11.	BUSINESS SEGMENT, GEOGRAPHIC AND CONCENTRATION RISK INFORMATION

As a new public entity, the Company commenced its

first

comprehensive annual operational planning process with its executive leadership team and board of directors in the

fourth

quarter of fiscal year

2016.

As part of that process, the Company assessed its reporting structure and changed the composition of its reporting units. Following this process, based on information that is regularly reviewed by the Company’s chief operating decision maker, the Company now has

two

reportable segments consisting of: Nuvectra and NeuroNexus. The Company determined its new reporting units by identifying its operating segments and assessing whether any components of these segments constituted a business for which discrete financial information is available and whether segment management would regularly review the operating results of any components. Through this process, the Company identified

two

reporting units: Nuvectra and NeuroNexus.

Nuvectra is a neurostimulation company committed to helping physicians improve the lives of people with chronic neurological conditions. Algovita is the Company’s

first

commercial offering and is approved for the treatment of chronic pain of the trunk and/or limbs. Nuvectra’s innovative technology platform also has capabilities under development to support other neurological indications such as SNM for the treatment of overactive bladder and DBS for the treatment of Parkinson’s Disease. Revenue includes development and engineering service fees and sales from the limited release of Algovita in the United States and Europe. Future revenues of Nuvectra are expected to come primarily from sales of Algovita, particularly after expansion of its launch commercially in the United States, and Virtis

, the

second

application of the Company’s neurostimulation technology platform and its

first

product for the SNM market.

NeuroNexus designs, manufactures and markets neural-interface technologies for the neuroscience clinical research market. Revenue includes sales of neural interface technology, components and systems to the neuroscience and clinical markets.

An analysis and reconciliation of the Company’s product lines, business segments and geographic information to the respective information in the Condensed Consolidated Financial Statements follows. Sales by geographic area are presented by allocating sales from external customers based on where the products are shipped or services are rendered (in thousands):

	Three Months Ended				Six Months Ended
	June 30, 2017		July 1, 2016		June 30, 2017		July 1, 2016
Product line sales:
Algovita	$	5,491	$	569	$	8,878	$	984
Neural interface components and systems		1,174		1,321		2,375		2,457
Development and engineering service		558		664		1,010		1,175
Total sales	$	7,223	$	2,554	$	12,263	$	4,616

	Three Months Ended				Six Months Ended
	June 30, 2017		July 1, 2016		June 30, 2017		July 1, 2016
Business segment sales:
Nuvectra	$	6,049	$	1,233	$	9,888	$	2,159
NeuroNexus		1,174		1,321		2,375		2,457
Total sales	$	7,223	$	2,554	$	12,263	$	4,616

	Three Months Ended						Six Months Ended
	June 30, 2017			July 1, 2016			June 30, 2017			July 1, 2016
Segment (loss) income from operations:
Nuvectra	$	(10,813	)	$	(8,316	)	$	(23,418	)	$	(15,217	)
NeuroNexus		90			66			146			(116	)
Total segment (loss) income from operations		(10,723	)		(8,250	)		(23,272	)		(15,333	)
Unallocated operating expenses		—			—			—			—
Operating loss		(10,723	)		(8,250	)		(23,272	)		(15,333	)
Unallocated other expense, net		(515	)		(511	)		(1,088	)		(570	)
Loss before provision for income taxes	$	(11,238	)	$	(8,761	)	$	(24,360	)	$	(15,903	)

	Three Months Ended				Six Months Ended
	June 30, 2017		July 1, 2016		June 30, 2017		July 1, 2016
Sales by geographic area:
United States	$	5,601	$	1,163	$	9,371	$	1,827
Non-Domestic locations:
Switzerland		586		724		1,059		1,270
Germany		523		309		874		865
Rest of world		513		358		959		654

Total sales	$	7,223	$	2,554	$	12,263	$	4,616

All of the Company’s long-lived tangible assets are located in the United States.