recognize a large

percentage of our quarterly revenues in the last month of the quarter, which may impact our working capital trends.

We are organized as, and operate in, one segment: the design, development, manufacture and sale of high-power semiconductor and fiber lasers. The following discussion sets forth certain components of our statements of results of operations as well as significant factors that impact those items.

Our revenues are generated primarily from the sale of semiconductor lasers, fiber lasers and other related products. We sell our products primarily through our direct sales organization and also our network of distributors and sales representatives worldwide. We have established, and expect to continue to broaden and deepen, relationships with our customers.

Sales of our products generally are recognized upon shipment or delivery, provided that the sales price is determinable, no obligation remains and collection is reasonably assured. Our sales typically are made on a purchase order or similar basis rather than through long-term purchase contracts.

We generated revenues of $138.6 million, $101.3 million, $87.1 million and $63.3 million in 2017, 2016, 2015 and 2014, respectively, representing a year-over-year compound annual growth rate of approximately 30%. Erosion of ASPs of established products is typical in our industry, and the ASPs of our products generally decrease as our products mature. We may also negotiate discounted selling prices from time to time with certain customers that purchase higher volumes, or to penetrate new markets or applications. We expect revenues to continue to increase as we grow our volumes and continue to introduce new and higher value products.

We primarily sell to three end markets: industrial, microfabrication, and aerospace and defense. In the year ended December 31, 2017, approximately $56.6 million, $60.9 million and $21.1 million of revenues were derived from the industrial, microfabrication, and aerospace and defense markets, respectively. In the year ended December 31, 2016, approximately $34.7 million, $47.6 million and $19.0 million of revenues were derived from the industrial, microfabrication, and aerospace and defense markets, respectively.

Our cost of revenues consists primarily of the cost of raw materials and components, direct labor expenses and manufacturing overhead. Cost of revenues includes compensation and other costs related to our manufacturing and service operations, facilities and equipment costs, shipping costs, write-downs for inventory obsolescence and provisions for warranty obligations. Inventories are written down and charged to cost of revenues when identified as excess or obsolete. Given the fixed nature of our facilities and equipment costs, we expect gross margin to increase as revenues and volumes increase; however, gross margins may fluctuate from period to period depending on product mix and the level of capacity utilization.

Our research and development expense consists primarily of compensation, development expenses related to the design of our products and certain components, the cost of materials and components to build prototype devices for testing and allocated facilities costs. Costs related to product development are recorded as research and development expense in the period in which they are incurred. We expect that research and development expense will increase in absolute dollars as we invest in developing new products and technologies. However, we expect research and development expense to decrease modestly

as a percentage of revenues over the longer term as revenues grow, although research and development expense may fluctuate as a percentage of revenues from period to period due to the timing and extent of these expenses.

Our sales and marketing expense consists primarily of costs related to compensation, trade shows, travel, allocated facilities costs, amortization of assets used for demonstration purposes, commissions and other sales and marketing expenses, including charges and benefits related to the change in allowance for doubtful accounts.

Our general and administrative expense consists primarily of compensation and associated costs for executive management, finance, legal and other administrative personnel, outside legal and professional fees, allocated facilities costs and other general corporate expenses.

We expect sales, general and administrative expense will continue to increase in absolute dollars as we continue to grow and incur the costs of compliance associated with being a publicly-traded company, including legal, audit and consulting fees. Although sales, general and administrative expense may fluctuate as a percentage of revenues from period to period due to the timing and extent of these expenses, over the long term, we expect sales, general and administrative expense to decrease modestly as a percentage of revenues as we scale with the growth of our business.

Interest expense, net, primarily consists of interest on outstanding debt under our credit facilities and any other indebtedness we may incur.

Other expense primarily relates to realized and unrealized gains and losses related to our foreign currency transactions and balances and other non-operating gains and losses.

Income tax expense consists primarily of foreign income taxes. Due to cumulative losses, we maintain a valuation allowance against our U.S. deferred tax assets. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. We record income tax expense for taxes in our foreign jurisdictions including China and Finland. We also record tax expense for uncertain tax positions taken and associated penalties and taxes.

The following table sets forth our results of operations for the periods presented:

	Year Ended December 31,

	2017			2016
	(in thousands)
Revenues	$	138,580		$	101,325
Cost of revenues		94,306			78,159

Gross profit		44,274			23,166

Operating expenses:
Research and development		15,123			15,239
Sales, general and administrative		19,353			17,265
Total operating expenses		34,476			32,504

Income (loss) from operations		9,798			(9,338	)
Other expense:
Interest expense, net		(1,269	)		(2,229	)
Other expense		(1,834	)		(753	)

Income (loss) before income taxes		6,695			(12,320	)
Income tax expense		4,858			1,882

Net income (loss)	$	1,837		$	(14,202	)

The following table sets forth selected consolidated statement of operations data for the periods presented, indicated as a percentage of revenues:

	Year Ended December 31,

	2017			2016
	(as a percentage of revenues)
Revenues		100.0			100.0
Cost of revenues		68.1			77.1

Gross profit		31.9			22.9

Operating expenses:
Research and development		10.9			15.0
Sales, general and administrative		14.0			17.0
Total operating expenses		24.9			32.1

Income (loss) from operations		7.1			(9.2	)
Other expense:
Interest expense, net		(0.9	)		(2.2	)
Other expense		(1.3	)		(0.7	)

Income (loss) before income taxes		4.8			(12.2	)
Income tax expense		3.5			1.9

Net income (loss)		1.3			(14.0	)

Revenues for 2017 increased $37.3 million, or 36.8% compared to 2016, primarily driven by higher revenues from each of our three key end markets. Revenues from the industrial end market increased $21.9 million due to significantly higher sales volumes of fiber lasers to new and existing customers, primarily in China, North America and South Korea. Approximately half of the increase in industrial fiber laser volumes was related to our introduction of new products as we continued to fill out our product portfolio and introduce higher power levels. The remaining increase was attributable to customer adoption of our existing products due to growth in cutting and other industrial applications. Revenue growth from the microfabrication end market was attributable to higher laser sales to customers in North America, Europe and Japan, primarily driven by continued growth in the microelectronics market, particularly for consumer electronics applications. Revenues from the aerospace and defense end market grew $2.1 million due to higher sales volumes of semiconductor lasers to a large aerospace and defense customer in North America.

Cost of revenues for 2017 increased $16.1 million, or 20.7%, primarily due to higher volumes compared to 2016. Gross profit increased $21.1 million, or 91.1% compared to 2016 due to the increase in sales volumes combined with lower product costs and increased absorption of fixed costs.

Gross margin increased to 31.9% in 2017 from 22.9% in 2016. The improvement in gross margin was primarily driven by manufacturing efficiencies realized in our laser production, as well as cost reductions for raw materials, a reduction in manufacturing overhead as a percentage of revenues due to higher production volumes, and an increase in overhead capitalized in inventory due to higher inventory levels at the end of the 2017.

Research and development expense for 2017 decreased $0.1 million, or 0.8%, compared to 2016. The decrease was related to lower depreciation and amortization primarily due to technology acquired in our acquisition of Arbor Photonics, Inc. being fully amortized in 2016, and lower usage of development materials due to product development cycles. These decreases were partially offset by higher compensation costs as we continued to increase headcount to support future development initiatives.

Sales, general and administrative expense for 2017 increased $2.1 million, or 12.1%, compared to 2016. The increase was primarily due a to $1.1 million increase in expenses for audit, legal and other professional services largely attributable to preparation for our initial public offering. Other increases in sales, general and administrative expense were related to higher compensation costs, driven by growing headcount within our sales, general and administrative functions. We also incurred higher depreciation and amortization primarily due to an increase in demonstration equipment driven by the introduction of new products and expansion to new customers. These increases were partially offset by a $1.0 million reduction in sales expense as a result of the recovery of a previously reserved receivable from a Chinese customer.

Interest expense, net, for 2017 decreased $1.0 million, or 43.1%, compared to 2016. The decrease was primarily due to lower balances of debt outstanding coupled with restructuring of our debt facilities, which included the extinguishment of debt with Multiplier Growth Partners SPV I, LP in July 2017 as it carried a higher interest rate than our new loan facility with Pacific Western Bank. We also recorded $0.2 million of interest income on recovery of a past due receivable from a Chinese customer and $0.1 million of interest income on higher cash deposit balances as a result of additional equity financing completed in 2017.

The increase in other expense for 2017 was primarily attributable to a $0.9 million loss on debt extinguishment related to paying off our loan facility with Multiplier Growth Partners SPV I, LP. Other changes included a decrease of $0.3 million in subsidy income in China, offset by lower net unrealized and realized foreign exchange losses due to more favorable foreign exchange rate fluctuations during the year.

Income tax expense for 2017 increased $3.0 million, or 158.1%, compared to 2016. There is limited tax expense associated with our operations in the United States as we maintain a full valuation allowance

against our U.S. deferred tax assets. Our tax expense is impacted by the geographic location of our pre-tax book income and is primarily related to operations in China and Finland. The $3.0 million increase in tax expense from $1.9 million in 2016 to $4.9 million in 2017 is primarily related to a $9.1 million increase in pre-tax foreign earnings, as well as the mix of income between China and Finland. Our effective foreign tax rate is approximately 31%, consisting of a 35% effective tax rate on Chinese earnings and a 20% effective tax rate on Finnish earnings. The Chinese effective tax rate consists of the 25% statutory rate and dividend withholding tax that is being accrued due to our intention to repatriate the earnings in the future. Finland has a 20% statutory rate.

We monitor Adjusted EBITDA, a non-GAAP financial metric, to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA is useful in evaluating our operating performance.

We define Adjusted EBITDA as net income (loss) adjusted for income tax expense, other non-operating expense or income, net interest expense, depreciation and amortization, stock-based compensation and other special items as determined by management. We believe that Adjusted EBITDA is a meaningful measure of performance as it is commonly utilized by us and the investment community to analyze operating performance in our industry. The following table sets forth Adjusted EBITDA and a reconciliation from net income (loss), the most comparable GAAP measure, for the periods presented.

Adjusted EBITDA as a non-GAAP financial measure reflects an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliation to the corresponding GAAP financial measure included in the table above, may provide a more complete understanding of factors and trends affecting our business. This non-GAAP financial measure should not be relied upon to the exclusion of GAAP financial measures.

We believe that the non-GAAP measure disclosed herein is only useful as an additional tool to help management and investors make informed decisions about our financial and operating performance. By definition, non-GAAP measures do not give a full understanding of our performance. To be useful, they must be used in conjunction with the comparable GAAP measures. In addition, non-GAAP financial measures are not standardized. It may not be possible to compare our financial measures with other companies' non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements and the notes thereto in their entirety and not to rely on any single financial measure.

The following table sets forth selected unaudited quarterly consolidated statements of operations data for each of the last eight quarters ending December 31, 2017. These data have been derived from unaudited quarterly consolidated financial statements not included in this prospectus. We have prepared the unaudited quarterly financial statements on a basis consistent with our audited consolidated financial statements included in this prospectus. In the opinion of management, the financial information reflects all adjustments consisting of only normal recurring adjustments, which we consider necessary for a fair presentation of this data. Our historical results are not necessarily indicative of the results that may be expected in any future period. The following quarterly financial data should be read in conjunction with our audited consolidated financial statements and related notes included in this prospectus.

We have experienced sequential revenue growth quarter-over-quarter, primarily driven by higher sales volumes. We have also continued to increase our gross margin as a result of improved capacity utilization and sales volumes growth. Revenues, cost of revenues, gross profit and gross margin may fluctuate from quarter to quarter based on customer demand, product mix and inventory levels. Our research and development expenses have fluctuated from quarter to quarter as a result of changes in headcount and our number of active product development projects. Our sales, general and administrative expenses have increased in total dollars as we have added sales and administrative personnel, incurred other expenses to meet increased demand for our products and to drive our growth strategy, and we have incurred higher professional fees in preparation for our initial public offering. Our sales, general and administrative expenses have fluctuated quarter-to-quarter primarily driven by timing of legal, accounting and other services.

	Three Months Ended

	Dec. 31, 2017			Sept. 30, 2017			June 30, 2017			March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
	(in thousands, except percentages)
Revenues	$	37,482		$	36,547		$	34,664		$	29,887		$	28,696		$	25,845		$	24,714		$	22,070
Cost of revenues⁽⁵⁾		25,200			24,202			23,984			20,920			20,291			20,215			18,807			18,846

Gross profit		12,282			12,345			10,680			8,967			8,405			5,630			5,907			3,224
Gross margin percentage		32.8	%		33.8	%		30.8	%		30.0	%		29.3	%		21.8	%		23.9	%		14.6	%
Operating expenses:
Research and development⁽¹⁾⁽⁵⁾		3,538			3,849			4,010			3,726			4,125			3,429			3,631			4,054
Sales, general and administrative⁽²⁾⁽⁴⁾⁽⁵⁾		6,053			3,897			4,774			4,629			4,387			4,044			4,460			4,374
Total operating expenses		9,591			7,746			8,784			8,355			8,512			7,473			8,091			8,428

Income (loss) from operations		2,691			4,599			1,896			612			(107	)		(1,843	)		(2,184	)		(5,204	)
Other income (expense):
Interest expense, net		(222	)		(76	)		(469	)		(502	)		(529	)		(539	)		(573	)		(588	)
Other income (expense)⁽³⁾		6			(1,043	)		(630	)		(167	)		(181	)		(61	)		(221	)		(290	)

Income (loss) before income taxes		2,475			3,480			797			(57	)		(817	)		(2,443	)		(2,978	)		(6,082	)
Income tax expense		1,382			1,236			1,084			1,156			611			473			595			203

Net income (loss)	$	1,093		$	2,244		$	(287	)	$	(1,213	)	$	(1,428	)	$	(2,916	)	$	(3,573	)	$	(6,285	)



Adjusted EBITDA⁽⁶⁾	$	4,926		$	6,598		$	3,930		$	2,635		$	2,249		$	308		$	(179	)	$	(3,309	)
Adjusted EBITDA, as percentage of revenues		13.1	%		18.1	%		11.3	%		8.8	%		7.8	%		1.2	%		(0.7	)%		(15.0	)%

(1): The quarter ended December 31, 2016 includes a research and development expense of $0.3 million associated with the acceleration of amortization related to a previously acquired intangible.
(2): The quarter ended September 30, 2017 reflects the collection of a previously reserved receivable of $1.0 million. This amount was recognized as a reduction in sales, general and administrative expense. The quarter ended September 30, 2017 also includes $0.1 million in expenses associated with preparing for our initial public offering, included in sales, general and administrative expense.
(3): The quarter ended September 30, 2017 includes a $0.9 million loss on debt extinguishment related to the extinguishment of our loan facility with Multiplier Growth Partners SPV I, LP, recognized in other expense.
(4): The quarter ended December 31, 2017 includes $0.8 million in expenses associated with preparing for our initial public offering, included in sales, general and administrative expense.

	Three Months Ended

	Dec. 31, 2017			Sept. 30, 2017		June 30, 2017			March 31, 2017			Dec. 31, 2016			Sept. 30, 2016			June 30, 2016			March 31, 2016
	(unaudited)
	(dollars in thousands)
Net income (loss)	$	1,093		$	2,244	$	(287	)	$	(1,213	)	$	(1,428	)	$	(2,916	)	$	(3,573	)	$	(6,285	)
Income tax expense		1,382			1,236		1,084			1,156			611			473			595			203
Other (income) expense		(6	)		1,043		630			167			181			61			221			290
Interest expense, net		222			76		469			502			529			539			573			588
Depreciation and amortization		2,123			1,890		1,959			1,950			2,282			2,080			1,941			1,796
Stock-based compensation		112			109		75			73			74			71			64			99

Adjusted EBITDA	$	4,926		$	6,598	$	3,930		$	2,635		$	2,249		$	308		$	(179	)	$	(3,309	)

We had cash and cash equivalents of $36.7 million and $13.5 million as of December 31, 2017 and 2016, respectively. The increase of $23.2 million or 172% was primarily related to the Series G convertible preferred stock financing, which closed in the second quarter of 2017.

Our principal uses of liquidity are to fund our working capital needs, purchase new capital equipment and service our debt obligations. To date, our principal sources of liquidity have been the net proceeds we received through private sales of equity securities, borrowings under our debt facilities and payments received from customers for our products.

We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months. However, we may need to raise additional capital to expand the commercialization of our products, fund our operations and further our research and development activities. Our future capital requirements may vary materially from period to period and will depend on many factors, including the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the continuing market acceptance of our products and ongoing investments to support the growth of our business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. From time to time, we may explore additional financing sources which could include equity, equity-linked and debt financing arrangements. We cannot assure you that any additional financing will be available on terms favorable to us, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. If adequate funds are not available on acceptable terms, or at all, we may not be able to adequately fund our business plans, which could materially adversely affect our operating cash flows and financial condition.

During 2017, net cash provided by operating activities was $3.4 million which was primarily due to $1.8 million of net income reported in the current year and non-cash adjustments of $9.0 million related to depreciation, debt extinguishment, and other items. These positive adjustments were partially offset by a $9.9 million increase in inventory and $3.5 million increase in accounts receivable, which grew to support higher revenue levels. Those uses of cash were offset by $5.7 million increase in accounts payable and other accrued expenses, driven by increased volumes of material purchases, year-end payroll and bonus accruals, and timing of payments to vendors.

During 2016, net cash provided by operating activities was $6.0 million which was driven by a $9.0 million reduction in inventory related to inventory management programs put in place in 2016 to optimize inventory levels relative to revenues and non-cash adjustments of $9.0 million related to depreciation and other items as well as a $3.0 million increase in cash related to fluctuations in the balance of accrued liabilities. These positive adjustments were partially offset by net loss of $14.2 million and $3.1 million related to an increase in the balance of other assets.

During 2017, net cash used in investing activities was $5.5 million which was primarily due to capital expenditures during the year related to further expanding our manufacturing capacity in our Shanghai facility, purchases of new manufacturing and lab equipment and investment in our IT infrastructure. During 2016, net cash used in investing activities was $4.0 million, which was due to $4.0 million of capital expenditures primarily related to expanding manufacturing capacity in our Shanghai facility.

During 2017, net cash provided by financing activities was $24.4 million which was primarily related to the Series G preferred stock financing closed in the second quarter of 2017 and which provided $27.5 million in net proceeds. This was partially offset by $2.8 million in net principal payments on our loans and $0.2 million in deferred offering costs related to our initial public offering. During 2016, net cash provided by financing activities was $3.6 million which was due to proceeds from the issuance of preferred stock of $12.0 million partially offset by principal payments on loans of $8.3 million.

In March 2014, we entered into a Loan and Security Agreement with Pacific Western Bank (successor in interest to Square 1 Bank), as lender. The loan facility initially provided for up to $15.0 million in aggregate commitments, including a $7.5 million term loan and a revolving loan facility subject to a borrowing base of eligible accounts receivable and inventory. In August 2014, the revolving loan facility

was increased to $20.0 million, with adjustments to the borrowing base. We amended and restated the loan facility in March 2018. The amended and restated loan facility provides for $25.0 million in aggregate commitments, including a term loan of $15.0 million and a revolving loan facility equal to the lesser of (i) $25.0 million minus the unpaid principal amount of the term loan and the amount of any reserves for ancillary banking services, or (ii) a borrowing base equal to 85% of eligible accounts receivable plus the lesser of $5.5 million or 35% of eligible inventory. Our obligations under the amended and restated loan facility are secured by substantially all of our assets.

We borrowed $13.5 million in aggregate principal amount under the $15.0 million term loan on July 14, 2017 to refinance the existing outstanding balance of the term loan and other debt, and the remaining principal amount of the term loan is available to borrow through July 14, 2018. As of December 31, 2017, we had $13.5 million outstanding principal amount under the term loan and $3.7 million outstanding principal amount under the revolving loan facility.

The term loan bears interest at a rate equal to the bank's prime rate plus 0.50% per annum, subject to a floor of 5.00% per annum. The revolving loans bear interest at a rate equal to the prime rate plus 0.50% per annum, subject to a floor of 5.00% per annum. Prior to the amendment and restatement of our loan facility in March 2018, the term loan bore interest at a rate equal to the bank's prime rate plus 1.50% per annum, subject to a floor of 5.50% per annum, and the revolving loans bore interest at a rate equal to the prime rate plus 1.00% per annum, subject to a floor of 5.00% per annum. Interest is due and payable monthly in arrears.

The principal amount of the term loan will be repaid in thirty-six equal monthly installments beginning on July 14, 2018. All outstanding principal and interest on the revolving loan is due and payable on July 14, 2019. We may prepay loans under the loan facility in whole or in part at any time without premium or penalty.

The loan facility contains customary affirmative and negative covenants, including covenants that require the lender's consent to, among other things, merge or consolidate, sell or transfer assets outside the ordinary course of business, make investments, incur additional indebtedness or guarantee indebtedness of others, pay dividends, redeem or repurchase our capital stock, enter into transactions with affiliates outside the ordinary course of business, create liens on our assets and make capital expenditures. We are also required to comply with a minimum revenue covenant and a $13.0 million cap on our capital expenditures for the fiscal year ending December 31, 2018. In the event our unrestricted cash and cash equivalents plus availability under the revolving loan facility is less than $15.0 million, our lender has the option to replace the minimum revenues covenant with a new minimum Adjusted EBITDA covenant.

The facility also contains events of default that include, among others, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-defaults to other indebtedness, judgment defaults, bankruptcy and insolvency defaults and a change of control default. Any default that is not cured or waived could result in the acceleration of the obligations under the loan facility, an increase in the applicable interest rate under the loan facility to a per annum rate equal to 5.00% above the applicable interest rate and would permit our lender to exercise remedies with respect to all of the collateral that is securing the loan facility.

As of December 31, 2017 and December 31, 2016, we were in compliance with the covenants under the loan facility.

In July 2015, we entered into a loan facility with Multiplier Growth Partners SPV I, LP, or Multiplier, as lender, and our subsidiary, Arbor Photonics, LLC, as co-borrower. The loan facility provided for a $15.0 million term loan available in two tranches and was subordinated to the loan facility with Pacific Western Bank. All of our obligations under the loan facility with Multiplier were secured by substantially all of our assets. We borrowed $12.5 million in aggregate principal amount under the loan facility. On July 17, 2017, we repaid the term loan in full and terminated the loan facility. The transaction qualified as a debt extinguishment and a loss of $0.9 million was recorded in other expense in the third quarter of 2017 as a result.

The term loan bore interest at a rate equal to 11.00% per annum. Interest was due and payable monthly in arrears. The loan facility would have matured on July 16, 2020. In connection with our prepayment and termination of the loan facility, we were required to pay a prepayment premium equal to 3.00% of the principal amount prepaid.

The following table sets forth a summary of our contractual obligations as of December 31, 2017:

We have commitments under non-cancelable purchase orders or vendor agreements of approximately $12.8 million as of December 31, 2017, the majority of which we expect to be fulfilled during the subsequent twelve months, or less.

We also have uncertain tax positions of $2.5 million as of December 31, 2017. However, as we are unable to reliably estimate the period of potential cash settlement, we have not included these amounts in the table of contractual obligations.

There have been no material changes to the contractual obligations since December 31, 2017 other than entering into a lease for additional space in Shanghai in the normal course of business and amending and restating our loan facility with Pacific Western Bank. For more information please see the section titled "—Credit Facilities."

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States and include our accounts and the accounts of our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the

carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. We believe that our significant accounting policies, which are discussed in Note 2 to our consolidated financial statements, and the accounting policies discussed below, involve a greater degree of complexity, involving management's judgments and estimates. Accordingly, these are the policies we believe are critical to understanding our financial condition and historical and future results of operations:

Our revenues are generated from the sale of semiconductor lasers, fiber lasers and other related products. Revenues are recognized when all of the following criteria are met:

In limited circumstances when customer-specified acceptance criteria exist, revenues are deferred until customer acceptance if we cannot demonstrate that the product meets the specifications prior to shipment. If installation is included with the sale of a product, installation revenues are deferred until installation is complete.

For arrangements with multiple elements, revenues are allocated across the separately identified deliverables and may be recognized or deferred.

We typically provide three to 36 months parts and service warranties on our laser products and maintain an accrual for any units sold that are subject to warranty. For certain products such as our fiber lasers, we may offer a longer warranty compared to our semiconductor lasers. We estimate our warranty accrual considering past claims experience, repair or replacement cost trends and the number of units carrying warranty coverage. We record a provision for the estimated future costs of warranty based upon historical cost and product performance experience when revenues are recognized. If actual warranty claims or repair and replacement costs differ from our historical experience, and as we introduce new products and offer longer warranty terms to our customers, the estimated warranty accrual may change and additional provisions may be required.

Inventory is stated at the lower of cost or net realizable value. Inventory includes raw materials and components that may be specialized in nature and subject to obsolescence. We record write-downs for excess or obsolete inventory items. The write-downs are based upon a review of inventory materials on hand, which we compare with historical usage and age of the underlying inventory. We determine the valuation of excess and obsolete inventory by considering historical usage, inventory aging and other qualitative factors. Because of our vertically integrated business model, a significant or sudden decrease in sales could result in a significant change in the estimates of excess or obsolete inventory valuation.

The determination of our tax provision is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region and is subject to judgments and estimates. Management carefully monitors the changes in many factors.

The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our business, results of operations and financial position. We believe we have adequately reserved for our uncertain tax positions; however, no assurance can be given that the final tax outcome of these matters will not be different than what we expect. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome for these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. Management provides a valuation allowance for deferred tax assets when it does not consider realization of such assets to be more likely than not. Due to uncertainty with respect to ultimate realizability of deferred tax assets, we have recorded a valuation allowance against the U.S. deferred tax assets as of December 31, 2017.

The provision for income taxes includes the impact of reserve positions and changes to reserves that are considered appropriate, as well as the related net interest and penalties.

We file income tax returns in the U.S. federal jurisdiction, various states and various foreign jurisdictions, including China and Finland. At December 31, 2017, our tax years 2012 through 2016, 2011 through 2016, and 2010 through 2016, remain open for examination in the federal, state and foreign jurisdictions, respectively. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses and credits were generated and carried forward, and make adjustments up to the net operating loss and credit carryforward amounts. We are not currently under federal, state, or foreign examination by any tax authority.

In December 2017, the Tax Cuts and Jobs Act, or the 2017 Tax Act, was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact us, most notably a reduction of the U.S. corporate income tax rate from 34% to 21% for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for a one-time transition tax on certain foreign earnings and the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest.

We recognized the income tax effects of the 2017 Tax Act in our 2017 financial statements in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the 2017 Tax Act was signed into law. As such, our financial results reflect the income tax effects of the 2017 Tax Act for which the accounting under ASC Topic 740 is complete and provisional amounts for those specific income tax effects of the 2017 Tax

Act for which the accounting under ASC Topic 740 is incomplete but a reasonable estimate could be determined.

Compensation expense related to share-based transactions, including employee and non-employee stock options, is measured and recognized in the financial statements based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. Stock-based compensation expense is recognized, net of forfeitures, over the requisite service period of the awards, which is generally five years.

Our use of the Black-Scholes option-pricing model requires the input of subjective assumptions, including the fair value of the underlying common stock, the expected term of the option and the expected volatility of the price of our common stock, risk-free interest rates and the expected dividend yield of our common stock. The assumptions used in our option-pricing model represent management's best estimates. These estimates involve inherent uncertainties and the application of management's judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards. The effective dates for recent accounting pronouncements noted below reflects the private company transition dates. See Note 2 to our consolidated financial statements included elsewhere in this prospectus for additional information regarding recent accounting pronouncements.

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, in May 2014. ASU 2014-09 requires an entity to recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU No. 2014-09 is effective for annual reporting periods

beginning after December 15, 2018. We expect to implement the provisions of ASU 2014-09 as of January 1, 2019. While we continue to assess the potential impacts of ASU 2014-09 and anticipate it could have an impact on our consolidated financial statements we do not know or cannot reasonably estimate the quantitative impact on the financial statements at this time.

The FASB issued ASU No. 2016-02, Leases (Topic 842), in February 2016. ASU 2016-02 requires a lessee to recognize a right of use asset and a lease liability for virtually all leases, other than leases that meet the definition of short-term. The standard is effective for annual reporting periods beginning after December 15, 2019. We are currently evaluating the impact of this accounting standard.

Since inception, we have not had any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for another contractually narrow or limited purpose.

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could materially adversely affect our business, financial condition and results of operations.

We are an emerging growth company under the JOBS Act. The JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to take advantage of this exemption.

Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on certain exemptions provided for in the JOBS Act we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an "emerging growth company," whichever is earlier.

We had cash and cash equivalents of $36.7 million as of December 31, 2017. The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes. We believe that we do not have any material exposure to changes in the fair value of our cash equivalents as a result of changes in interest rates due to the short-term nature of these assets.

We are subject to interest rate risk in connection with the borrowings under our amended and restated loan facility. As of December 31, 2017, we had $13.5 million outstanding principal amount under the term loan and $3.7 million outstanding principal amount under the revolving loan facility. The term loan bears

interest at a rate equal to the bank's prime rate plus 0.50% per annum, subject to a floor of 5.00% per annum. The revolving loans bear interest at a rate equal to the bank's prime rate plus 0.50% per annum, subject to a floor of 5.00% per annum. A 10% increase or decrease in interest rates would result in a less than $0.1 million change in our obligations under the loan facility.

Due to our international operations, a significant portion of our revenues, cost of revenues and operating expenses are denominated in currencies other than the USD, principally the Chinese RMB and the Euro. As a result, our international operations give rise to transactional market risk associated with exchange rate movements of the USD, the Chinese RMB and the Euro. Management attempts to minimize these exposures by partially or fully offsetting foreign currency denominated assets and liabilities at our subsidiaries that operate in different functional currencies. The effectiveness of this strategy can be limited by the volume of underlying transactions at various subsidiaries and by our ability to accelerate or delay intercompany cash settlements. As a result, we are unable to completely offset the foreign currency denominated assets and liabilities.

At December 31, 2017, our material foreign currency exposure is related to our net investment in our foreign subsidiaries. The potential loss in fair value resulting from a hypothetical 10% adverse change in foreign exchange rates would be approximately $2.6 million. Foreign exchange rate gains or losses on foreign investments as of December 31, 2017 are reflected as a cumulative translation adjustment, net of tax, and do not affect our results of operations.

We generated revenues of $138.6 million and $101.3 million in 2017 and 2016, respectively, and net income (loss) of $1.8 million and $(14.2) million in 2017 and 2016, respectively. As of December 31, 2017, we had over 1,000 employees worldwide. Our vertically integrated operations include a semiconductor laser manufacturing facility at our Vancouver, Washington headquarters, an optical fiber manufacturing facility in Lohja, Finland, and a laser packaging and assembly facilities in Vancouver, Washington, Hillsboro, Oregon and Shanghai, China. We were founded in 2000 and possess an intellectual property portfolio that included over 350 issued or pending patents as of December 31, 2017.

gain medium, were the initial types of lasers used in industrial applications. While gas and crystal lasers are an improvement over mechanical and other non-laser techniques for material processing, they have various deficiencies, which may include lower reliability, the need for costly cooling and more frequent maintenance, lower beam quality, energy inefficiency, and lack of programmability and serviceability.

In a fiber laser, the gain medium is an optical fiber infused with rare earth elements, and the energy source is one or more semiconductor lasers. The term "semiconductor laser" can describe an individual semiconductor laser chip or a product that combines an array of such chips into a more powerful device, which is typically the approach used to build a fiber laser. Semiconductor lasers vary based upon the material used as the gain medium, the spectrum of light generated, the beam shape, the power yielded, the brilliance, as well as other characteristics. Substantial improvements in the power, brilliance, cost, reliability and efficiency of semiconductor lasers have been foundational to the improved performance and cost competitiveness of fiber lasers.

Power and brilliance are critical measures of laser performance. Both laser power and laser brilliance can vary dramatically. For example, a single semiconductor laser chip used in a handheld laser pointer generates a fraction of a watt of power, whereas high-power semiconductor laser chips used in a high-power fiber laser can generate as much as 20 watts of power per chip. The output power of a high-power fiber laser, using an array of high-power semiconductor lasers amplified via specialty fiber, can be thousands of watts, or kilowatts. Laser brilliance is a measure of how much power a laser generates over a given emission area and the rate of divergence of its beam. Therefore, two lasers emitting the same power but with different emission areas or beam divergences will have different levels of brilliance. Semiconductor laser brilliance is critical for scaling power in fiber lasers, as high-power fiber lasers require efficient aggregation of the output power of many semiconductor lasers into a single fiber.

Over the past few decades, the cost per brilliant watt produced by semiconductor lasers has fallen dramatically as a result of improved laser design and production techniques and increased production volumes. This has led to the rapid adoption of fiber lasers in a variety of markets. We believe a parallel can be drawn to the proliferation of integrated circuits as their processing power increased while the cost per transistor fell. This advancement is defined as Moore's Law, which is an observation that the number of transistors in an integrated circuit doubles approximately every two years.

We believe our high-power fiber lasers offer significant advancements over legacy fiber lasers in terms of programmability, serviceability and reliability. These advantages are a function of our vertically integrated business model, proprietary semiconductor laser technology, unique high-power fiber laser architectures and advanced in-house manufacturing methods.

We believe the programmability of our lasers is a distinctive feature that makes them well-suited for use with versatile, multi-function machine tools in a wide range of applications. The programmability of our lasers improves the speed and quality of the systems into which they are incorporated. Moreover, the programmability of our lasers enables our OEM customers to develop machine tools that can be utilized across multiple applications, thereby allowing end users to replace multiple tools inside a factory with a single, more flexible tool. Our fiber lasers incorporate proprietary control hardware and software that provide end users with significant flexibility to optimize not only output power but also the optical waveform (temporal beam shape) and the selection of the optical profile (spatial beam shape). Our customers can program our laser via a simple interface that modifies different beam variables during its use in a production cycle.

Our fiber lasers are designed to be serviced quickly on site and by our customers. Most service activities can be completed without extracting the laser from the machine tool and often without the need for our direct involvement. In contrast, end users operating machine tools built with legacy fiber lasers that require the machine tool manufacturer to coordinate the service activity with the laser provider can experience longer disruptions in their operations when the lasers need servicing. With legacy lasers and competing fiber lasers, a service activity necessitating the removal of the laser from the machine tool on the production floor and its transportation to a remote service depot for service and repair can lead to longer operational downtime. The architecture of our fiber lasers enables them to be serviced on site, generally in less than two hours, often eliminating the need for the end customers to have spare lasers in reserve. As a result, end users benefit from significantly higher production uptime, and our customers benefit by the ability to manage the end-user experience without having to rely upon a laser manufacturer representative for ongoing service.

The productivity, efficiency and versatility offered by high-power fiber lasers have been critical in making them a key part of the evolution of the industrial ecosystem. Material processing applications, the largest of which is cutting, and others such as welding, cladding, heat treating and additive manufacturing comprise the majority of the industrial laser market. High-power fiber lasers are rapidly replacing gas and other legacy lasers for cutting, due to their significantly faster speed, higher quality and lower cost when used across a wide range of metals. High-power fiber lasers also continue to take market share from non-laser cutting techniques, and are expanding into other applications such as tube cutting and other three-dimensional parts.

The factors driving the utilization of high-power fiber lasers in metal welding applications, including increased speed, quality and cost, are similar to those that have fueled their adoption for metal cutting. Fiber laser welding can be done faster, with deeper penetration, less distortion and lower heat input than traditional methods like arc welding. These advantages have fueled adoption of high-power fiber lasers across the automotive industry where system productivity and versatility are critical. Other metal fabrication industries, such as aerospace, energy and light manufacturing, are also embracing the unique capabilities offered by high-power fiber lasers for welding applications as they seek improved production efficiencies and higher levels of industrial automation.

In addition to improving traditional manufacturing processes, fiber lasers are also enabling new applications such as metal additive manufacturing. High-power fiber lasers provide the precise power needed to fuse metal powders into intricate three-dimensional metal structures. Advancements in laser technology are also enabling manufacturers to produce ever-larger parts with more complex geometries at faster speeds and lower costs.

The addressable market for semiconductor and fiber lasers in the industrial market is expected to grow from approximately $1.0 billion in 2015 to approximately $2.5 billion by 2020.

disable or destroy. Compared to conventional weapons, directed energy weapons using high-power fiber lasers offer ultra-precise targeting, low cost per use and a nearly unlimited magazine. Over the past decade, directed energy technologies have improved steadily, culminating in a series of successful demonstrations of significantly higher power, multi-kilowatt systems. Systems using high-power fiber lasers have shown the highest degree of operational viability. The addressable market for semiconductor and fiber lasers in the aerospace and defense market is expected to grow from approximately $0.4 billion in 2015 to approximately $0.5 billion by 2020.

We believe the following strengths will allow us to maintain and extend our leadership position:

Innovative semiconductor laser technology. We design and manufacture the industry's most brilliant semiconductor lasers. Our semiconductor lasers serve as the core building block of all of our solutions, and are incorporated into our fiber lasers. Our proprietary semiconductor laser architecture, from semiconductor laser chip through packaging, is designed to deliver high-performance, high-power and reliable solutions that can be optimized to end-user needs. We intend to continue to aggressively invest in the development of semiconductor laser technology to meet the evolving needs of our customers.

Differentiated high-power fiber laser technology. Our high-power fiber lasers provide distinct advantages over other fiber lasers and legacy lasers. Our fiber lasers are programmable, serviceable and reliable. Our fiber lasers are programmable using a proprietary solution that allows our customers to program laser beam strength and shape and real-time pulse timing to optimize the performance of their solution for specific applications. This programmability, along with the wide operating range of our lasers, enables our OEM customers to develop machine tools that can be utilized across multiple applications, thereby allowing end users to replace multiple tools inside a factory with a single, more flexible tool. We have designed our high-power fiber lasers to allow for expeditious and easy in-field serviceability. Intelligent sensors embedded in our fiber lasers provide our end users with real-time diagnostics and feedback. Our fiber lasers have been designed to operate dependably and stably in a wide range of harsh environments. Additionally, we have designed proprietary back reflection suppression technologies into our high-power fiber lasers, which allows for greater uptime.

Customizable high-power semiconductor and fiber laser solutions based on a scalable platform. We offer a scalable platform that is enabled by our extensive library of proprietary semiconductor and fiber laser designs, packaging options and specialty optical fibers. While we sell standard products for many applications, we primarily target higher value, high-volume opportunities that require deep collaboration, solution customization and deep integration into our OEM customers' systems. As a result of our platform-based approach, we are able to quickly and simply configure solutions that are optimized to the particular requirements of our OEM customers. Our lasers are designed into systems with stringent specifications for quality, performance and reliability, and our lasers are often mission critical in these applications.

Vertically integrated business model. We design, develop and manufacture the critical elements of our high-power semiconductor and fiber lasers, including semiconductor laser chips and optical fiber. Our control and execution of nearly all steps of the manufacturing process allow us to optimize product quality, protect our intellectual property, effectively manage costs and minimize queue time between each process step. We believe that being vertically integrated also enables us to sell at the level of integration our customers desire, at highly competitive price points and at attractive profit margins.

Strong relationships with our diverse customer base. We partner with our customers in the early stages of their system design cycle and collaborate with them to develop high-power semiconductor and fiber laser solutions that meet their specific requirements. We believe our partnership-based approach creates a competitive advantage for us, as it has enabled us to create long-term relationships with our customers,

many of which span over a decade. We sold our products to over 300 customers worldwide in 2017 and have shipped thousands of high-power fiber lasers. In addition, our U.S. based engineering team and manufacturing facilities enable us to partner with U.S. aerospace and defense customers, as domestic operations are often critical in order to serve as a strategic supplier.

Proven engineering and executive team. The universe of experienced engineers who can design and manufacture high-power semiconductor and fiber lasers is limited. We believe our team members include many of the world's foremost experts in the areas of semiconductor and fiber laser design and manufacturing, and have been involved in pioneering semiconductor laser design, including work at Bell Labs, Nortel Networks Corporation, SDL, Inc., Xerox PARC and other leading innovators prior to joining us. Complementing the depth of our technical staff is the breadth and experience of our senior management team. Members of our management team have honed their ability to lead technology-driven organizations in competitive industries through their previous experience at industry-leading companies such as Agilent Technologies, Inc., Avago Technologies, Coherent, Inc., JDS Uniphase Corporation, McKinsey & Company and Orbotech Ltd.

Increase sales. We intend to leverage our leading position in high-power semiconductor and fiber lasers and our global footprint in key geographies to increase our sales. Continued displacement of legacy lasers and non-laser energy sources by high-power semiconductor and fiber lasers in a wide range of applications should enable us to increase sales from existing customers and to generate sales from new customers. In addition, our long history of operating in China, which represents the largest geographic market for lasers, has allowed us to develop a deep understanding of the Chinese market. We believe our in-country sales, marketing and production operations in China will continue to enable us to increase sales in the region. Our development and production facilities in the U.S. enable us to compete effectively for U.S. government-related programs. We believe the quality and performance of our lasers and our innovative approach of tailoring our platform-based high-power semiconductor and fiber laser solutions to the specific needs of our customers will allow us to grow our market share.

We design and manufacture a range of high-power semiconductor and fiber lasers. Our products are typically integrated into laser systems or manufacturing tools built by our customers.

Our semiconductor lasers serve as the core building block of our products and are deeply integrated with our OEM customers' systems used in applications in the industrial, microfabrication, and aerospace and defense markets. We sell high-power semiconductor lasers with a broad range of power levels, wavelengths and output fiber sizes. Our semiconductor lasers offer the industry's highest brilliance, and we believe are among the industry's most reliable.

We offer programmable, serviceable and reliable high-power fiber lasers primarily for use in industrial, microfabrication, and aerospace and defense applications. Our fiber lasers enable fast, high-quality and efficient processing of materials. The programmability and wide operating range of our fiber lasers makes them easy for our customers to use and expands their applicability. For example, in some cases, one of our lasers can take the place of several less-flexible lasers. We have also designed our fiber lasers to enable a tool integrator or end user to perform common field service activities on-site, which results in higher machine uptime, lower cost of ownership and an improved customer experience.

The table below summarizes our products and associated applications and features.

From time to time, we develop products to address specific applications for select customers that require custom integration of our semiconductor laser chip and advanced optical assemblies. By their nature, these are typically sole-source designs with long product cycles. We also sell active and passive specialty optical fiber to select customers.

We believe we have developed strong, defensible technologies essential to the design and manufacture of semiconductor laser chips, fiber-coupled semiconductor laser packages, optical fiber and fiber lasers.

Laser brilliance can be thought of as the measure of how efficiently photons are integrated to scale power in semiconductor lasers and fiber lasers. A brilliant laser is one that emits a high level of power relative to the surface area and rate of divergence of its beam, and by increasing the brilliance of a laser we are able to increase its power scaling capability efficiently and cost effectively. Increasing power by increasing brilliance is more challenging than simply increasing the emitting surface area of the laser due to high optical power densities. Our lasers can endure extraordinary optical power densities because of our

proprietary passivation technique applied to the emitting facet of the laser chip, operating reliably for extended operating cycles and with long operating lifetimes.

To further increase the power of a semiconductor laser, we combine several laser chips into a single package. Numerous proprietary packaging methods are used to combine the beams of several of laser chips and couple them into a single strand of optical fiber. If the beams are not aligned well, or are not efficiently coupled to the fiber, the laser will not be as powerful as it theoretically could be, and that optical power loss can affect system performance. The resulting high-power and high-brilliance semiconductor laser is then used on its own or as the energy source within our fiber lasers.

In a similar manner, we scale the power of our fiber lasers by efficiently aggregating the power output of numerous semiconductor lasers. The beam alignment and coupling challenges are similar, but the much higher power levels increase the optical packaging challenges, and we have developed proprietary fiber laser architectures to effectively combine the output of several high-brilliance semiconductor lasers to create a much higher power fiber laser.

The core building block of our technology is a compound semiconductor laser chip manufactured from a gallium arsenide wafer. We have developed advanced metal-organic chemical vapor deposition processes that yield high-quality semiconductor material with low-defect density and high uniformity. We believe that our semiconductor laser chips offer industry-leading brilliance as a result of proprietary and trade-secret protected semiconductor laser chip design, laser cavity design and facet passivation.

We patented our multiplexed single-chip architecture for high-power semiconductor laser packaging. Prior to this advancement, high-power semiconductor lasers were based in bar-type architectures which had inherently limited brilliance and reliability. Our approach isolates the individual laser chips electrically, mechanically and thermally, resulting in the most brilliant and among the most reliable lasers commercially available. This architecture is now the leading method for powering fiber lasers and other solid-state lasers.

Our experience with multiplexed single-chip architecture gives us a performance advantage in multiple critical categories, including power, brilliance, efficiency and reliability. Our semiconductor lasers combine the beams from multiple individual semiconductor laser chips into a single fiber. As a result, the power of our semiconductor lasers scales with chip power and the number of chips integrated within a single package. Our extensive experience in optical alignment and package design enables us to overcome many complex thermal and beam stability challenges to produce highly reliable semiconductor lasers.

Our active optical fibers are used as the gain medium in which lasing or amplification of light occurs in our fiber lasers. Our active fibers consist of an inner core that is doped with rare-earth ions and an outer core of un-doped glass for guiding the power delivered from our semiconductor lasers.

We utilize a proprietary and patented process for making our fibers, which we call Direct Nanoparticle Deposition, or DND. We have been developing and improving our DND technology for more than a decade. Our DND process enables simultaneous, single-step deposition of all elements in the active fiber and provides high compositional uniformity and independent control of refractive-index and doping profiles. Our DND technology enables high doping concentration, which allows for higher power and efficiency and shorter fiber length.

Our passive optical fibers route and deliver the optical energy generated in our semiconductor lasers and fiber lasers. Our passive fibers are designed to match the optical guiding properties of our rare earth-doped fibers, enabling compatibility with and low-loss splicing of our active fiber within our fiber lasers.

Our fiber lasers use an active fiber that is doped with a rare-earth element to amplify the light from multiple semiconductor laser chips into a much higher brilliance laser beam. For example, the brilliance of one of our typical semiconductor lasers is 3.2 W/(mm-mrad)², while the brilliance of our diffraction-limited 1.2kW fiber laser is greater than 7,800 W/(mm-mrad)². This represents an approximate 2,400x increase in brilliance using our proprietary fiber laser architecture.

The power available from our fiber lasers has increased significantly due to the increase in power of our semiconductor laser chips and advances in our multi-chip semiconductor laser architecture, our DND active fibers and our proprietary fiber laser architectures. We scale power by both combining the outputs of multiple fiber lasers and by increasing the output power of our individual fiber laser.

Our fiber lasers offer many features, including programmable waveforms, high-speed waveform modulation capabilities, back-reflection suppression, operability in harsh environments, quick and easy serviceability and industry-leading power stability. The resulting performance and quality provide significant advantages over alternative laser and non-laser solutions for existing applications, and support the commercial feasibility of an increasing number of new applications. We intend to continue to aggressively advance our fiber laser, semiconductor laser and active fiber technologies to further improve the performance, programmability, serviceability and reliability advantages.

Our research and development team comprises experts in physics, electrical engineering, opto-electronic and opto-mechanical device and packaging design. Our research and development activities include innovation of existing products to enhance performance, reduce cost or improve manufacturing and design of new products that address select market opportunities. While we seek to improve our products on all operating characteristics, we believe we lead the market in terms of semiconductor laser chip brilliance. We work closely with customers to develop products to meet customer application and performance needs, making our research and development efforts more efficient. We also benefit from our vertically integrated business model, as we are able to conduct design cycles more rapidly through control of the full production process.

We incurred research and development expenses of approximately $15.1 million, $15.2 million and $15.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. We intend to continue our commitment to research and development and to introduce new products, solutions and complementary products that would allow us to maintain and strengthen our competitive position.

Our success depends in part upon our ability to protect our intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including patents, copyrights, trademarks and trade secrets, as well as customary contractual protections with our customers, suppliers, employees and consultants that contribute to our material intellectual property.

As of March 31, 2018, we had 90 issued U.S. patents, 109 pending U.S. patent applications, 125 issued foreign patents, 40 pending foreign patents and 57 pending PCT applications covering elements of semiconductor and fiber laser manufacturing and design, optical, fiber and circuit design and waveguide design and fabrication. Our issued patents are set to expire from 2021 to 2037.

We market and sell our products to global OEMs primarily through our direct sales force located in the United States, China, South Korea, Germany and Finland. To supplement our direct sales team, we have non-exclusive contracts in place with several independent sales representatives and distributors in North America, Asia and Europe. We selected these independent representatives and distributors based on their ability to provide effective field sales, marketing communications and technical support for select products and markets in target geographies. Our sales and marketing efforts are conducted through an integrated process that involves our direct sales force, Field Applications Engineers, or FAEs, and customer service representatives and our senior management team.

Our FAEs work closely with our sales and engineering teams to provide product development support to our OEM customers. Through close collaboration, our FAEs develop deep relationships with our OEM customers, providing us with unique insight into their product roadmaps and allowing us to identify business opportunities at an early stage. Our integrated sales and marketing strategy enables us to be highly responsive and successful in navigating each customer's unique and oftentimes complex design qualification process.

We maintain customer support and field service staff in our major markets in the United States, Europe, China and South Korea. We work closely with customers to service equipment and train customers to use and repair our products and explore additional applications for our technologies. We plan to expand our support and field service footprint, particularly in locations where business volume requires local service capabilities.

We sell to and support over 300 customers worldwide. A few customers drive a significant portion of our revenues. In the aggregate, our top ten customers accounted for approximately 61% and 60% of our revenues in 2017 and 2016, respectively. Suzhou Quick Laser Technology Co., Ltd accounted for 14% and 11% of our revenues in 2017 and 2016, respectively, and Raytheon Company accounted for 10% of our revenues in 2016. No other customer accounted for 10% or more of our revenues in 2017 or 2016.

In the fiber laser market, our primary competitor is IPG Photonics Corporation. We also compete with other companies that offer fiber lasers and other lasers such as BWT Beijing Ltd., Coherent, Inc., II-VI Incorporated, Lumentum Holdings Inc., Maxphotonics Co., Ltd., Raycus Fiber Laser Technologies Co. Ltd. and Trumpf GmbH + Co. KG.

We believe that the primary competitive factors in the high-power semiconductor and fiber laser markets are:

We also compete with widely used non-laser production methods, such as plasma cutting, water-jet cutting and resistance welding. We believe that competition will be particularly intense from makers of CO2, YAG and disc lasers, as such makers of laser solutions may lower their prices in order to maintain market share and have committed significant research and development resources to pursue opportunities related to these technologies.

We also compete against our OEM customers' internal production of competitive laser technologies. To the extent our OEM customers move toward using such in-house technologies, this could force us to lower our prices to remain a competitive solution.

We manufacture, package and test the critical elements of our high-power semiconductor and fiber lasers, including semiconductor laser chips and optical fiber in-house. Our vertically integrated business model enables us to control and protect our proprietary technologies and process knowledge, and ensures our supply of critical components. Controlling and executing nearly all steps of the manufacturing process provides us several advantages, including:

We outsource components and materials when we feel that a specific component, by itself, does not provide a sufficient competitive advantage to warrant investment in the capital and human resources necessary for its manufacture. We work with our suppliers in these situations to ensure consistent quality and delivery performance. In many cases, components are custom manufactured for us based on our proprietary specifications.

We manufacture our products in facilities in Vancouver, Washington, Hillsboro, Oregon, Lohja, Finland and Shanghai, China. We manufacture certain electrical-optical components in our Vancouver, Washington, Shanghai, China and Hillsboro, Oregon facilities. Our fiber operations in Finland are fully vertically integrated; we make the fiber preforms and draw the fiber. Our semiconductor laser chips, which we fabricate, test and package in our Vancouver, Washington facility, are the fundamental building blocks of all of our products. We fabricate our lasers on gallium arsenide wafers in our own foundry using proprietary equipment and processes. Wafers are diced into individual laser chips, and these laser chips are assembled into a package that concentrates the laser light from each laser chip into optical fiber. Our packaging incorporates both patented intellectual property as well as process know-how to create a low-cost and highly reliable end-product that meets customer specifications. We combine our packaged semiconductor lasers with the fiber we manufacture in Finland to create laser amplifiers, conducting the process steps with sensitive intellectual property in our Washington facility. We assemble these components into complete fiber lasers in Washington and China.

We purchase raw materials used to manufacture our products and other components, such as semiconductor wafer substrates, fiber laser chip packages, optics and other materials, from single or limited-source suppliers. We typically purchase our materials through purchase orders or agreed-upon terms and conditions and we do not have guaranteed supply arrangements with many of these suppliers. To mitigate raw material supply risks, we take a variety of actions such as second source qualification, accumulation of safety stock and vendor surveillance.

We believe our existing manufacturing facilities are adequate to meet current and anticipated near-term demand. If additional capacity is needed, we believe that such capacity will be available on commercially reasonable terms.

Backlog consists of purchase orders for products that we expect to ship within the next twelve months. As of December 31, 2017, we had backlog of $44.6 million. Our backlog is not necessarily indicative of revenues for any specific future period due to possible order cancellations or deferrals, and shipping or acceptance delays. Backlog does not represent any assurance that we will realize a profit from filling the orders represented thereby.

Our products are mission critical to our customers, and the superior performance and reliability of our lasers is crucial to our competitive strategy. To ensure our products perform to the high standards that we and our customers demand, we have established rigorous quality assurance protocols that are compliant with state-of-the-art industry standards. Our Hillsboro, Oregon and Vancouver, Washington facilities are ISO 9001:2008 registered (ISO 9001:2015 pending). Our Shanghai, China facility and our Lohja, Finland facilities are ISO 9001:2015. Our team has the expertise in quality control, manufacturing and process engineering necessary to produce highly reliable products that consistently meet customer expectations.

We are subject to significant regulation by local, state, federal and international laws in all jurisdictions in which we operate. Compliance to these requirements can be costly and time consuming. We believe that our operations, products, services and actions substantially comply with applicable regulations in all jurisdictions. However, the risk of non-compliance cannot be eliminated and therefore there is no assurance that future costs related to these regulations will not be incurred. There is also the possibility that regulations will be retroactively applied, interpreted or applied differently to our operations, products, services and actions which will require significant time and resources.

Lasers sold in the United States are classified as Class IV Laser Products under the applicable rules and regulations of the Center for Devices and Radiological Health, or CDRH, of the U.S. Food and Drug Administration. CDRH regulations require a self-certification procedure pursuant to which a manufacturer must submit a filing to the CDRH with respect to each product incorporating a laser device, make periodic reports of sales and purchases and comply with product labeling standards, product safety and design features and informational requirements. The CDRH may seek fines and other remedies for violations of their requirements. Outside of the United States, most countries reference the International IEC60825-1 standard in their regulations, and our products are classified as Class 4. Our products are registered with the CDRH, but it is the responsibility of our customers to certify their product to CDRH and IEC60825 requirements.

Our products contain hazardous substances that are subject to various federal, state, local and international laws governing environmental health and safety, including those relating to the purchase, transportation, storage, use, disposal, land-usage and human exposure. We believe that our operations are in compliance in all material respects with all applicable environmental laws and regulations, including reporting requirements. In addition, we have put in place a wide range of safety training and internal controls regarding the handling of such hazardous substances. However, in the event that we fail to comply with pertinent laws and regulations, we may be subject to damages and liabilities.

All of our operations are also subject to regulation by local, state, federal and international worker health and safety laws in all jurisdictions in which we operate. For instance, in the United States, we are required to comply with the Occupational Safety and Health Administration regulations and the applicable, more stringent Oregon and Washington requirements. Typical safety hazards are in the areas of laser, electrical and hazardous materials, whereas health hazards tend to be related to hazardous materials and ergonomics. We have designed controls and engage in continual improvement programs in order to better address these risks.

Certain products of ours are subject to the Export Administration Regulations, administered by the Department of Commerce, Bureau of Industry Security, which require that we obtain an export license before we can export products or technology to specified countries. Additionally, some of our products are subject to International Traffic in Arms Regulations, a United States regulatory regime to restrict and control the export of defense and military related technologies to safeguard U.S. national security and further U.S. foreign policy objectives. Other products of ours are controlled by similar laws in other jurisdictions. Failure to comply with these laws could result in sanctions by the government, including substantial monetary penalties, denial of export privileges and debarment from government contracts. We maintain an export compliance program staffed by dedicated personnel under which we screen export transactions against current lists of restricted exports, destinations and end users with the objective of carefully managing export-related decisions and transactions and shipping logistics and ensuring compliance with these rules. We believe we have obtained all export licenses required for our shipments subject to these regulations.

As of March 31, 2018, we had a total of 1,071 employees worldwide, of which 1,064 were full-time. The majority of our employees are located in the United States and China. In Finland, certain employees belong to labor unions for their specialty. There are no labor unions to which our employees belong in any other location. We have not experienced any work stoppages at any of our facilities. We consider our relationship with our employees to be good.

Location	Lease Expiration		Primary Functions

Vancouver, Washington	July 31, 2018 - November 30, 2024	122,400	Corporate headquarters; general corporate activities, product development, sales and support, chip fabrication and packaging and fiber laser operations
Hillsboro, Oregon	January 31, 2023	30,200	Aerospace and defense packaging
Lohja, Finland	April 1, 2022	31,800	Optical fiber development and manufacturing
Shanghai, China	April 16, 2019 - January 31, 2021	82,828	Product development, China sales, service and chip packaging
Seoul, South Korea	September 30, 2018	1,400	South Korea sales; installation, training and service

We believe that our existing facilities are adequate to meet our current needs and that we will be able to renew existing leases and obtain additional commercial space as needed.

In December 2013, we submitted a disclosure letter to the Office of the Inspector General of the Department of Defense advising that we might not have been eligible for certain contracts we were awarded under the Small Business Innovation Research, or SBIR, Program, notwithstanding our prior representations that we were eligible. The matter was referred to the Small Business Administration and the U.S. Department of Justice for investigation of potential violations of the civil False Claims Act. In March 2015, a civil settlement agreement related to the SBIR matter was signed, in which we agreed to pay $420,000 and received a release of any civil liabilities with respect to the SBIR matter. This settlement has been paid in full.

In October 2014, we received a request for information related to the SBIR matter from the U.S. Attorney's Office, Criminal Division. We provided documentation and an explanation of why a criminal investigation was unwarranted. In March 2015, we received an additional request, to which we also responded. The Criminal Division has contacted certain of our former employees as recently as June 2017. Although we are unable to predict the final outcome of this matter, in the event that the Criminal Division brings any claims, we intend to vigorously defend ourselves.

In addition, we may, from time to time, be party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially adversely affect our business, financial condition, results of operations and growth prospects.

The following table sets forth the names, ages and positions of our executive officers and directors as of March 31, 2018:

Name	Age	Position

*Executive Officers:*
Scott Keeney	53	President, Chief Executive Officer and Chairman of the Board
Ran Bareket	51	Chief Financial Officer
Robert Martinsen	56	Chief Technology Officer
*Non-Employee Directors:*
Bandel Carano⁽⁴⁾	56	Director
Douglas Carlisle⁽¹⁾⁽³⁾	61	Director
Bill Gossman⁽¹⁾⁽⁴⁾	56	Director
Raymond Link⁽¹⁾⁽²⁾	64	Director
Gary Locke⁽³⁾	68	Director
Geoffrey Moore⁽²⁾	71	Director
David Osborne	78	Director

Scott Keeney, one of our co-founders, has served as our president, chief executive officer and as a member of our board of directors since July 2000 and as chairman of our board of directors since February 2018. Prior to joining us, from 1998 to 2000, Mr. Keeney served as chief executive officer for Aculight Corporation, a laser company acquired by Lockheed Martin Corporation in 2008. Prior to that, he served as a consultant for McKinsey & Company, a consulting firm, from 1993 to 1998. Mr. Keeney received a B.A. in economics from the University of Washington and an M.B.A. from Harvard Business School. We believe Mr. Keeney's perspective, experience and institutional knowledge as our co-founder, president and chief executive officer qualify him to serve as director.

Ran Bareket has served as our chief financial officer since January 2018. Previously, from July 2015 to January 2018, Mr. Bareket served as corporate vice president and chief financial officer for Orbotech Ltd., a publicly-traded company. Prior to that, he served as vice president, finance and operations for the printed circuit boards division of Orbotech from July 2014 to June 2015. Before joining Orbotech, Mr. Bareket served as vice president and chief financial officer of IVC Industries, Inc., a manufacturer of nutritional supplements and non-pharmaceutical drug products from January 2012 to June 2014. From January 2000 to December 2011, he held various finance positions at Kulicke & Soffa Industries, Inc., a global designer and manufacturer of semiconductor, LED and electronic assembly equipment, including corporate vice president and principal accounting officer. Mr. Bareket is a Certified Public Accountant. Mr. Bareket received a B.A. in accounting and management from the Tel Aviv Management College and an M.B.A from Pennsylvania State University.

Robert Martinsen has served as our chief technology officer since September 2013. Previously, from October 2004 to September 2013, Mr. Martinsen served as our vice president, product engineering. Prior to joining us, from February 2002 to September 2004, Mr. Martinsen served as director, product development for the semiconductor business unit of Coherent, Inc., a publicly-traded laser company. Prior to that, he served as director, product design at Novalux LED Ltd., a laser systems company, from July 2000 to February 2002. Mr. Martinsen received a B.E. in marine engineering from the State University of New York Maritime College, an M.E. in mechanical and aerospace engineering from the University of Virginia and a S.M. in ocean engineering and electrical engineering from the Massachusetts Institute of Technology.

Bandel Carano has served as a member of our board of directors since April 2001, as a member of our compensation committee from February 2004 to December 2012 and as a member of our technology security compliance committee since February 2018, and from February 2005 to November 2006. Mr. Carano is a general partner of Oak Investment Partners, a multi-stage venture capital firm he joined in 1985. From 1983 to 1985, Mr. Carano was a member of Morgan Stanley's Venture Capital Group, where he was responsible for advising Morgan Stanley on high-tech new business development and sponsoring venture investments. Mr. Carano currently serves on the boards of directors of NeoPhotonics Corporation, Kratos Defense & Security Solutions, Inc. and numerous private companies. Mr. Carano also serves on the Investment Advisory Board of the Stanford Engineering Venture Fund. Mr. Carano received a B.S. and an M.S. in electrical engineering from Stanford University. We believe Mr. Carano's technical engineering background and experience advising growth-oriented technology companies as a venture capital investor, coupled with his experience as a director of numerous public and private companies, qualifies him to serve on our board.

Douglas Carlisle has served as a member of our board of directors since April 2001, as a member of our audit committee since February 2005 and as a member of our nominating and governance committee since February 2018. Mr. Carlisle has been a general partner and managing director of Menlo Ventures, a venture capital firm investing primarily in engineering and technology based early-stage growth companies, since September 1984. Prior to that, from 1982 to September 1984, Mr. Carlisle was an associate at Menlo Ventures. Mr. Carlisle currently serves on the boards of directors of numerous private companies. Mr. Carlisle received a B.S. in electrical engineering from the University of California, Berkeley and a J.D. and an M.B.A. from Stanford University. We believe that Mr. Carlisle's experience advising growth-oriented technology companies as a venture capital investor, coupled with his experience as a director of various companies, qualifies him to serve on our board.

Bill Gossman has served as a member of our board of directors since May 2016, as a member of our compensation committee from May 2016 to February 2018, as a member of our technology and security compliance committee since May 2016, as a member of our audit committee since February 2018 and served as our acting chief financial officer from April 2001 to July 2001. Mr. Gossman has been a venture partner at Mohr Davidow Ventures since April 2009, when he rejoined the firm after serving from January 2001 to March 2003. In his capacity with Mohr Davidow, he has served on the boards of directors or as chief executive officer of several of its portfolio companies, including Marble Security, Inc. from May 2011 to July 2014 and AudienceScience, Inc., where he served as chief executive officer from 2003 to 2007, and

again, at the company's request, from June 2016 until June 2017. AudienceScience entered into receivership and began to wind up its operations in June 2017. Prior to Mohr Davidow, Mr. Gossman founded and served as the chief operating officer and chief financial officer for @mobile, a wireless networking company, until its sale to Openwave in 2000. Prior to @mobile, Mr. Gossman served as vice president, strategic planning and international marketing with AT&T Custom Electronic Systems, and in a variety of engineering and management positions with Northrop Corporation and Hughes Aircraft Company. Mr. Gossman received a B.S. in engineering from Cornell University, an M.S. in engineering from the Massachusetts Institute of Technology and an M.B.A. from the University of Maryland. We believe that Mr. Gossman's extensive senior management and business experience in venture capital, and as a founder, director and chief executive officer of numerous companies, qualifies him to serve on our board.

Raymond Link has served as a member of our board of directors since December 2010, as a member of our compensation committee since December 2011 and as a member of our audit committee since December 2010. From July 2005 to April 2015, Mr. Link served as executive vice president and chief financial officer of FEI Company, a leading supplier of scientific and analytical instruments for nanoscale imaging. Prior to FEI, from July 2001 to June 2005 Mr. Link was the chief financial officer of TriQuint Semiconductor, Inc., a manufacturer of electronic signal processing components for wireless communications which he joined in 2001 as a result of TriQuint's merger with Sawtek, Inc., where he was the chief financial officer. Mr. Link currently serves on the boards of directors of Electro Scientific Industries, Inc., a supplier of laser-based solutions for the microelectronics industry, and FormFactor, Inc., a leading provider of test and measurement solutions for the semiconductor industry. Mr. Link received a B.S. in business administration from the State University of New York at Buffalo and an M.B.A. from the Wharton School at the University of Pennsylvania, is a licensed Certified Public Accountant and a fellow with the National Association of Corporate Directors. We believe that Mr. Link's financial and accounting expertise, including his service as a chief financial officer and as a director of two public companies, qualifies him to serve on our board.

Gary Locke has served as a member of our board of directors since August 2017 and as a member of our nominating and governance committee since February 2018. Since 2014, Mr. Locke has been the chairman of Locke Global Strategies LLC, through which he provides strategic advice and consulting services to businesses in the United States and China. From 2011 until 2014, Mr. Locke, served as the United States Ambassador to China. Mr. Locke was the United States Secretary of Commerce from 2009 to 2011. Prior to that, Mr. Locke served two consecutive terms as Governor of the State of Washington from 1997 to 2005. Mr. Locke currently serves on the boards of directors of AMC Entertainment Holdings, Inc., an American movie theater chain, and Fortinet, Inc., a provider of unified threat management solutions. Mr. Locke received a B.A. in political science from Yale University and a J.D. from Boston University. We believe Mr. Locke's extensive leadership, executive experience and global business perspective from his roles as the Governor of Washington, Secretary of Commerce and United States Ambassador to China qualify him to serve on our board.

Geoffrey Moore has served as a member of our board of directors since September 2012 and as a member of our compensation committee since December 2012. Currently, Dr. Moore serves as managing director of Geoffrey Moore Consulting. He also serves as chairman emeritus of TCG Advisors LLC, where he was a managing director from May 2003 until June 2011, as well as Chasm Institute and Chasm Group, management consulting firms he co-founded. Dr. Moore has been a venture partner at Mohr Davidow

Ventures since February 1998 and serves as an advisor to many of its portfolio companies. From October 2006 until May 2015, Dr. Moore served on the board of directors of Akamai Technologies, Inc., a leading content delivery network and cloud services provider. Dr. Moore received a B.A. in literature from Stanford University and a Ph.D. in literature from the University of Washington. We believe that Dr. Moore's experience as a venture capital investor, as well as his public company board experience, qualifies him to serve on our board.

David Osborne has served as a member of our board of directors since September 2000. Mr. Osborne served as a vice president at JDS Uniphase Corporation, a maker of fiber optic networking equipment, from August 1984 to January 1998. Prior to JDS, Mr. Osborne served as president of Osborne Associates from June 1981 to August 1984 and as a product marketing manager at Spectra Physics, a developer of high-performance precision lasers, from February 1973 to June 1981. Prior to Spectra, Mr. Osborne served as an engineering department manager at Memorex, a consumer electronics company, from June 1969 to February 1973. Mr. Osborne received a B.S. in electrical engineering from San Jose State University and an M.B.A. from Santa Clara University. We believe that Mr. Osborne's extensive leadership experience with companies in the laser industry qualifies him to serve on our board.

Our board of directors is currently composed of eight members. Except for Mr. Locke, each of our directors was elected to our board of directors pursuant to a voting agreement that will terminate automatically by its terms upon the completion of this offering. After this offering, the number of directors will be fixed by our board of directors, subject to the terms of our amended and restated certificate of incorporation and amended and restated bylaws. There are no family relationships among any of our directors or executive officers.

Our board of directors will be divided into three classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the class whose terms are then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the annual meeting of stockholders to be held during the years 2019 for the Class I directors, 2020 for the Class II directors and 2021 for the Class III directors.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control. See "Description of Capital Stock—Anti-Takeover Effects of Delaware and Washington Law and Our Certificate of Incorporation and Bylaws" for a discussion of other anti-takeover provisions found in our amended and restated certificate of incorporation and amended and restated bylaws.

Upon the completion of this offering, our common stock will be listed on The Nasdaq Global Select Market. Under the rules of The Nasdaq Stock Market, independent directors must comprise a majority of a listed company's board of directors within a specified period of the completion of this offering. In addition, the rules of The Nasdaq Stock Market require that, subject to specified exceptions, each member of a listed company's audit, compensation and nominating and governance committees must be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.

Under the rules of The Nasdaq Stock Market, a director will only qualify as an "independent director" if, in the opinion of that company's board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

To be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or (ii) be an affiliated person of the listed company or any of its subsidiaries.

In February 2018, our board of directors undertook a review of its composition, the composition of its committees and the independence of our directors and considered whether any director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out his responsibilities. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors has determined that, other than Scott Keeney and Bill Gossman, none of our current directors has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is "independent" as that term is defined under the rules of The Nasdaq Stock Market. In making this determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Scott Keeney, our president and chief executive officer, is also the chairman of our board of directors. Our board of directors determined that having our principal executive officer also serve as the chairman of our board of directors provides us with optimally effective leadership and is in our best interests and those of our stockholders. Mr. Keeney founded and has led our company since its inception. Our board of directors believes that Mr. Keeney's strategic vision for our business, his in-depth knowledge of our products, the laser industry and his experience serving as our president and chief executive officer since our inception make him well qualified to serve as chairman of our board.

The role given to the lead independent director helps ensure a strong independent and active board of directors. In February 2018, our board of directors appointed Raymond Link to serve as our lead independent director, effective upon the completion of this offering. As lead independent director, Mr. Link will preside over periodic meetings of our independent directors, serve as a liaison between the chairperson of our board of directors and the independent directors and perform such additional duties as our board of directors may otherwise determine and delegate.

Our board of directors has an audit committee, a compensation committee, a nominating and governance committee and a technology security compliance committee, each of which has the composition and the responsibilities described below.

The members of our audit committee are Raymond Link, Douglas Carlisle and Bill Gossman. Rule 10A-3 of the Exchange Act and the rules of The Nasdaq Stock Market require that our audit committee have at least one independent member upon the listing of our common stock, have a majority of independent members within 90 days of the date of this prospectus and be composed entirely of independent members within one year of the date of this prospectus. Our board of directors determined that each of Raymond Link and Douglas Carlisle satisfy the independence standards for audit committee

members established by applicable SEC rules and the rules of The Nasdaq Stock Market, and that Bill Gossman does not satisfy the independence standards for an audit committee member. Each member of our audit committee meets the financial sophistication requirements of The Nasdaq Stock Market. Our audit committee chairman, Raymond Link, is our audit committee financial expert, as that term is defined under the SEC rules implementing Section 407 of the Sarbanes-Oxley Act of 2002, and possesses financial sophistication, as defined under the rules of The Nasdaq Stock Market. Our audit committee oversees our corporate accounting and financial reporting process and assists our board of directors in monitoring our financial systems. Our audit committee operates under a written charter that specifies its duties and responsibilities and satisfies the applicable listing standards of The Nasdaq Stock Market. Our audit committee will:

The members of our compensation committee are Geoffrey Moore and Raymond Link. Our board of directors determined that each member of our compensation committee satisfies the independence standards for compensation committee members established by applicable SEC rules and the rules of The Nasdaq Stock Market, is a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act and is an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. Geoffrey Moore is the chairman of our compensation committee. Our compensation committee oversees our compensation policies, plans and benefits programs. Our compensation committee operates under a written charter that specifies its duties and responsibilities and satisfies the applicable listing standards of The Nasdaq Stock Market. The compensation committee will:

The members of our nominating and governance committee are Gary Locke and Douglas Carlisle. Our board of directors determined that each member of our nominating and governance committee satisfies the independence standards for nominating and governance committee members established by applicable SEC rules and the rules of The Nasdaq Stock Market. Gary Locke is the chairman of our nominating and governance committee. Our nominating and governance committee oversees and assists

our board of directors in reviewing and recommending nominees for election as directors. Our nominating and governance committee operates under a written charter that specifies its duties and responsibilities and satisfies the applicable listing standards of The Nasdaq Stock Market. The nominating and governance committee will:

The members of our technology security compliance committee are Bandel Carano and Bill Gossman. Bandel Carano is the chairman of our technology security compliance committee. The technology security compliance committee oversees our classified business activities and security measures designed to protect our information technology, data and intellectual property. Our technology security compliance committee operates under a written charter that specifies its duties and responsibilities. The technology security compliance committee will:

To date, we have not paid cash compensation to any of our non-employee directors for serving on our board of directors. From time to time, we have granted stock options to certain of our non-employee directors for their service on our board of directors, including to Messrs. Gossman, Link and Moore in May 2017 and Mr. Locke in August 2017. In connection with this offering, we expect to implement a formal cash and equity compensation program for our non-employee directors.

The following table sets forth information concerning compensation paid or accrued for services rendered to us by members of our board of directors for the year ended December 31, 2017. We did not pay or accrue any compensation for any of our non-employee directors for the year ended December 31, 2017, other than to Messrs. Gossman, Link, Locke and Moore. Mr. Keeney, our president, chief executive officer and director, did not receive any additional compensation for his service as a director. Information concerning the compensation earned by Mr. Keeney is set forth in the section titled "Executive Compensation."

recognized by the applicable non-employee directors upon vesting or exercise of the applicable awards. As of December 31, 2017, Mr. Gossman held stock options to purchase 72,313 shares of our common stock; Mr. Link held stock options to purchase 30,700 shares of our common stock; Mr. Locke held stock options to purchase 69,725 shares of our common stock. Mr. Locke was appointed to our board of directors in August 2017; and Dr. Moore held stock options to purchase 77,590 shares of our common stock. Messrs. Carano, Carlisle and Osborne did not hold any stock options as of December 31, 2017.

(2): One-fifth of the shares subject to the option vest on June 1, 2018 and one-twentieth of the shares vest quarterly thereafter, subject to the holder's continued service through each applicable vesting date. In the event of a change in control, as defined in our 2001 Plan, 100% of the then-outstanding shares subject to the option will become vested.
(3): Mr. Gossman earned $101,520 for consulting services provided to us in 2017. Information concerning this consulting arrangement is set forth in the section titled "Certain Relationships and Related Party Transactions."
(4): One-fourth of the shares subject to the option vest on August 3, 2018 and one-forty-eighth of the shares vest quarterly thereafter, subject to the holder's continued service through each applicable vesting date. In the event of a change in control, as defined in our 2001 Plan, 100% of the then-outstanding shares subject to the option will become vested.

From June to December 2017, Mr. Link exercised options to purchase 10,397 shares of our common stock for aggregate consideration of $9,111.

We have a practice of reimbursing directors for travel, lodging and other reasonable expenses incurred in connection with their attendance at board or committee meetings.

Our board of directors has adopted a compensation policy for outside directors, effective as of the date of the effectiveness of the registration statement of which this prospectus forms a part. This policy was developed, with input from our independent compensation consultant firm, Compensia, Inc., regarding practices and compensation level at comparable companies. It is designed to attract, retain, and reward non-employee directors.

Under this director compensation policy, each non-employee director is expected to receive the cash and equity compensation for board services described below. We also expect to continue to reimburse our non-employee directors for reasonable, customary and documented travel expenses to board meetings.

Under this director compensation policy, no non-employee directors may be paid, issued or granted, in any fiscal year, cash compensation with an aggregate value greater than $150,000 and (equity compensation with an aggregate value greater than $300,000 (with the value of each award determined in accordance with the policy)). Any cash compensation paid or equity awards granted to an individual for his or her services as an employee, or for his or her services as a consultant (other than as an non-employee director), will not count against this limitation.

The policy is expected to provide our non-employee directors with the following cash compensation for their services:

All cash payments to non-employee directors are expected to be paid quarterly in arrears on a prorated basis no later than 30 days following the end of such quarter.

Election to Receive RSUs in lieu of Cash Retainers. Subject to any limits under our 2018 Plan, each non-employee director may elect to convert his or her annual cash compensation under the non-employee director policy into an award of RSUs under our 2018 Plan. If the non-employee director makes this election in a timely manner in accordance with the policy, each such award of RSUs automatically will be granted on the first trading day after January 1 of the calendar year for which the election applies and have a value (as defined in the policy) equal to the aggregate amount of such annual cash compensation, rounded down to the nearest whole share. Each such award of RSUs will vest as to 1/4 of the award on the last date of each calendar quarter following the date of grant of the award, in each case, subject to the non-employee director's continued service with us through the applicable vesting date.

Initial Award. Subject to the limits in the 2018 Plan, each person who first becomes a non-employee director following the date of the effectiveness of the registration statement of which this prospectus forms a part is expected to receive an initial award of RSUs, or the initial award, covering a number of shares of our common stock having a value (determined in accordance with the policy) equal to $120,000 (or a lesser amount determined by our board of directors in its sole discretion before the grant date), which grant is expected to be effective on the first trading date on which su

	Per share		Total

Initial public offering price	$	16.00	$	96,000,000
Underwriting discounts and commissions⁽¹⁾	$	1.12	$	6,720,000
Proceeds, before expenses, to us	$	14.88	$	89,280,000


Stifel		Raymond James
Needham & Company	Canaccord Genuity	D.A. Davidson & Co.

	Shares Purchased					Total Consideration

	Shares Purchased					Total Consideration					Average Price Per Share
	Number		Percent			Amount		Percent			Average Price Per Share
Existing stockholders before this offering		27,621,147		82.2	%	$	176,131,470		64.7	%	$	6.38
Investors participating in this offering		6,000,000		17.8			96,000,000		35.3			16.00

Total		33,621,147		100.0	%	$	272,131,470		100.0	%

	Year Ended December 31

	2017			2016
	(in thousands)
Net cash provided by operating activities	$	3,411		$	5,959
Net cash used in investing activities		(5,477	)		(4,027	)
Net cash provided by financing activities		24,419			3,641
Effect of exchange rate changes on cash		834			1,072

Net increase in cash	$	23,187		$	6,645

	Payments Due by Period

	Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years		Total
	(in thousands)
Operating lease obligations	$	2,751	$	3,286	$	2,024	$	998	$	9,059
Long term debt obligations, including current portion		2,288		14,992		—		—		17,280
Estimated interest payments		974		400		—		—		1,374
Capital lease obligations		75		116		—		—		191

Total	$	6,088	$	18,794	$	2,024	$	998	$	27,904

		Page

Prospectus Summary			1
Risk Factors			15
Special Note Regarding Forward-Looking Statements and Industry Data			41
Use of Proceeds			43
Dividend Policy			44
Capitalization			45
Dilution			47
Selected Consolidated Financial Data			49
Management's Discussion and Analysis of Financial Condition and Results of Operations			51
Business			69
Management			84
Executive Compensation			94
Certain Relationships and Related Party Transactions			108
Principal Stockholders			112
Description of Capital Stock			115
Shares Eligible for Future Sale			121
Material U.S. Federal Income and Estate Tax Consequences for Non-U.S. Holders of Common Stock			124
Underwriting			128
Legal Matters			136
Experts			136
Where You Can Find Additional Information			136
Index to Consolidated Financial Statements			F-1


Initial public offering price per share			$	16.00
Pro forma net tangible book value per share as of December 31, 2017	$	2.08
Increase in pro forma net tangible book value per share attributable to investors participating in the offering		2.22

Pro forma as adjusted net tangible book value per share, as adjusted to give effect to this offering				4.30

Dilution in pro forma as adjusted net tangible book value per share to investors participating in this offering			$	11.70

Name

Bill Gossman	7,622	⁽²⁾	101,520	⁽³⁾	109,142
Raymond Link	7,622	⁽²⁾	—		7,622
Gary Locke	52,297	⁽⁴⁾	—		52,297
Geoffrey Moore	7,622	⁽²⁾	—		7,622