What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-17 compared with 2025-02-18 · 136 added, 177 removed, 714 unchanged (30% of the section changed)

39 unchanged sentences

The principal considerations for our determination that this is a critical audit matter are:

● The transaction price adjustment is related to material accounts and disclosures that are important to the users of the consolidated financial statements

● Significant judgment is required to estimate the expected amount of cash consideration to be collected, which is a key input into management’s transaction price adjustment

● As it relates to sales with Medicare, the future collection could significantly differ from those subjective estimates given the payment uncertainty due to the appeals process for claims initially denied .

● The transaction price adjustments are related to material accounts and disclosures that are important to the users of the consolidated financial statements

● Significant judgment is required to estimate the expected amount of cash consideration to be collected, which is a key input into management’s transaction price adjustments

Our audit procedures related to the transaction price adjustments – uncollected lymphedema product sales with commercial payers and Medicare included the following, among others:

● We tested the design and operating effectiveness of management’s key controls relating to their commercial payer and Medicare transaction price adjustments and commercial payer lookback analysis through reperformance, observation of the controls being performed, and inspection of supporting documentation providing evidence of control performance.

● We tested the design and operating effectiveness of management’s key controls relating to their commercial payer and Medicare transaction price adjustments and lookback analysis through reperformance, observation of the controls being performed, and inspection of supporting documentation providing evidence of control performance.

● To test management’s estimate of the commercial payer and Medicare transaction price adjustments, we:

(1) recomputed management’s calculation of the historical collection amounts by payer based on transactions that occurred during the year for a sample of commercial payers and Medicare (2) assessed management’s qualitative adjustments to any claims and (3) tested the completeness and accuracy of the underlying data used in management’s calculation of the historical collection amount s.

● For sales to patients insured by commercial payers, we assessed the reasonableness of management’s year-end analysis of the transaction price adjustments recorded in the prior year compared to actual pricing adjustments experienced in the current period by recomputing the results of management’s historical lookback analysis of collection amounts by payer portfolio and total reserve.

● For sales to patients insured by commercial payers and Medicare, we assessed the reasonableness of management’s year-end analysis of the transaction price adjustments recorded in the prior year compared to actual pricing adjustments experienced in the current period by recomputing the results of management’s historical lookback analysis of collection amounts by payer portfolio and total reserve.

/s/ GRANT THORNTON LLP

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Current assets

Accounts receivable

Accounts receivable, net

Net investment in leases

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Intangible assets, net

Accounts receivable, non-current

Deferred income taxes

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Total operating expenses

Income (loss) from operations

Income from operations

Interest income

Interest expense

Income (loss) before income taxes

Income before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) per common share

Weighted-average common shares used to compute net income (loss) per common share

Net income per common share

Weighted-average common shares used to compute net income per common share

The accompanying notes are an integral part of these consolidated financial statements .

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(In thousands, except share data)

(Accumulated Deficit)

Balances, December 31, 2022

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Exercise of common stock options and vesting of performance and restricted stock units

Sale of common stock from follow-on public offering, net of offering expenses

Common shares issued for employee stock purchase plan

Net loss for the period

Net income for the period

Balances, December 31, 2023

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Exercise of common stock options and vesting of performance and restricted stock units

Sale of common stock from follow-on public offering, net of offering expenses

Share repurchases

Common shares issued for employee stock purchase plan

4 unchanged sentences

Share repurchases

( 2,143,099 )

Common shares issued for employee stock purchase plan

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Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

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Changes in assets and liabilities, net of acquisition:

Accounts receivable

Accounts receivable, net

Net investment in leases

Income taxes payable

Prepaid expenses and other assets

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Net cash (used in) provided by financing activities

Net increase (decrease) in cash

Net (decrease) increase in cash

Cash – beginning of period

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Cash paid for taxes

Accrued excise tax on stock repurchases

Capital expenditures incurred but not yet paid

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We provide stock-based compensation in the form of various types of equity-based awards, including time-based restricted stock units, performance-based restricted stock units, stock options, and through our Employee Stock Purchase Plan (“ESPP”).

Stock-based compensation expense is based on the estimated fair value of the award on the grant date for equity awards, or on the first date of the ESPP purchase period for shares under the ESPP, and recognized over the requisite service periods on our Consolidated Statements of Income using the straight-line expense attribution approach.

Stock-based compensation expense is based on the estimated fair value of the award on the grant date for equity awards, or on the first date of the ESPP purchase period for shares under the ESPP, and recognized over the requisite service periods on our Consolidated Statements of Operations using the straight-line expense attribution approach.

The estimated fair value of time-based and performance based restricted stock units is based on the closing price of our common stock on the grant date.

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The CODM assesses performance for the segment, allocates resources and monitors budget versus actual results using consolidated revenue and net income (loss) which is reflected in the Consolidated Statement of Operations.

Immaterial Correction of an Error

During the three months ended December 31, 2025, the Company identified an immaterial error related to the calculation of the Company’s deferred tax asset related to stock-based compensation.

The Company did not properly reverse the deferred tax asset balance for certain stock options that had vested but later expired and as such its deferred income tax balance was overstated.

In accordance with Staff Accounting Bulletin (“SAB”) No.

99, “Materiality”, and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, the Company evaluated the quantitative and qualitative considerations of the error and determined that the related impact was not material to results of operations, financial position, or cash flows for any historical annual or interim period.

To correct the error, the Company recorded an out-of-period adjustment.

The out-of-period adjustment reduced the Company’s deferred income tax balance, and increased its income tax expense, by $ 2.8 million as of and for the year ended December 31, 2025.

Accounting Pronouncement Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software” which modernizes the accounting for internal-use software costs to better align with the way that software is currently developed.

The update removes all reference to the project stages of software development and establishes two criteria that must be met to begin capitalizing software costs.

This update is effective for interim and annual periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No.

2024-03, “Income Statement – Reporting Comprehensive Income – Expense disaggregation Disclosures (Subtopic 220-40):

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The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

Recently Adopted Accounting Pronouncement

In December 2023, the FASB issued ASU No.

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The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.

Recently Adopted Accounting Pronouncement

In November 2023, the FASB issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” which requires entities to enhance disclosures around segment reporting.

The guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company adopted ASU 2023-07 with respect to the year ended December 31, 2024.

As a result, we have enhanced our segment disclosures in this report.

We retrospectively adopted this ASU for the year ended December 31, 2025.

The adoption of this ASU affects only our disclosures, with no impacts to our financial condition and results of operations.

On September 8, 2021, we entered into an Asset Purchase Agreement (“AffloVest APA”) to acquire the AffloVest therapy business from International Biophysics Corporation (“IBC”).

Under the terms of the AffloVest APA, we agreed to pay IBC a total of up to $ 100.0 million for the purchase of substantially all of the assets related to its branded high frequency chest wall oscillation vest therapy business, other than specifically identified excluded assets.

We acquired AffloVest to further expand our position as a leader in treating patients with underserved chronic conditions in the home.

The acquired assets included inventory, tooling, intellectual property, permits and approvals, data and records, and customer and supplier information.

At closing, $ 80.0 million of the purchase price was paid, of which a total of $ 0.5 million was deposited into an escrow account at closing for purposes of satisfying certain post-closing purchase price adjustments and indemnification claims.

Subsequent to closing, $ 0.2 million was returned to us as a result of working capital adjustments and the remaining $ 0.3 million was released to IBC.

The AffloVest acquisition was funded through a combination of cash on hand and proceeds from borrowings.

On November 4, 2022, we entered into an Amendment to the AffloVest APA, the “Amendment” with IBC, which modified the terms of the earn-out arrangement under the AffloVest APA, as follows:

● Initial Earn-Out:

The AffloVest APA provided for an initial earn-out equal to 1.5 times the amount by which the AffloVest U.S.

revenues in the period from October 1, 2021 to September 30, 2022 (the “Initial Earn-Out Period”) exceed a specified amount;

provided that in no event will the payment exceed $ 10.0 million.

o The APA Amendment provides that the calculated amount of the initial earn-out payment is $ 10.0 million, of which the Company paid $ 5.0 million on November 28, 2022, and $ 5.0 million, plus an imputed interest payment of $ 250,000 , on May 25, 2023.

● Second Earn-Out:

The AffloVest APA provided for a second earn-out equal to 1.5 times the amount by which the AffloVest U.S.

revenues in the period from October 1, 2022 to September

30, 2023 exceed the revenues recognized during the Initial Earn-Out Period;

provided that in no event will the payment exceed $ 10.0 million.

o The APA Amendment changes the 1.5 times multiplier to 3.0 times, but still provides that in no event will the second earn-out payment exceed $ 10.0 million.

o Subsequent to September 30, 2023, it was determined that the calculated amount of the second earn-out payment was $ 5.6 million, which was paid by the Company on November 28, 2023 (see Note 17 – “Fair Value Measurements”).

The fair value of the earn-out as of the acquisition date was $ 6.4 million.

The fair value of the earn-out, reflecting management’s estimate of the likelihood of achieving these targets, was determined by employing a Monte Carlo Simulation model.

This amount and the current versus non-current allocation was remeasured at the end of each reporting period until the payment requirement ended, with any adjustments reported in income from operations (see Note 17 – “Fair Value Measurements”).

Accounts Receivable

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Definite-lived intangible assets:

Defensive intangible assets

Customer accounts

Customer relationships

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Total intangible assets

Amortization expense was $ 3.8 million for each of the years ended December 31, 2024, 2023 and 2022, of which $ 1.3 million in each of the years ended December 31, 2024, 2023 and 2022, were recorded in cost of sales revenue.

Amortization expense was $ 3.7 million for the year ended December 31, 2025, and $ 3.8 million for each of the years ended December 31, 2024 and 2023, of which $ 1.3 million in each of the years ended December 31, 2025, 2024 and 2023, were recorded in cost of sales revenue.

Future amortization expenses are expected as follows:

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Accrued expenses consisted of the following:

(In thousands)

At December 31,

At December 31, 2023

Legal and consulting

(In thousands)

In-transit inventory

Sales and use tax

Legal and consulting

Clinical studies

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All tenors of term SOFR are subject to a credit spread adjustment of 0.10 % (“Adjusted Term SOFR”).

Following the Third Amendment, the term loan and amounts drawn under the revolving credit facility bear interest, at our option, at a rate equal to (a) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50 % and (iii) Adjusted Term SOFR for a one-month tenor plus 1 % (the “Base Rate”) plus an applicable margin or (b) Adjusted Term SOFR for an interest period of one, three or six months, at our option, plus the applicable margin.

The applicable margin is 0.75 % to 2.25 % on loans bearing interest at the Base Rate and 1.75 % to 3.25 % on loans bearing interest at Adjusted Term SOFR, in each case depending on our consolidated total leverage ratio;

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On November 1, 2024, we entered into a Fifth Amendment Agreement (the “Fifth Amendment”), which further amended the Credit Agreement.

The Fifth Amendment permits the Company to make payments to repurchase shares of its common stock, as long as the Company is not in default before and after giving effect to such repurchases, and as long as such repurchases do not exceed $ 30.0 million.

On December 21, 2023, we made a payment of $ 16.8 million to repay in full the outstanding balance on the revolving credit facility.

As of December 31, 2024, we had outstanding borrowings of $ 26.3 million under the Credit Agreement, comprised entirely of the term loan.

The principal of the term loan is required to be repaid in quarterly installments of $ 750,000 .

Maturities of the term loan for the next three years as of December 31, 2024, were as follows:

(In thousands)

Deferred financing fees

Net Note Payable

Current portion of note payable

Non-current portion of note payable

Our obligations under the Credit Agreement are secured by a security interest in substantially all of our and our subsidiary’s assets and are also guaranteed by our subsidiary.

As of December 31, 2024, the Credit Agreement contained a number of restrictions and covenants, including that we maintain compliance with a maximum consolidated total leverage ratio, a minimum fixed charge coverage ratio and a minimum consolidated EBITDA covenant.

As of December 31, 2024, we were in compliance with all covenants under the Credit Agreement.

The Fifth Amendment permitted the Company to make payments to repurchase shares of its common stock, subject to certain limitations.

On July 31, 2025, we entered into an Amended and Restated Credit Agreement (the “2025 Restated Credit Agreement”), which amended and restated the Credit Agreement in its entirety.

The 2025 Restated Credit Agreement, among other things, revised the applicable margin payable based on pricing levels determined by our consolidated total leverage ratio that range from 1.75 % to 2.75 % under the revolving credit facility, and revised the commitment fee to a rate per annum ranging from 0.125 % to 0.250 % for the unused portion of the revolving credit facility, also depending on our consolidated total leverage ratio.

The 2025 Restated Credit Amendment also expanded the revolving credit facility from $ 25.0 million to $ 40.0 million and extended the maturity date of the revolving credit facility from August 1, 2026, to July 31, 2028.

The 2025 Restated Credit Agreement also eliminated the minimum consolidated EBITDA financial covenant, such that the financial covenants now consist of a maximum consolidated total leverage ratio covenant and a minimum fixed charge coverage ratio covenant.

In addition, the 2025 Restated Credit Agreement revised certain negative covenants, including the restricted payment covenant, which now permits the Company to repurchase shares of its common stock and make certain other payments, as long as the Company is not in default under the 2025 Restated Credit Agreement, has a consolidated total leverage ratio of no greater than 1.75 to 1.00, and has liquidity of not less than $ 30.0 million, in each case both before and after giving effect to such stock repurchases or the making of such payments.

In connection with the entry into the 2025 Restated Credit Agreement, on July 31, 2025, we paid off the full amount outstanding under the term loan, which was $ 24.4 million (inclusive of principal and interest), using cash on hand.

The 2025 Restated Credit Agreement removes the provisions from the Credit Agreement related to a committed term loan, such that the only term loan related provisions in the 2025 Restated Credit Agreement relate to our ability to request uncommitted incremental term loan facilities and/or an increase in the amount of the revolving loans available under the 2025 Restated Credit Agreement in an amount not to exceed $ 25.0 million in the aggregate, subject to the satisfaction of certain conditions.

As of December 31, 2025, we had no outstanding borrowings under the 2025 Restated Credit Agreement.

Our obligations under the 2025 Restated Credit Agreement are secured by a security interest in substantially all of our and our subsidiary’s assets and are also guaranteed by our subsidiary.

As of December 31, 2025, the 2025 Restated Credit Agreement contained a number of restrictions and covenants, including that we maintain compliance with a maximum consolidated total leverage ratio and a minimum fixed charge coverage ratio.

As of December 31, 2025, we were in compliance with all covenants under the 2025 Restated Credit Agreement.

Commitments and Contingencies

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These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Consolidated Balance Sheets, with rent expense recognized on a straight-line basis over the term of the lease.

The remaining lease terms vary from approximately one to seven years as of December 31, 2024.

The remaining lease terms vary from approximately one to six years as of December 31, 2025.

We entered into a lease (“initial lease”) in October 2018, for approximately 80,000 square feet of office space for our new corporate headquarters in Minneapolis, Minnesota.

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2016-02, “Leases” (Topic 842) (“ASC 842”).

December 2019, we further amended the lease which extended the expiration date of the initial lease, extended the expiration date of and added approximately 4,000 square feet to the second lease, as well as added approximately 37,000 square feet of additional office space, accounted for as a separate lease (“third lease”) in accordance with ASC 842.

In December 2019, we further amended the lease which extended the expiration date of the initial lease, extended the expiration date of and added approximately 4,000 square feet to the second lease, as well as added approximately 37,000 square feet of additional office space, accounted for as a separate lease (“third lease”) in accordance with ASC 842.

The portion of the space covered under the initial lease was placed in service in September 2019.

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We also have operating lease agreements for certain computer and office equipment.

The remaining lease terms as of December 31, 2024, ranged from less than one year to approximately four years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities.

The remaining lease terms as of December 31, 2025, ranged from less than one year to approximately three years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities.

The leases provide an option to purchase the related equipment at fair market value at the end of the lease.

The leases will automatically renew as a month-to-month rental at the end of the lease if the equipment is not purchased or returned.

leases will automatically renew as a month-to-month rental at the end of the lease if the equipment is not purchased or returned.

Lease Position, Undiscounted Cash Flow and Supplemental Information

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Major Vendors

We had purchases from one vendor that accounted for 20 % of our total purchases for the year ended December 31, 2024, and purchases from one vendor that accounted for 25 % of total purchases for the year ended December 31, 2023.

We had purchases from one vendor that accounted for 13 % and 20 % of our total purchases for the years ended December 31, 2025, and 2024, respectively.

Purchase Commitment

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Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

On May 24, 2022, a stockholder derivative lawsuit was filed in the United States District Court for the District of Minnesota, purportedly on behalf of the Company against certain of our present and former officers and directors and the Company (as a nominal defendant), captioned Jack Weaver v.

Moen, et al., File No.

0:22-cv-01403-NEB-BRT (the “Weaver Lawsuit”).

The Weaver Lawsuit generally arose out of the same subject matter as a previously settled securities class action captioned Brian Mart v.

Tech., Inc., et al., File No.

0:20-cv-02074-NEB-BRT (D.

Minn.) (the “Mart Lawsuit”), which alleged, inter alia, that we and eight of our former officers and directors made materially false or misleading statements about our business, operational and compliance policies.

The Weaver Lawsuit alleged the following claims under the Exchange Act and common law:

(1) that the director defendants made materially false or misleading public statements in proxy statements in violation of Section 14(a) of the Exchange Act;

(2) that the director defendants’ stock and option awards should be rescinded under Section 29(b) of the Exchange Act;

(3) that the officer defendants’ employment contract compensation should be rescinded under Section 29(b) of the Exchange Act;

(4) that certain officer defendants are liable for contribution arising out of any liability incurred in the Mart Lawsuit, under

Sections 10(b) and 21D of the Exchange Act;

(5) that the individual defendants breached their fiduciary duties;

and (6) that the individual defendants were unjustly enriched.

The Weaver Lawsuit sought unspecified damages.

In August 2022, the matter was transferred to the United States District Court for the District of Delaware by order granting the Parties Stipulation to Transfer.

On February 10, 2023, we filed a motion to dismiss the action.

The plaintiff filed an Amended Complaint on March 3, 2023.

On March 31, 2023, we filed a motion to dismiss the Amended Complaint.

On July 31, 2023, the plaintiff filed a Joint Notice of Preliminary Settlement indicating that the parties had reached a non-binding settlement-in-principal on most of the material terms that would resolve all claims between the parties and requested that the Court temporarily stay all deadlines, hearings, and conferences while the parties continued to finalize settlement.

On June 6, 2024, the parties entered into a Stipulation of Settlement in the Weaver Lawsuit.

On June 7, 2024, the plaintiff filed an unopposed motion for preliminary approval of the settlement.

On June 27, 2024, the Court entered an order granting the motion for preliminary approval of the settlement.

The final settlement hearing occurred on August 28, 2024, and on September 4, 2024, the Court entered its order approving the settlement, including the agreed upon attorneys’ fees and expense awards to plaintiffs’ counsel and service awards to the shareholder plaintiffs.

Pursuant to the settlement, we adopted and maintain certain corporate governance reforms.

The attorneys’ fees and expense award of approximately $ 0.5 million was covered by insurance and has been paid.

The settlement does not constitute an admission of liability or wrongdoing by us or any of our current or former directors or officers.

This matter is now concluded.

On October 25, 2024, the United States District Court, District of Massachusetts (Boston) unsealed two qui tam complaints against us, and we were served with these complaints on January 14, 2025 and January 21, 2025.

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Both complaints seek damages, statutory penalties, attorneys’ fees, and costs.

On February 24, 2025, the parties (the relators under both complaints and the Company) filed a joint motion requesting that both actions be stayed until November 25, 2025, to provide time for the government to review and assess sample claims for the purpose of assessing the allegations.

On February 25, 2025, the court granted the motion and issued orders that stay both actions until November 25, 2025.

On November 21, 2025, the parties filed a joint motion to extend the stay to March 25, 2026.

That same day, the court issued an order granting the motion.

We will defend the actions as they proceed.

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On November 4, 2024, we announced that our board of directors authorized a program to repurchase shares of our common stock in the open market or in privately negotiated purchases, or both, in an aggregate amount not to exceed $ 30.0 million.

The share repurchase program became effective on October 30, 2024 and expires on October 31, 2026.

The share repurchase program became effective on October 30, 2024 and

was scheduled to expire on October 31, 2026.

Upon purchase of the shares, we reduce our common stock for the par value of the shares with the excess cost applied against additional paid-in capital.

We made share repurchases under the share repurchase program as follows, which include the market price of the shares, commissions and excise tax:

As of June 24, 2025, the Company had utilized substantially all of the repurchase authorization under the program and therefore completed the share repurchase program.

In aggregate under the program, the Company repurchased a total of 2,338,617 shares of common stock at a total cost of $ 30.0 million.

Repurchases were funded through available cash balances and ongoing business operating cash generation and could have been suspended or discontinued at any time.

Shares of stock repurchased under the program were immediately retired.

Repurchases under our share repurchase program reduce the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

On October 16, 2025, our Board of Directors authorized a new program to repurchase up to $ 25.0 million of our common stock.

Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both.

The timing and number of shares to be purchased will be based on the price of the Company's common stock, general business and market conditions and other investment considerations and factors.

This share repurchase program expires on November 3, 2027.

The program does not obligate the Company to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice.

We made repurchases under the share repurchase program in the following periods, which include the market price of the shares, commissions and excise tax:

(In thousands, except share and per share data)

Number of shares repurchased

Total share repurchased cost

Total shares repurchased cost

Average total cost per repurchased share

As of December 31, 2024 $ 26.5 million of authorized share repurchases were remaining under the share repurchase program.

The timing and amount of future repurchases will be determined based on an evaluation of market conditions and other factors.

Repurchases will be funded through available cash balances and ongoing business operating cash generation and may be suspended or discontinued at any time.

Shares of stock repurchased under the program are immediately retired.

Repurchases under our share repurchase program reduce the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

Stock-Based Compensation

Our 2016 Equity Incentive Plan (the “2016 Plan”) authorizes us to grant stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to employees, non-employee directors and certain consultants and advisors.

There were up to 4,800,000 shares of our common stock initially reserved for issuance pursuant to the 2016 Plan.

The 2016 Plan provides that the number of shares reserved and available for issuance under the 2016 Plan will automatically increase annually on January 1 of each calendar year, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the lesser of:

(a) 5 % of the number of common shares of stock outstanding as of December 31 of the immediately preceding calendar year, or (b) 2,500,000 shares;

provided, however, that our Board of Directors may determine that any annual increase be a lesser number.

In addition, all awards granted under our 2007 Omnibus Stock Plan and our 2003 Stock Option Plan that were outstanding when the 2016 Plan became effective and that are forfeited, expire, are cancelled, are settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan.

Pursuant to the automatic increase feature of the 2016 Plan , 1,180,019 shares were added as available for issuance thereunder on January 1, 2024.

Our Board of Directors exercised its prerogative to forego the automatic increase on January 1, 2025 and January 1, 2023.

On May 7, 2025, our stockholders approved the Tactile Systems Technology, Inc.

2025 Equity Incentive Plan (the “2025 Plan”), which authorizes us to grant stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to employees, non-employee directors and certain consultants and advisors.

The 2025 Plan provides for the issuance of up to 1,850,000 shares of our common stock, plus the number of shares subject to any award under the 2016 Equity Incentive Plan (the “2016 Plan”) that was outstanding on May 7, 2025 and that later expires, is cancelled or forfeited, is settled for cash or otherwise does not result in the issuance of all of the shares subject to such award.

As of December 31, 2025, 1,873,013 shares were available for future grant pursuant to the 2025 Plan.

Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated.

However, existing awards under those plans continue to vest in accordance with the original vesting schedules and will expire at the end of their original terms.

Following our stockholders’ approval of the 2025 Plan on May 7, 2025, no additional grants will be made under the 2016 Plan.

However, outstanding awards under the 2016 Plan will continue to be governed by their respective original terms.

We recorded total stock-based compensation expense of $ 8.4 million, $ 7.8 million and $ 7.5 million for the years ended December 31, 2025, 2024 and 2023, respectively.

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The total grant date fair value of options vested during the year was $ 0.2 million, $ 0.6 million and $ 1.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

At December 31, 2024, there was approximately $ 29 thousand of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 0.9 years.

At December 31, 2025, there was no unrecognized pre-tax stock option expense under our equity compensation plans.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model.

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There were no stock options granted in the years ended December 31, 2025, 2024 or 2023.

The following table sets forth the estimated fair value of our stock options granted in the year indicated, and the assumptions on which the fair value was determined:

Expected term

Expected volatility

Risk-free interest rate

Expected dividend yield

Fair value on the date of grant

Our stock option activity for the three years ended December 31, 2025, 2024 and 2023, was as follows:

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The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

Options exercisable of 386,457 at December 31, 2023, and 435,363 at December 31, 2022 had weighted average exercise prices of $ 41.53 and $ 43.83 , respectively.

Options exercisable of 386,990 at December 31, 2024, and 386,457 at December 31, 2023 had weighted average exercise prices per share of $ 41.36 and $ 41.53 , respectively.

The following summarizes additional information about our stock options:

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Vested options, end of the year

Forfeited options, during the year

Time-Based Restricted Stock Unit s

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Stock-based compensation expense included in our Consolidated Statements of Operations for time-based restricted stock units was $ 5.5 million, $ 5.9 million and $ 5.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2024, there was approximately $ 6.1

million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.8 years.

As of December 31, 2025, there was approximately $ 6.0 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.7 years.

Our time-based restricted stock unit activity for the years ended December 31, 2025, 2024 and 2023 was as follows:

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Performance-Based Restricted Stock Units

We have granted performance-based restricted stock units (“PSUs”) to certain participants under the 2016 Plan.

We have granted performance-based restricted stock units (“PSUs”) to certain participants.

These PSUs have both performance-based and time-based vesting features.

The PSUs granted in 2021 were earned if and to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2022.

The PSUs granted in 2022 will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in 2023.

The number of PSUs earned under these grants will depend on the level at which the performance targets are achieved and can range from 50 % of target if threshold performance is achieved and up to 150 % of target if maximum performance is achieved.

One-third of the earned PSUs will vest on the date the Compensation and Organization Committee certifies the number of PSUs earned, and the remaining two-thirds of the earned PSUs will vest on the first anniversary of that certification date.

All earned and vested PSUs will be settled in shares of common stock.

The PSUs granted in 2023 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in each of 2023 and 2024 (ranging from 25 % to 175 % of target), and one-third will be earned if and to the extent performance goals to be established are achieved in 2025.

The PSUs granted in 2022 were earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin were achieved in 2023.

The number of PSUs earned under these grants depended on the level at which the performance targets were achieved and could range from 50 % of target if threshold performance was achieved and up to 150 % of target if maximum performance was achieved.

One-third of the earned PSUs vested on the date the Compensation and Organization Committee certified the number of PSUs earned, and the remaining two-thirds of the earned PSUs vested on the first anniversary of that certification date.

All earned and vested PSUs were settled in shares of common stock.

All earned and vested PSUs will be settled in shares of common stock.

The PSUs granted in 2024 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in each of 2024 and 2025 (ranging from 25 % to 175 % of target), and one-third will be earned if and to the extent performance goals to be established are achieved in 2026.

The PSUs granted in 2025 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue and adjusted EBITDA margin are achieved in 2025 and revenue change and adjusted EBITDA change are achieved in each of 2026 and 2027 (in each case, ranging from 25 % to 175 % of target).

All earned and vested PSUs will be settled in shares of common stock.

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The stock-based compensation expense for the year ended December 31, 2025 reflects an expense of $ 1.1 million related to the PSUs granted in 2025, an expense of $ 0.9 million related to the PSUs granted in 2024 and an expense of $ 0.2 million related to PSUs granted in 2023.

The stock-based compensation expense for the year ended December 31, 2023 reflects an expense of $ 0.5 million related to the PSUs granted in 2023 and $ 0.4 million related to PSUs granted in 2022.

The stock-based compensation expense for the year ended December 31, 2024 reflects an expense of $ 0.5 million related to

the PSUs granted in 2024, an expense of $ 0.4 million related to PSUs granted in 2023 and an expense of $ 0.3 million related to PSUs granted in 2022.

As of December 31, 2025, there was approximately $ 2.1 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.0 years.

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This share reserve will automatically be supplemented each January 1, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the least of (a) 1 % of the shares of our common stock outstanding on the immediately preceding December 31, (b) 500,000 shares or (c) such lesser amount as our Board of Directors may determine.

Pursuant to the automatic increase feature of the ESPP, 240,780 shares were added as available for issuance thereunder on January 1, 2025 and 236,003 shares were added as available for issuance thereunder on January 1, 2024.

Our Board of Directors exercised its prerogative to forego the automatic increase on January 1, 2023.

Pursuant to the automatic increase feature of the ESPP, 224,381 shares were added as available for issuance thereunder on January 1, 2026, 240,780 shares were added as available for issuance thereunder on January 1, 2025 and 236,003 shares were added as available for issuance thereunder on January 1, 2024.

As of December 31, 2025, 1,520,743 shares were available for future issuance under the ESPP.

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Sales-type lease revenue and the associated cost of revenue for the years ended December 31, 2025, 2024 and 2023, was:

Year Ended December 31,

(In thousands)

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Year Ended December 31,

Tax expense at statutory rate

State income taxes, net of federal benefit

Executive compensation

Meals and entertainment

Employee Stock Purchase Plan

Federal business credits

Valuation allowance

Return to provision

Deferred reprice - state

Unrecognized tax benefits

Excess benefit on non-qualified stock options and RSUs

Interest and penalties

162(m) write down

Net effective rate

($ In thousands)

US Federal Statutory Tax Expense/Rate

State and Local Income Taxes, Net of Federal Benefit (1)

Tax Credits - Research & Experimentation

Change in Valuation Allowance

Nontaxable or Nondeductible Items - Meals & Entertainment

Nontaxable or Nondeductible Items - Executive Compensation

Nontaxable or Nondeductible Items - Other

Changes in Unrecognized Tax Benefits

Other Reconciling Items - Stock Based Compensation

Other Reconciling Items

Net tax expense / effective rate

(1) State taxes in California, Pennsylvania, Illinois, New York, Texas, Maryland, and Tennessee made up the majority (greater than 50 percent) of the tax effect in this line item.

A reconciliation of income taxes paid is as follows

(In thousands)

United States - Federal

United States - California

United States - Tennessee

United States - Other States

Total Income Taxes Paid

A reconciliation of unrecognized tax benefits (“UTB”) is as follows:

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These differences relate primarily to different methods used for income tax purposes including depreciation and amortization, warranty and vacation accruals, and deductions related to allowances for doubtful accounts receivable, and inventory reserves.

As of December 31, 2024, the Company had approximately $ 1 thousand of state net operating loss ("NOL") carryforwards.

A portion of the state NOL carry forward amounts have begun to expire in the current year.

As of December 31, 2025, the Company had no remaining state net operating loss ("NOL") carryforwards.

The Company is subject to income tax examinations in the U.S.

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The Company is not under exam in any jurisdictions.

The effective tax rate for the twelve months ended December 31, 2024, was an expense of 27.8 %, compared to a benefit of 80.8 % for the twelve months ended December 31, 2023.

The primary driver of the change in our effective tax rate was the fact that we did not have a release of a valuation allowance on our deferred tax assets for 2024, while in 2023 there was a release of a valuation allowance to recognize the full value of our deferred tax assets.

We recorded an income tax expense of $ 6.5 million and an income tax benefit of $ 12.7 million for the twelve months ended December 31, 2024 and 2023, respectively.

The effective tax rate for the twelve months ended December 31, 2025, was an expense of 39.1 %, compared to 27.8 % for the twelve months ended December 31, 2024.

We recorded an income tax expense of $ 12.3 million and $ 6.5 million for the twelve months ended December 31, 2025 and 2024, respectively.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.

For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest

benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

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The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

Net Income (Loss) Per Common Share

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

Net Income Per Common Share

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

(In thousands, except share and per share data)

Net income (loss)

Weighted-average shares outstanding

Weighted-average shares used to compute diluted net income (loss) per share

Net income (loss) per share - Basic

Net income (loss) per share - Diluted

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

Weighted-average shares used to compute diluted net income per share

Net income per share - Basic

Net income per share - Diluted

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

Restricted stock units

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The recognized revenue volatility estimate was based on a study of historical asset volatility for a set of comparable public companies.

The model included other assumptions including the market price of risk, which was calculated as the weighted average cost of capital

less the long-term risk-free rate.

The model included other assumptions including the market price of risk, which was calculated as the weighted average cost of capital less the long-term risk-free rate.

The earn-out liability was adjusted to fair value at each reporting date until the end of the earn-out period, which was September 30, 2023.

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Non-financial assets, such as equipment and leasehold improvements, and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired.

Subsequent Event

On February 17, 2026, the Company completed the acquisition of LymphaTech, a provider of digital 3D scanning technology for chronic swelling detection, measurement, and monitoring.

The acquisition is expected to enhance the Company’s expanding lymphedema portfolio.

The transaction included an initial cash payment of $ 6.8 million, which was paid at closing.

The acquisition agreement also provided for additional consideration contingent upon the achievement of certain milestones during periods following the acquisition date.

As of the date the financial statements were issued, the Company has not determined the probability of the milestones, and the related contingent consideration cannot be reasonably estimated.

The transaction will be accounted for as a business combination under ASC 805.

The Company is in the process of determining the preliminary purchase price allocation, including the valuation of acquired assets and contingent consideration.

The results of LymphaTech will be included in the Company’s consolidated financial statements beginning on the acquisition date.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data