What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-02 compared with 2021-05-03 · 107 added, 70 removed, 152 unchanged (54% of the section changed)

3 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.

Since the onset of COVID-19, we have remained proactive to ensure we continue to adapt to the needs of our employees, clinicians and patients.

These changes to our business include, but are not limited to:

● Initially modifying our operations with the primary focus on keeping our employees safe while continuing to serve our clinicians and patients.

As an essential business under federal guidelines, we continued to manufacture product and implemented multiple, smaller rotational shifts and other best practices to help protect the health and safety of our workforce.

More recently, however, we have migrated closer to our pre-COVID work shifts, implementing more stringent safety measures including mandatory use of face masks, social distancing and temperature checks for our employees.

For a detailed listing of the changes to our business practices since the onset of the pandemic, refer to previous reports filed with the Securities and Exchange Commission.

Continued modifications to our business include, but are not limited to:

● Incorporating remote and flexible work arrangements for employees whenever possible, including real-time, online training of our new sales representatives.

In addition, with the increase in the rollout of vaccines and evolving CDC guidance, we have begun to develop our long-term in-office and remote work strategy with the goal of launching it in the second half of 2021.

● Loosening employee travel restrictions in alignment with the opening of healthcare facilities and clinics while also continuing to maintain social distancing contact restrictions to reduce exposure.

● Continuing to collaborate with payers to modify coverage requirements to allow us to serve patients virtually.

● Utilizing a mix of employee trainers and independent healthcare practitioners to educate patients on the proper use of our solutions virtually or in-person, as required.

This is a transition from our initial response to the COVID-19 social distancing requirements and recommendations, which required we initially move to a “no contact” virtual patient training model to substantially reduce the need for in-person contact and visits to patients’ homes and clinics in order to protect the health and limit the exposure of both our trainers and patients.

● Continuing to host large virtual medical education programs, in place of formerly in-person meetings.

In addition, we are actively developing our long-term in-office and remote work strategy with the goal of launching it in the second half of 2021.

● Eliminating employee travel restrictions in alignment with the opening of healthcare facilities and clinics while also continuing to maintain social distancing contact restrictions to reduce exposure.

● Utilizing a mix of employee trainers and independent healthcare practitioners to educate patients on the proper use of our solutions virtually or in-person.

● Continuing to host large virtual medical education programs, while also beginning to schedule smaller in-person meetings.

● Supporting clinicians and patients by using rigorous infection control practices when in-person visits are required.

18 unchanged sentences

We derive the vast majority of our revenue from our Flexitouch system.

Sales and rentals of our Flexitouch system represented 88% of our revenue in each of the three months ended March 31, 2021 and 2020.

Sales and rentals of our Flexitouch system represented 88% of our revenue in each of the six months ended June 30, 2021 and 2020.

We introduced our Entre system in the United States in February 2013.

The Entre system is sold or rented to patients who need a simple pump or who do not yet qualify for insurance reimbursement for an advanced compression device such as our Flexitouch system.

For each of the three months ended March 31, 2021 and 2020, sales and rentals of our Entre system represented 12% of our revenue.

For each of the six months ended June 30, 2021 and 2020, sales and rentals of our Entre system represented 12% of our revenue.

In October 2018, we licensed, from Sun Scientific, Inc., the intellectual property rights related to the Airwear Gradient Compression Wrap, or the Airwear wrap, in the United States and Canada, for use in all medical applications, including but not limited to swelling/edema and ulcers (including lymphedema and chronic venous insufficiency conditions), but excluding the use of the intellectual property in the field of prophylaxis for deep vein thrombosis.

8 unchanged sentences

Our field commercial team consists of our direct sales force and a team of Field Support Specialists.

Our collective field commercial team has grown to over 295 employees as of March 31, 2021, compared to 285 employees as of December 31, 2020.

Our collective field commercial team has grown to over 300 employees as of June 30, 2021, compared to 285 employees as of December 31, 2020.

This model allows us to directly approach patients and clinicians, whereby we disintermediate the traditional durable medical equipment channel, allowing us to capture both the manufacturer and distributor margins.

In the first quarter of 2021, we began to utilize a mix of employee trainers and independent healthcare practitioners to educate patients on the proper use of our solutions virtually or in-person, as required.

As it relates to the impact of COVID-19 on our first quarter commercial processes, we continued to see a certain number of healthcare facilities and clinics with restricted access to their clinicians, reduced patient consultations and treatments, or temporary closures due to the pandemic.

We also continued to see some of the restrictions loosen, in line with the applicable governmental regulations.

As most of our clinician customers practice outside of a hospital, we can interact with clinicians and patients on a virtual basis, using video conferencing and other non-direct means.

As it relates to the impact of COVID-19 on our commercial processes in the first half of 2021, we continued to see restrictions loosen, in line with the applicable governmental regulations.

As a result, we continue to expand our interactions with clinicians and patients on an in-person basis, where possible, while continuing to engage in virtual interactions as requested.

We expect these virtual interactions with clinicians and patients to continue into the future until the pandemic subsides, and perhaps as a best practice in the future.

To that end, we plan to continue to work towards expanding our commercial organization throughout the first half of 2021 by adding to our direct sales force.

To that end, we plan to continue to work towards expanding our commercial organization throughout 2021 by adding to our overall commercial team.

We invest substantial resources in our reimbursement function to improve operational efficiencies and enhance individual payer expertise, while continuing our strategic focus of payer development.

3 unchanged sentences

We have seen increased flexibility in coverage criteria with select payers in which they now allow the use of virtual patient interactions in place of the previously required in-person interactions.

However, as these circumstances are ever-changing, the extent to which these changes will remain in place and the impact on our business in the future are not determinable at this time.

We also have a clinical team, consisting of a scientific advisory board, in-house therapists and nurses, and a medical director (part-time), that serves as a resource to clinicians and patients and guides the development of clinical evidence in support of our products.

However, as these circumstances are

ever-changing, the extent to which these changes will remain in place and the impact on our business in the future are not determinable at this time.

We also have a clinical team, consisting of a scientific advisory board, in-house therapists and nurses, and a Chief Medical Officer (part-time), that serves as a resource to clinicians and patients and guides the development of clinical evidence in support of our products.

Most clinical studies require observation and interaction with clinicians and patients to monitor results and progress.

Given the impact of COVID-19, patient recruitment for our clinical studies involving our products and clinical outcomes had previously been suspended in 2020.

However, in the first quarter of 2021, approximately half of our clinical trial sites had resumed research activities as the healthcare provider staff are being reallocated from COVID-19 response teams or furloughs back to research activities.

However, in the first half of 2021, approximately half of our clinical trial sites had resumed research activities as the healthcare provider staff are being reallocated from COVID-19 response teams or furloughs back to research activities.

Study visits and new patient enrollments are gradually resuming, albeit more slowly than targeted enrollment rates.

4 unchanged sentences

However, we cannot assure you that our supply chain will not be materially impacted in the future.

For the three months ended March 31, 2021, we generated revenue of $42.8 million and had a net loss of $2.3 million, compared to revenue of $43.7 million and a net loss of $1.3 million for the three months ended March 31, 2020.

Our primary sources of capital to date have been from operating income, private placements of our capital stock and capital raised in our initial public offering, which closed on August 2, 2016.

For the three months ended June 30, 2021, we generated revenue of $51.1 million and had net income of $1.3 million, compared to revenue of $35.1 million and a net loss of $13.9 million for the three months ended June 30, 2020.

For the six months ended June 30, 2021, we generated revenue of $93.8 million and had a net loss of $1.0 million, compared to revenue of $78.8 million and a net loss of $15.2 million for the six months ended June 30, 2020.

Our primary sources of capital since inception have been from operating income, private placements of our capital stock and capital raised in our initial public offering, which closed on August 2, 2016.

We operate in one segment for financial reporting purposes.

Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

Comparison of the Three and Six Months Ended June 30, 2021 and 2020

The following table presents our results of operations for the periods indicated:

20 unchanged sentences

Loss before income taxes

Income tax benefit

Revenue decreased $0.9 million, or 2%, to $42.8 million in the three months ended March 31, 2021, compared to $43.7 million in the three months ended March 31, 2020.

The decrease in total revenue was attributable to a decrease of $1.1 million, or 3%, in sales and rentals of the Flexitouch system, offset partially by an increase of $0.2 million, or 5%, in sales and rentals of the Entre system in the quarter ended March 31, 2021.

First quarter revenue continued to be negatively impacted by COVID-19, primarily from social distancing requirements and safety protocols imposed within clinics.

The decrease in first quarter revenue was partially offset by the continued expansion of our field commercial team, effective virtual educational events and an increase in the number of Medicare patients served.

Revenue from the Veterans Administration represented 14% and 16% of total revenue in the three months ended March 31, 2021 and 2020, respectively.

Revenue from Medicare represented 20% and 15% of total revenue in the three months ended March 31, 2021 and 2020, respectively.

The following table summarizes our revenue by product for the three months ended March 31, 2021 and 2020, both in dollars and percentage of total revenue:

Income tax (benefit) expense

Net income (loss)

Six Months Ended

(In thousands)

Condensed Consolidated Statement

of Operations Data:

Sales revenue

Rental revenue

Total revenue

Cost of revenue

Cost of sales revenue

Cost of rental revenue

Total cost of revenue

Gross profit - sales revenue

Gross profit - rental revenue

Operating expenses

Sales and marketing

Research and development

Reimbursement, general and administrative

Total operating expenses

Loss from operations

Other (expense) income

Loss before income taxes

Income tax (benefit) expense

Revenue increased $15.9 million, or 45%, to $51.1 million in the three months ended June 30, 2021, compared to $35.1 million in the three months ended June 30, 2020.

The increase in total revenue was attributable to an increase of $14.0 million, or 45%, in sales and rentals of the Flexitouch system and an increase of $2.0 million, or 49%, in sales and rentals of the Entre system in the quarter ended June 30, 2021.

Second quarter 2021 revenue benefited from the initial stages of recovery from the COVID-19 pandemic, with a portion of healthcare facilities and clinics relaxing restrictions and increasing patient throughput.

The increase in second quarter revenue was further driven by improvements in salesforce productivity and effective virtual education events yielding an expanded prescriber base and an increase in Medicare patients served.

Revenue increased $15.0 million, or 19%, to $93.8 million in the six months ended June 30, 2021, compared to $78.8 million in the six months ended June 30, 2020.

The increase was primarily attributable to an increase of $12.8 million, or 18%, in sales and rentals of our Flexitouch system and an increase of $2.2 million, or 24%, in sales and rentals of the Entre system for the six months ended June 30, 2021.

Revenue for the six months ended June 30, 2021, benefited from the initial stages of recovery from the COVID-19 pandemic, with a portion of healthcare facilities and clinics relaxing restrictions and increasing patient throughput, as well as an expanded prescriber base.

Revenue from the Veterans Administration represented 14% and 12% of total revenue in the three months ended June 30, 2021 and 2020, respectively.

Revenue from the Veterans Administration represented 14% of total revenue in each of the six months ended June 30, 2021 and 2020.

Revenue from Medicare represented 16% and 15% of total revenue in the three months ended June 30, 2021 and 2020, respectively.

Revenue from Medicare represented 18% and 15% of total revenue in the six months ended June 30, 2021 and 2020, respectively.

The following table summarizes our revenue by product for the three and six months ended June 30, 2021 and 2020, both in dollars and percentage of total revenue:

Three Months Ended

6 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.

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

Six Months Ended

(In thousands)

Flexitouch system

Other products (1)

Percentage of total revenues

Flexitouch system

Other products (1)

(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 six months ended June 30, 2021 and 2020.

Our business is affected by seasonality.

4 unchanged sentences

Cost of Revenue and Gross Margin

Cost of revenue decreased $0.1 million, or 0.5%, to $12.5 million in the three months ended March 31, 2021, compared to $12.6 million in the three months ended March 31, 2020.

The decrease in cost of revenue was primarily attributable to a decrease in the number of Flexitouch systems sold and rented, slightly offset by an increase in Entre system sales and rentals.

Total gross margin was 71% of revenue in each of the three months ended March 31, 2021 and 2020.

Cost of revenue increased $4.6 million, or 46%, to $14.9 million in the three months ended June 30, 2021, compared to $10.2 million in the three months ended June 30, 2020.

Cost of revenue increased $4.6 million, or 20%, to $27.4 million in the six months ended June 30, 2021, compared to $22.8 million in the six months ended June 30, 2020.

The increase in cost of revenue in both periods was primarily attributable to an increase in the number of Flexitouch and Entre systems sold and rented.

The total gross margin rate was 71% of sales in each of the three and six months ended June 30, 2021 and June 30, 2020.

Sales and Marketing Expenses

Sales and marketing expenses decreased $4.2 million, or 18%, to $18.8 million in the three months ended March 31, 2021, compared to $23.0 million in the three months ended March 31, 2020.

The decrease was primarily attributable to a $1.9 million decrease from reduced sales meetings, tradeshows and professional services, a $1.3 million reduction of our external patient training expense as a result of pivoting to more virtual patient trainings, $0.8 million of reduced travel and entertainment expense due to decreased travel activities and a $0.2 million reduction in personnel-related compensation expense.

Sales and marketing expenses increased $3.5 million, or 20%, to $20.9 million in the three months ended June 30, 2021, compared to $17.4 million in the three months ended June 30, 2020.

The increase was primarily attributable to a $2.1 million increase in personnel-related compensation expense as a result of the increased headcount in the commercial team, a $0.7 million increase in our external patient training expense as a result of increased in-person trainings and a $0.7 million increase in travel and entertainment expense due to eased restrictions on travel .

Sales and marketing expenses decreased $0.6 million, or 2%, to $39.7 million in the six months ended June 30, 2021, compared to $40.4 million in the six months ended June 30, 2020.

The decrease was primarily attributable to a $2.0 million decrease from reduced sales meetings, tradeshows and professional services and a $0.6 reduction in external patient training expense, partially offset by a $2.0 million increase in personnel-related compensation expense as a result of the increased headcount in the commercial team.

Research and Development Expenses

Research and development (“R&D”) expenses decreased $0.4 million, or 25%, to $1.3 million in the three months ended March 31, 2021, compared to $1.7 million in the three months ended March 31, 2020, which decrease was primarily attributable to comparably lower clinical studies activity as a result of COVID-19.

Research and development (“R&D”) expenses increased $0.1 million, or 9%, to $1.2 million in the three months ended June 30, 2021, compared to $1.1 million in the three months ended June 30, 2020, which was primarily attributable to an increase in clinical studies activity.

R&D expenses decreased $0.3 million, or 11%, to $2.5 million in the six months ended June 30, 2021, compared to $2.8 million in the six months ended June 30, 2020, which was primarily attributable to a $0.2 million decrease in professional services and a $0.1 million decrease in personnel-related compensation expense.

Reimbursement, General and Administrative Expenses

Reimbursement, general and administrative expenses increased $3.4 million, or 31%, to $14.3 million in the three months ended March 31, 2021, compared to $10.9 million in the three months ended March 31, 2020.

This increase was primarily attributable to a $2.4 million increase in occupancy costs, depreciation expense, legal and professional fees, and a $1.0 million increase in personnel-related compensation expense as a result of increased headcount in our reimbursement operations, payer relations and corporate functions.

Reimbursement, general and administrative expenses decreased $0.2 million, or 2%, to $14.1 million in the three months ended June 30, 2021, compared to $14.4 million in the three months ended June 30, 2020.

This decrease was primarily attributable to a $3.6 million impairment charge related to the write-off of our Airwear wrap-related long-lived assets recorded in the second quarter of 2020, partially offset by a $1.9 million increase in personnel-related compensation expense as a result of increased headcount in our reimbursement operations, payer relations and corporate functions and a combined $1.4 million increase in occupancy costs, depreciation expense and legal fees, in each case in the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Reimbursement, general and administrative expenses increased $3.2 million, or 13%, to $28.4 million in the six months ended June 30, 2021, compared to $25.2 million in the six months ended June 30, 2020.

The increase was primarily attributable to a combined $3.5 million increase in occupancy costs, depreciation expense, legal and professional fees and a $3.3 million increase in personnel-related compensation expense as a result of increased headcount in our reimbursement operations, payer relations and corporate functions, partially offset by a $3.6 million impairment charge related to the write-off of our Airwear wrap-related long-lived assets recorded in the second quarter of 2020.

Other Income (Expense), Net

Other income (expense), net was an expense of $10 thousand and income of $0.3 million for the three months ended March 31, 2021 and 2020, respectively.

Other income (expense), net was an expense of $24,000 and income of $36,000 for the three months ended June 30, 2021 and 2020, respectively, and was an expense of $34,000 and income of $0.3 million for the six months ended June 30, 2021 and 2020, respectively.

Other income (expense) was primarily impacted by interest income realized on marketable securities and the gain and loss on cost method investments .

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

The primary driver of this change was related to the net operating loss carryback claim refund recognized in the first quarter of 2020, which did not impact the benefit in the current year’s comparable period, slightly offset by an increase in the tax deductibility of meals and entertainment related expenses.

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

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

The primary driver of these changes was a tax benefit related to a research and development credit recognized in the second quarter of 2021.

Liquidity and Capital Resources

At March 31, 2021, our principal sources of liquidity were cash and cash equivalents of $ 46.9 million and net accounts receivable of $ 40.0 million, as well as the borrowing capacity available under our 2018 Credit Agreement.

At June 30, 2021, our principal sources of liquidity were cash and cash equivalents of $ 49.0 million and net accounts receivable of $ 42.6 million, as well as the borrowing capacity available under our Restated Credit Agreement.

The following table summarizes our cash flows for the periods indicated:

Three Months Ended

Six Months Ended

(In thousands)

3 unchanged sentences

Financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Operating Activities

Net cash used in operating activities during the three months ended March 31, 2021, was $0.8 million, resulting from a net loss of $2.3 million which was offset by non-cash net income (loss) adjustments of $1.4 million and a net decrease in operating assets and liabilities of $0.1 million.

Net cash used in operating activities during the six months ended June 30, 2021, was $1.9 million, resulting from a net loss of $1.0 million and a net decrease in operating assets and liabilities of $3.7 million, which was partially offset by non-cash net income (loss) adjustments of $2.8 million.

The non-cash net income (loss) adjustments consisted primarily of $5.1 million of stock-based compensation expense, $3.6 million in deferred taxes and $1.3 million of depreciation and amortization expense.

The uses of cash related to changes in operating assets primarily consisted of increases in inventories of $3.5 million and net investment in leases of $0.5 million, partially offset by decreases in accounts receivable of $2.5 million and prepaid expenses and other assets of $0.4 million.

The changes in operating liabilities consisted of an increase in accounts payable of $5.0 million, partially offset by decreases in accrued payroll and related taxes of $3.0 million and accrued expenses of $0.8 million.

Net cash provided by operating activities during the three months ended March 31, 2020, was $0.9 million, resulting from a net loss of $1.3 million and non-cash net income (loss) adjustments of $4.4 million, which were offset by a net increase in operating assets and liabilities of $2.2 million.

The non-cash net income adjustments consisted primarily of $2.7 million of stock-based compensation expense, a $0.9 million decrease in deferred taxes and $0.7 million of depreciation and amortization expense.

The uses of cash related to changes in operating assets primarily consisted of increases in the income taxes receivable of $4.2 million, inventories of $3.3 million and net investment in leases of $0.7 million, partially offset by a decrease in accounts receivable of $1.7 million.

The changes in operating liabilities consisted of increases in accounts payable of $4.7 million and accrued expenses of $1.0 million, partially offset by a decrease in accrued payroll and related taxes of $1.8 million.

The uses of cash related to changes in operating assets primarily consisted of increases in inventories of $2.6 million, accounts receivable of $1.2 million, net investment in leases of $1.0 million and income taxes of $0.8 million, partially offset by a decrease in prepaid expenses and other assets of $0.5 million.

The changes in operating liabilities consisted of increases in accrued expenses of $1.7 million and accounts payable of $0.9 million, partially offset by a decrease in accrued payroll and related taxes of $1.2 million.

Net cash used in operating activities during the six months ended June 30, 2020, was $8.0 million, resulting from a net loss of $15.2 million and net decrease in operating assets and liabilities of $7.7 million, which were offset by non-cash net income adjustments of $14.8 million.

The non-cash net income adjustments consisted primarily of $5.1 million of stock-based compensation expense, a $4.3 million decrease in deferred taxes, a $4.0 million impairment loss charge related to the write-off of our Airwear wrap product line, and $1.4 million of depreciation and amortization expense.

The uses of cash related to changes in operating assets primarily consisted of increases in inventories of $5.9 million, income taxes of $1.6 million, net investment in leases of $0.5 million and prepaid expenses and other assets of $0.3 million, partially offset by a decrease in accounts receivable of $1.2 million.

The changes in operating liabilities consisted of increases in accounts payable of $1.6 million and accrued expenses of $1.0 million, offset by a decrease in accrued payroll and related taxes of $3.1 million.

Investing Activities

Net cash used in investing activities during the three months ended March 31, 2021, was $0.3 million consisting of purchases of property and equipment, and patent costs.

Net cash provided by investing activities during the three months ended March 31, 2020, was $9.6 million, primarily consisting of $10.0 million in proceeds from maturities of marketable securities partially offset by $0.4 million in purchases of property and equipment.

Net cash used in investing activities during the six months ended June 30, 2021, was $0.7 million, consisting of purchases of property and equipment, and patent costs.

Net cash provided by investing activities during the six months ended June 30, 2020, was $15.7 million, primarily consisting of $16.5 million in proceeds from maturities of marketable securities, partially offset by $0.8 million in purchases of property and equipment and patent costs.

Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2021, was $0.2 million, consisting of $1.3 million in proceeds from exercise of common stock options, partially offset by $1.1 million in taxes paid for the net share settlement of performance and restricted stock units.

Net cash used in financing activities during the three months ended March 31, 2020, was $1.0 million, consisting of $1.2 million in taxes paid for the net share settlement of performance and restricted stock units, partially offset by $0.2 million in proceeds from exercise of common stock options.

Net cash provided by financing activities during the six months ended June 30, 2021, was $3.8 million, consisting of $4.9 million in proceeds from exercise of common stock options and the issuance of common stock under the ESPP, partially offset by $1.1 million in taxes paid for the net share settlement of performance and restricted stock units.

Net cash provided by financing activities during the six months ended June 30, 2020, was $0.8 million, consisting of $2.4 million in proceeds from exercise of common stock options and the issuance of common stock under the ESPP, partially offset by $1.6 million in taxes paid for the net share settlement of restricted stock units.

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”).

On April 30, 2021, we entered into an Amended and 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”), which expires on April 30, 2024.

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 amends and restates in its entirety the 2018 Credit Agreement.

As of March 31, 2021, and the date on which we filed this report, we did not have any outstanding borrowings under either 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, subject to satisfaction of certain conditions.

As of June 30, 2021, and the date on which we filed this report, we did not 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 March 31, 2021, we were in compliance with all financial covenants under the 2018 Credit Agreement.

For additional information on the 2018 Credit Agreement, see Note 9 – “Credit Agreement” to the condensed consolidated financial statements in this report .

For additional information on the Restated Credit Agreement, see Note 16 – “Subsequent Event” to the condensed consolidated financial statements in this report .

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

Adequacy of Capital Resources

9 unchanged sentences

Although the impact of the COVID-19 pandemic is difficult to predict, we believe our cash, cash equivalents and cash flows from operations together with the Restated Credit Agreement will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.

Inflation and changing prices did not have a material effect on our business during the three months ended March 31, 2021, and we do not expect that inflation or changing prices will materially affect our business for at least the next twelve months.

Inflation and changing prices did not have a material effect on our business during the six months ended June 30, 2021, and we do not expect that inflation or changing prices will materially affect our business for at least the next twelve months.

In August 2017, we filed a shelf registration statement on Form S-3 with the SEC.

1 unchanged sentence

The shelf registration statement also registered for resale from time to time up to 5,703,534 shares of our common stock held by the selling stockholders named therein.

In September 2017, certain of the selling stockholders completed a secondary offering of 3,795,000 shares of our common stock at a public offering price of $33.00 per share.

September 2017, certain of the selling stockholders completed a secondary offering of 3,795,000 shares of our common stock at a public offering price of $33.00 per share.

We did not receive any proceeds from the sale of the shares by the selling stockholders.

2 unchanged sentences

The CARES Act is a tax-and-spending package intended to provide economic relief to address the impact of the COVID-19 pandemic.

Act includes several tax provisions that, among other things, allow businesses to carry back net operating losses (“NOLs”) arising in 2018, 2019, and 2020 to the prior five tax years.

The CARES Act includes several tax provisions that, among other things, allow businesses to carry back net operating losses (“NOLs”) arising in 2018, 2019, and 2020 to the prior five tax years.

In the third quarter of 2020, we collected $2.9 million related to the carry back of our NOLs arising from these prior tax years.

20 unchanged sentences

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 2. Management’s Discussion and Analysis