What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-02 compared with 2021-05-03 · 144 added, 121 removed, 419 unchanged (39% of the section changed)

28 unchanged sentences

Accrued warranty reserve, non-current

Income taxes payable, non-current

Operating lease liabilities, non-current

4 unchanged sentences

Preferred stock, $ 0.001 par value, 50,000,000 shares authorized;

none issued and outstanding as of March 31, 2021 and December 31,

none issued and outstanding as of June 30, 2021 and December 31,

Common stock, $ 0.001 par value, 300,000,000 shares authorized;

19,639,113 shares issued and outstanding as of March 31, 2021;

19,782,295 shares issued and outstanding as of June 30, 2021;

19,492,718 shares issued and outstanding as of December 31, 2020

7 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except share and per share data)

16 unchanged sentences

Loss before income taxes

Income tax benefit

Net loss per common share

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

Income tax (benefit) expense

Net income (loss)

Net income (loss) per common share

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

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

Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended

Six Months Ended

(In thousands)

Other comprehensive income:

Unrealized gain on marketable securities

Income tax related to items of other comprehensive income

Total other comprehensive income

Comprehensive loss

Net income (loss)

Other comprehensive income (loss):

Unrealized loss on marketable securities

Income tax related to items of other comprehensive loss

Total other comprehensive income (loss)

Comprehensive income (loss)

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

4 unchanged sentences

(Loss) Income

Balances, March 31, 2021

Stock-based compensation

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

Common shares issued for employee stock purchase plan

Comprehensive income for the period

Balances, June 30, 2021

Balances, December 31, 2020

2 unchanged sentences

Taxes paid for net share settlement of performance and restricted stock units

Common shares issued for employee stock purchase plan

Comprehensive loss for the period

Balances, June 30, 2021

Balances, March 31, 2020

Stock-based compensation

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

Taxes paid for net share settlement of performance and restricted stock units

Common shares issued for employee stock purchase plan

Comprehensive loss for the period

Balances, June 30, 2020

Balances, December 31, 2019

2 unchanged sentences

Taxes paid for net share settlement of performance and restricted stock units

Common shares issued for employee stock purchase plan

Comprehensive loss for the period

Balances, March 31, 2020

Balances, June 30, 2020

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

Cash flows from operating activities

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

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

2 unchanged sentences

Stock-based compensation expense

Gain on other investments and maturities of marketable securities

Impairment losses

Changes in assets and liabilities:

7 unchanged sentences

Accrued expenses and other liabilities

Net cash (used in) provided by operating activities

Net cash used in operating activities

Cash flows from investing activities

2 unchanged sentences

Intangible assets costs

Net (used in) provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities

1 unchanged sentence

Proceeds from exercise of common stock options

Net cash provided by (used in) financing activities

Net (decrease) increase in cash and cash equivalents

Proceeds from the issuance of common stock from the employee stock purchase plan

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents – beginning of period

27 unchanged sentences

In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.

The results for the three months ended March 31, 2021, are not necessarily indicative of results to be expected for the year ending December 31, 2021, or for any other interim period or for any future year.

The results for the six months ended June 30, 2021, are not necessarily indicative of results to be expected for the year ending December 31, 2021, or for any other interim period or for any future year.

The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

6 unchanged sentences

The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic.

We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols.

There are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it.

We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols, particularly during 2020 and the first quarter of 2021.

While we saw some level of recovery in the second quarter of 2021, there are no reliable estimates of how long the pandemic will last, whether any recovery will be sustained or will reverse course, the severity of any resurgence of COVID-19 or variant strains of the virus, the effectiveness of vaccines and attitudes towards receiving them, or what ultimate effects the pandemic will have.

For that reason, we are unable to reasonably estimate the long-term impact of the pandemic on our business at this time.

5 unchanged sentences

Actual results could differ from those estimates.

Comprehensive Loss

Comprehensive loss reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Our comprehensive loss represents net loss adjusted for unrealized gains and losses on available-for-sale marketable securities and the related taxes .

Comprehensive Income (Loss)

Comprehensive income (loss) reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Our comprehensive income (loss) represents net income (loss) adjusted for unrealized gains and losses on available-for-sale marketable securities and the related taxes .

Summary of Significant Accounting Policies

Significant Accounting Policies

There were no material changes in our significant accounting policies during the three months ended March 31, 2021.

There were no material changes in our significant accounting policies during the six months ended June 30, 2021.

See Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, for information regarding our significant accounting policies.

5 unchanged sentences

Marketable Securities

There were no investments in marketable securities at March 31, 2021 and December 31, 2020.

There were no net pre-tax unrealized gains for marketable securities at March 31, 2021.

There were no sales of marketable securities during the three months ended March 31, 2021.

There were no marketable securities in an unrealized loss position at March 31, 2021 and December 31, 2020.

There were no investments in marketable securities at June 30, 2021 and December 31, 2020.

There were no net pre-tax unrealized gains for marketable securities at June 30, 2021.

There were no sales of marketable securities during the six months ended June 30, 2021.

There were no marketable securities in an unrealized loss position at June 30, 2021 and December 31, 2020.

Inventories consisted of the following:

(In thousands)

At March 31, 2021

At June 30, 2021

At December 31, 2020

4 unchanged sentences

Our patents and other intangible assets are summarized as follows:

At March 31, 2021

At June 30, 2021

(In thousands)

11 unchanged sentences

Total intangible assets

Amortization expense was $ 0.1 million for each of the three months ended March 31, 2021 and 2020.

Amortization expense was $ 0.1 million for each of the three months ended June 30, 2021 and 2020, and $ 0.1 million and $ 0.3 million for the six months ended June 30, 2021 and 2020, respectively.

Future amortization expenses are expected as follows:

(In thousands)

2021 (April 1 - December 31)

2021 (July 1 - December 31)

Accrued Expenses

1 unchanged sentence

(In thousands)

At March 31, 2021

At June 30, 2021

At December 31, 2020

1 unchanged sentence

In-transit inventory

Travel and business

Sales and use tax

3 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

7 unchanged sentences

Credit Agreement

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

The 2018 Credit Agreement provides for a $ 10.0 million revolving credit facility.

Subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the 2018 Credit Agreement and/or add one or more term loan facilities in an amount not to exceed an incremental $ 25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the 2018 Credit Agreement (including under the revolving credit facility) does not exceed $ 35.0 million.

As of March 31, 2021, and the date on which we filed this report, we did no t have any outstanding borrowings under the 2018 Credit Agreement.

Our obligations under the 2018 Credit Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets and are also guaranteed by our subsidiaries.

The 2018 Credit Agreement contains a number of restrictions and covenants, including that we maintain compliance with a maximum leverage ratio and a minimum liquidity covenant.

As of March 31, 2021, we were in compliance with all financial covenants under the 2018 Credit Agreement.

On April 30, 2021, we entered into an Amended and Restated Credit Agreement (the “Restated Credit Agreement”) with Wells Fargo Bank, National Association.

The Restated Credit Agreement amends and

restates in its entirety the 2018 Credit Agreement.

For additional information on the Restated Credit Agreement, see Note 16 – “Subsequent Event”.

On April 30, 2021, we entered into an Amended and Restated Credit Agreement (the “Restated Credit Agreement”) with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent, which expires on April 30, 2024.

The Restated Credit Agreement amended and restated in its entirety the 2018 Credit Agreement.

The Restated Credit Agreement provides for a $ 25 million revolving credit facility, with the ability to increase the amount of the revolving loans available and/or add one or more term loan facilities not to exceed an incremental $ 30 million in the aggregate, subject to satisfaction of certain conditions.

As of June 30, 2021, and the date on which we filed this report, we did no t have any outstanding borrowings under the Restated Credit Agreement.

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

The Restated Credit Agreement contains a number of restrictions and covenants, including that we maintain compliance with a maximum leverage ratio and a minimum liquidity covenant.

As of June 30, 2021, we were in compliance with all financial covenants under the Restated Credit Agreement.

Commitments and Contingencies

13 unchanged sentences

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

The remaining lease terms vary from approximately one to ten years as of March 31, 2021.

The remaining lease terms vary from approximately one to ten years as of June 30, 2021.

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.

8 unchanged sentences

Subsequent to the initial term, the lease becomes a month-to-month, cancelable lease.

As of March 31, 2021, we had approximately 50 vehicles with agreements within the initial, noncancelable lease term that are recorded as ROU operating lease assets and operating lease liabilities.

As of June 30, 2021, we had approximately 55 vehicles with agreements within the initial, noncancelable lease term that are recorded as ROU operating lease assets and operating lease liabilities.

In addition to monthly rental fees specific to the vehicle, there are fixed monthly nonlease components that have been included in the ROU operating lease assets and operating lease liabilities.

2 unchanged sentences

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

The remaining lease terms as of March 31, 2021, ranged from less than one year to approximately five years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities.

The remaining lease terms as of June 30, 2021, ranged from less than one year to approximately five 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.

3 unchanged sentences

(In thousands)

At March 31, 2021

At June 30, 2021

At December 31, 2020

4 unchanged sentences

Weighted average discount rate

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental cash flow information for our operating leases:

3 unchanged sentences

(In thousands)

2021 (April 1 - December 31)

2021 (July 1 - December 31)

Total minimum lease payments

3 unchanged sentences

Non-current obligations under operating lease liabilities

As of March 31, 2021, we have additional lease commitments of $ 7.1 million related to amendments to existing building leases that have not yet commenced.

As of June 30, 2021, we have additional lease commitments of $ 7.6 million related to amendments to existing building leases that have not yet commenced.

As the lessee we are involved in providing guidance to the lessor for related improvements, however these improvements are managed and owned by the lessor.

Operating lease costs were $ 0.8 million and $ 0.7 million for the three months ended March 31, 2021 and 2020, respectively.

Operating lease costs were $ 0.8 million and $ 0.7 million for the three months ended June 30, 2021 and 2020, respectively.

Operating lease costs were $ 1.7 million and $ 1.4 million for the six months ended June 30, 2021 and 2020, respectively.

Major Vendors

We had purchases from two vendors that accounted for 33 % of our total purchases for the three months ended March 31, 2021, and from two vendors that accounted for 32 % of our total purchases for the three months ended March 31, 2020.

We had purchases from two vendors that accounted for 33 % of our total purchases for each of the three and six months ended June 30, 2021.

We had purchases from two vendors that accounted for 33 % and 32 % of our total purchases for the three and six months ended June 30, 2020, respectively.

Purchase Commitments

We issued purchase orders prior to March 31, 2021, totaling $ 19.8 million for goods that we expect to receive within the next year.

We issued purchase orders prior to June 30, 2021, totaling $ 19.8 million for goods that we expect to receive within the next year.

Retirement Plan

We maintain a 401(k) retirement plan for our employees in which eligible employees can contribute a percentage of their pre-tax compensation.

We recorded an expense related to our discretionary contr ibutions to the 401(k) plan of $0.3 million and $ 0.1 million for the three months ended March 31, 2021 and 2020, respectively.

We recorded an expense related to our discretionary contributions to the 401(k) plan of $ 0.3 million and $ 0.1 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.6 million and $ 0.1 million for the six months ended June 30, 2021 and 2020, respectively.

Legal Proceedings

30 unchanged sentences

Section 20(a) of the Exchange Act because each defendant is a controlling person.

Defendants’ response to the Amended Complaint is due on June 18, 2021.

We intend to move to dismiss the action.

On June 18, 2021, we and the individual defendants filed a motion to dismiss the Amended Complaint.

The motion has not been decided yet.

Stockholders' Equity

7 unchanged sentences

Pursuant to the automatic increase feature of the 2016 Plan, 972,591 and 952,697 shares were added as available for issuance thereunder on January 1, 2021 and 2020, respectively.

As of March 31, 2021, 6,345,847 shares were available for future grant pursuant to the 2016 Plan.

As of June 30, 2021, 6,358,084 shares were available for future grant pursuant to the 2016 Plan.

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

2 unchanged sentences

In conjunction with the acceptance of the written offer, our CEO received both restricted stock units and stock option awards under our 2016 Plan during the third fiscal quarter of 2020 and the stock options have a seven year term.

A portion of the awards will vest on June 30, 2021, with the remaining portion of the awards vesting over a period of three years from the date of grant.

Further, all of the stock options included in these awards required that our stock price exceeded $ 40.15 for 20 consecutive trading days during the term of the option in order to vest, which was met in the first quarter of 2021 .

The fair value of stock options subject to the market condition was estimated, at the date of grant, using the Monte Carlo Simulation model.

We recorded stock-based compensation expense of $ 2.5 million and $ 2.7 million for the three months ended March 31, 2021 and 2020, respectively.

A portion of the awards vested on June 30, 2021, with the remaining portion of the awards vesting over a period of three years from the date of grant.

Further, the stock options were valued at the date of grant using the Monte Carlo Simulation model due to a market condition that required that our stock price exceed $ 40.15 for 20 consecutive trading days during the term of the option in order to vest.

This condition was satisfied in the first quarter of 2021 .

We recorded stock-based compensation expense of $ 2.7 million and $ 2.4 million for the three months ended June 30, 2021 and 2020, respectively, and $ 5.1 million for each of the six months ended June 30, 2021 and 2020.

This expense was allocated as follows:

Three Months Ended

Six Months Ended

(In thousands)

6 unchanged sentences

Stock options issued to participants other than non-employees typically vest over three or four years and typically have a contractual term of seven or ten years .

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ 1.2 million and $ 0.9 million for the three months ended March 31, 2021 and 2020, respectively.

At March 31, 2021, there was approximately $ 8.8 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.1 years.

Our stock option activity for the three months ended March 31, 2021, was as follows:

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ 1.1 million and $ 1.0 million for the three months ended June 30, 2021 and 2020, respectively, and $ 2.3 million and $ 1.8 million for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021, there was approximately $ 7.3 million

of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.0 years.

Our stock option activity for the six months ended June 30, 2021, was as follows:

Exercise Price

4 unchanged sentences

Cancelled/Expired

Balance at March 31, 2021

Options exercisable at March 31, 2021

Balance at June 30, 2021

Options exercisable at June 30, 2021

(1) The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant.

1 unchanged sentence

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 529,219 as of March 31, 2020, had a weighted-average exercise price of $ 17.88 per share.

Options exercisable of 438,283 as of June 30, 2020, had a weighted-average exercise price of $ 21.86 per share.

Time-Based Restricted Stock Units

1 unchanged sentence

Time-based restricted stock units granted under the 2016 Plan vest over one to three years .

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $ 1.3 million and $ 1.2 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was approximately $ 7.9 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 2.1 years.

Our time-based restricted stock unit activity for the three months ended March 31, 2021, was as follows:

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $ 1.2 million and $ 1.4 million for the three months ended June 30, 2021 and 2020, respectively, and $ 2.5 million and $ 2.6 million for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021, there was approximately $ 7.5 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 2.0 years.

Our time-based restricted stock unit activity for the six months ended June 30, 2021, was as follows:

Average Grant

2 unchanged sentences

Balance at December 31, 2020

Balance at March 31, 2021

Deferred and unissued at March 31, 2021 (2)

Balance at June 30, 2021

Deferred and unissued at June 30, 2021 (2)

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

(2) For the three months ended March 31, 2021, there were no restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments.

As of March 31, 2021, there were 6,469 outstanding restricted stock units that had been previously granted to non-employee directors in lieu of their quarterly cash retainer payments.

(2) For the six months ended June 30, 2021, there were no restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments.

As of June 30, 2021, there were 6,469 outstanding restricted stock units that had been previously granted to non-employee directors in lieu of their quarterly cash retainer payments.

Performance-Based Restricted Stock Units

1 unchanged sentence

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

The PSUs granted in

2018 were earned to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2019.

The PSUs granted in 2018 were earned to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2019.

The PSUs granted in 2019 would have been earned to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2020, but none were so earned.

4 unchanged sentences

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

Stock-based compensation expense recognized for PSUs was a benefit of $ 0.3 million and an expense of $ 0.4 million for the three months ended March 31, 2021 and 2020, respectively.

The stock-based compensation benefit for the three months ended March 31, 2021 reflected a $ 0.5 million benefit due to a change in the estimated payout associated with PSUs granted in 2020 being below the minimum performance target threshold level, as defined, partially offset by an expense of $ 0.2 million related to the PSUs granted in 2018 and 2021.

As of March 31, 2021, there was approximately $ 1.8 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.9 years.

Our performance-based restricted stock unit activity for the three months ended March 31, 2021, was as follows:

Stock-based compensation expense recognized for PSUs was an expense of $ 0.2 million and a benefit of $ 0.3 million for the three months ended June 30, 2021 and 2020, respectively, and a benefit of $ 0.1 million and an expense of $ 0.1 million for the six months ended June 30, 2021 and 2020, respectively.

The stock-based compensation benefit for the six months ended June 30, 2021 reflected a $ 0.5 million benefit due to a change in the estimated payout associated with PSUs granted in 2020 being below the minimum performance target threshold level, as defined, partially offset by an expense of $ 0.4 million related to the PSUs granted in 2018 and 2021.

At June 30, 2021, there was approximately $ 1.7 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.7 years.

Our performance-based restricted stock unit activity for the six months ended June 30, 2021, was as follows:

Average Grant

2 unchanged sentences

Balance at December 31, 2020

Balance at March 31, 2021

Balance at June 30, 2021

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

6 unchanged sentences

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, 194,518 and 190,539 shares were added as available for issuance thereunder on January 1, 2021 and 2020, respectively.

As of March 31, 2021, 1,782,422 shares were available for future issuance under the ESPP.

We recognized stock-based compensation expense associated with the ESPP of $ 0.3 million and $ 0.2 million for the three months ended March 31, 2021 and 2020, respectively.

Pursuant to the automatic increase feature of the ESPP, 194,518 and

190,539 shares were added as available for issuance thereunder on January 1, 2021 and 2020, respectively.

As of June 30, 2021, 1,740,328 shares were available for future issuance under the ESPP.

We recognized stock-based compensation expense associated with the ESPP of $ 0.2 million and $ 0.3 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.4 million and $ 0.6 million for the six months ended June 30, 2021 and 2020, respectively.

We derive our revenue from the sale and rental of our compression products to our customers in the United States.

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

5 unchanged sentences

(1) The “other products” line primarily includes revenue from our Entre system.

The Actitouch system and the Airwear wrap contributed immaterial amounts of revenue for each of the three months ended March 31, 2021 and 2020.

Rental revenue for the three months ended March 31, 2021 and 2020, was primarily from private insurers.

Our revenue from third-party payers, inclusive of sales and rental revenue, for the three months ended March 31, 2021 and 2020, are summarized in the following table:

The Actitouch system and the Airwear wrap contributed immaterial amounts of revenue for each of the three and six months ended June 30, 2021 and 2020.

Our revenue from third-party payers, inclusive of sales and rental revenue, for the three and six months ended June 30, 2021 and 2020, are summarized in the following table:

Three Months Ended

Six Months Ended

(In thousands)

11 unchanged sentences

While the contract is with the patient, in certain circumstances, the third party payer elects an initial rental period with an option to extend.

We assess the likelihood of extending the lease at the onset of the lease to determine if the option is reasonably certain to be exercised.

We assess the likelihood of extending the lease at the onset of the lease to determine if the option is reasonably

certain to be exercised.

As the lease is short-term in nature, we anticipate collection of substantially all of the net investment within the first year of the lease agreement.

Completion of these payments represents the fair market value of the equipment, and as such, interest income is not applicable.

Sales-type lease revenue and the associated cost of revenue for the three months ended March 31, 2021 and 2020, was:

Three Months Ended March 31,

Rental revenue for the three and six months ended June 30, 2021 and 2020, was primarily from private insurers.

Sales-type lease revenue and the associated cost of revenue for the three and six months ended June 30, 2021 and 2020, was:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

5 unchanged sentences

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

The effective tax rate for the three months ended March 31, 2021 was a benefit of 44.7 % , compared to a benefit of 68.8 % for the three months ended March 31, 2020.

The primary drivers of the change in our effective tax rate is attributable to a change in the deductibility of business meals to 100 % in 2021 from 50 % in 2020.

We also recorded additional tax benefit in the first quarter of 2020 related to a tax refund for a net operating loss carryback claim.

We recorded an income tax benefit of $ 1.8 million and a benefit of $ 2.9 million for the three months ended March 31, 2021 and 2020, respectively.

The effective tax rate for the three months ended June 30, 2021, was a benefit of 1,405 % , compared to an expense of 75 % for the three months ended June 30, 2020.

The primary driver of the change in our effective tax rate is attributable to recording a benefit in the three months ended June 30, 2021, to recognize a tax credit for a research and development credit study conducted for tax years 2017-2020.

We recorded an income tax benefit of $ 1.4 million and an expense of $ 5.9 million for the three months ended June 30, 2021 and 2020, respectively.

The effective tax rate for the six months ended June 30, 2021, was a benefit of 77 % , compared to an expense of 25 % for the six months ended June 30, 2020.

The primary driver of the change in our effective tax rate is attributable to recording a benefit in the six months ended June 30, 2021, to recognize a tax credit for a research and development credit study conducted for tax years 2017-2020.

We recorded an income tax benefit of $ 3.2 million and an expense of $ 3.0 million for the six months ended June 30, 2021 and 2020, respectively.

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

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

We are not currently under examination in any jurisdiction.

As of June 30, 2021, tax contingencies related to federal and state credits recorded within the Condensed Consolidated Balance Sheets were $ 0.5 million.

Changes in tax laws, regulations, administrative practices, principles, and interpretations may impact our tax contingencies.

The timing of the resolution of income tax controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued.

We are currently under examination by the New York Department of Taxation and Finance for tax years 2017, 2018, and 2019.

The examination may lead to proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods.

In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense on our statement of operations.

Net Loss Per Share

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

Net Income (Loss) Per Share

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

Three Months Ended

Six Months Ended

(In thousands, except share and per share data)

Net income (loss)

Weighted-average shares outstanding

Dilutive effect of stock-based awards

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

Net loss per share - Basic

Net loss per share - Diluted

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

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 share for the periods presented because including them would have been anti-dilutive:

Three Months Ended

Six Months Ended

Restricted stock units

9 unchanged sentences

The lowest priority is given to unobservable inputs (Level 3).

The following provides information regarding fair value measurements for our cash equivalents as of March 31, 2021, and December 31, 2020, according to the three-level fair value hierarchy:

At March 31, 2021

The following provides information regarding fair value measurements for our cash equivalents as of June 30, 2021, and December 31, 2020, according to the three-level fair value hierarchy:

At June 30, 2021

Quoted Prices

7 unchanged sentences

Money market mutual funds

During the three months ended March 31, 2021, there were no transfers within the three-level hierarchy.

During the three and six months ended June 30, 2021, there were no transfers within the three-level hierarchy.

A significant transfer is recognized when the inputs used to value a security have been changed, which merits a transfer between the disclosed levels of the valuation hierarchy.

3 unchanged sentences

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

Subsequent Event

On April 30, 2021, we entered into the Restated Credit Agreement with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent.

The Restated Credit Agreement amends and restates in its entirety the 2018 Credit Agreement.

The Restated Credit Agreement provides for a $ 25 million revolving credit facility.

The revolving credit facility matures on April 30, 2024.

Subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Restated Credit Agreement and/or add one or more term loan facilities in an amount not to exceed $ 30 million in the aggregate, such that the total aggregate principal amount of loans available under the Restated Credit Agreement (including under the revolving credit facility) does not exceed $ 55 million.

Amounts drawn under the revolving credit facility will 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) LIBOR for an interest period of one month plus 1 % (the “Base Rate”) plus an applicable margin or (b) LIBOR plus the applicable margin.

The applicable margin is 0.65 % to 1.40 % on loans bearing interest at the Base Rate and 1.65 % to 2.40 % on loans bearing interest at LIBOR, in each case depending on our consolidated total leverage ratio.

Undrawn portions of the revolving credit facility are subject to an unused line fee at a rate per annum from 0.300 % to 0.375 % , depending on our consolidated total leverage ratio.

Our obligations under the Restated Credit Agreement are secured by a security interest in substantially all of our assets and those of our subsidiaries and will also be guaranteed by our subsidiaries.

The Restated Credit Agreement limits our ability to make capital expenditures during a fiscal year in excess of the amounts set forth in the Restated Credit Agreement, and requires that we (i) not permit, as of the last day of each fiscal quarter, our consolidated total leverage ratio to exceed 3.00 to 1.00 and (ii) maintain minimum cash and cash equivalents, measured on the last day of each fiscal quarter, of not less than $ 5 million.

The Restated Credit Agreement also contains certain other restrictions and covenants, which, among other things, restrict our ability to acquire or merge with another entity, dispose of our assets, make investments, loans or guarantees, incur additional indebtedness, create liens or other encumbrances, or pay dividends or make other distributions.

Amounts due under the Restated Credit Agreement may be accelerated upon an Event of Default (as defined in the Restated Credit Agreement), such as breach of a representation, covenant or agreement of ours, defaults with respect to certain of our other material indebtedness or the occurrence of bankruptcy if not otherwise waived or cured.

We may use the proceeds from advances under the revolving credit facility (i) to finance capital expenditures, (ii) to pay fees, commissions and expenses in connection with the Restated Credit Agreement and (iii) for working capital and general corporate purposes.

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-Q

Item 1. Financial Statements