What changed in this filing

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Item 1A. Risk Factors

2022-02-23 compared with 2021-02-23 · 120 added, 107 removed, 900 unchanged (20% of the section changed)

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The COVID-19 pandemic has adversely affected, and we expect that it will continue to adversely affect, our business, financial condition and results of operations.

The COVID-19 pandemic, and efforts taken to address the pandemic, have negatively impacted the global economy and our business, and are expected to continue to have negative effects.

The pandemic has caused us to modify many of our business practices, but we cannot assure you that those modifications will be successful in mitigating the negative impacts of COVID-19.

As described elsewhere in this report, as a result of the COVID-19 pandemic, a number of healthcare facilities and clinics have restricted access to their clinicians, reduced patient consultations and treatments, or closed temporarily due to the pandemic.

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.

Further, due to the impact of COVID-19, patient recruitment for our clinical studies involving our products and clinical outcomes has been suspended.

Further, the extent to which the COVID-19 pandemic will impact our business, financial condition and results of operations in the future will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on our clinician customers and their patients, our suppliers and our payers, and the remedial actions and stimulus measures adopted by governmental authorities, and to what extent normal economic and operating conditions can resume.

While we saw some level of recovery in the second quarter of 2021, the second half of 2021 was negatively impacted by the prolonged recovery from COVID-19 and increased variant cases during the period, which extended and expanded restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment.

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.

Further, the extent to which the COVID-19 pandemic, including any resurgence or variant strains of the virus, will impact our business, financial condition and results of operations in the future will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on our clinician customers and their patients, our suppliers and our payers, the remedial actions, any vaccine mandates and stimulus measures adopted by governmental authorities, and to what extent normal economic and operating conditions can resume.

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any related economic recession or depression that has occurred or may occur in the future.

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● limitations on the ability of our workforce to perform their duties effectively;

● difficulties recruiting and retaining qualified employees, in part as a result of our vaccine policy;

● disruptions in the timely delivery of our products to patients;

● difficulties complying with the covenants and/or restrictions contained in our debt agreements;

● increased risks of phishing, ransomware and other cybersecurity attacks;

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Our long-term growth depends on awareness and adoption of our products.

A primary growth strategy is to establish our products as the standard of care for the treatment of lymphedema and chronic venous insufficiency.

A primary growth strategy is to establish our products as the standard of care for the treatment of chronic diseases.

In order to achieve this growth strategy, we must:

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● demonstrate consistent coverage and reimbursement for our solutions by private payers, Medicare, the Veterans Administration and certain Medicaid programs.

Clinicians may not adopt our solutions as the standard of care for lymphedema and chronic venous insufficiency or may not prescribe our products for a number of reasons, including:

Clinicians may not adopt our solutions as the standard of care for lymphedema, chronic venous insufficiency and bronchiectasis or may not prescribe our products for a number of reasons, including:

● our inability to educate a sufficient number of clinicians on these diseases or our products;

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If our direct sales force fails to adequately promote, market and sell our products, our sales may suffer.

In order to generate future sales growth, we will need to expand the size and geographic scope of our direct sales organization.

Accordingly, our future success will depend largely on our ability to continue to hire, train, retain and motivate skilled sales personnel with significant technical knowledge of lymphedema and chronic venous insufficiency.

Because the competition for their services is high, we cannot be certain we will be able to hire and retain additional personnel on favorable or commercially reasonable terms, if at all.

Failure to hire or retain qualified sales personnel would prevent us from building awareness of our solutions, expanding our business and generating additional sales.

If we are unable to expand our sales and marketing capabilities,

we may not be able to effectively commercialize our products, which could have an adverse impact on our business.

Our direct sales force has recently experienced increased turnover and difficulty in recruiting qualified replacements.

We cannot assure you that this will not continue or that we will be able to reduce turnover in our direct sales force or recruit and retain quality candidates for our direct sales force.

Our future success will depend largely on our ability to hire, train, retain and motivate skilled sales personnel with significant technical

knowledge of lymphedema and chronic venous insufficiency.

Failure to hire or retain qualified sales personnel would prevent us from building awareness of our solutions, expanding our business and maintaining or generating additional sales.

If we are unable to maintain or expand our sales and marketing capabilities, we may not be able to effectively commercialize our products, which could have an adverse impact on our business.

Physicians and payers may require additional clinical studies prior to prescribing our products or to providing or maintaining coverage and reimbursement for our products.

Any subsequent clinical studies that are conducted and published may not be positive or consistent with our existing data, which would adversely affect the rate of adoption of our products.

Our success depends in large part on the medical and third-party payer community's acceptance of our products as being useful in treating patients with lymphedema or chronic venous insufficiency.

Our success depends in large part on the medical and third-party payer community's acceptance of our products as being useful in treating patients with lymphedema, chronic venous insufficiency or bronchiectasis.

While the results of our studies collectively indicate a favorable safety and efficacy profile, the study designs and results may not be viewed as compelling to physicians and insurers.

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We utilize third-party, single-source suppliers for some components and materials used in our products, and the loss of any of these suppliers could have an adverse impact on our business.

We rely on third-party manufacturers and suppliers to supply all components and materials used in our Flexitouch and Entre systems.

We rely on third-party manufacturers and suppliers to supply all components and materials used in our Flexitouch, Entre and AffloVest systems.

Our ability to supply our products commercially depends, in part, on our ability to obtain components and materials in accordance with our specifications and with regulatory requirements and in sufficient quantities to meet demand for our products.

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These NCDs and LCDs may be subject to review and revision from time to time, which revisions may not be favorable for coverage of our products.

For example, an LCD released in December 2015 added restrictive criteria that impacts Medicare coverage of our Flexitouch system and our Entre system for certain patients.

Additional LCDs, or changes in LCDs for our products, could have adverse effects on our business.

Additional NCDs or LCDs, or changes in NCDs or LCDs for our products, could have adverse effects on our business.

Further, we believe that a reduction or elimination of coverage or reimbursement of our products by Medicare would likely cause some commercial third-party payers to implement similar reductions in their coverage or reimbursement of our products.

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The resulting trade war could have a significant adverse effect on world trade and the world economy.

To the extent that trade tariffs and other restrictions imposed by the United States increase the price of, or limit the amount of, the raw materials and products we import into the United States,

the costs of our raw materials may be adversely affected and the demand from our customers for products and services may be diminished, which could adversely affect our revenue and profitability.

To the extent that trade tariffs and other restrictions imposed by the United States increase the price of, or limit the amount of, the raw materials and products we import into the United States, the costs of our raw materials may be adversely affected and the demand from our customers for products and

services may be diminished, which could adversely affect our revenue and profitability.

In addition, our margins could be significantly impacted.

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The medical device industry is highly competitive.

Our success depends, in part, upon our ability to maintain a competitive position in the development of technologies and solutions for the at-home treatment of lymphedema and chronic venous insufficiency or for market adjacencies.

Our success depends, in part, upon our ability to maintain a competitive position in the development of technologies and solutions for the at-home treatment of lymphedema, chronic venous insufficiency and bronchiectasis or for market adjacencies.

Any product we develop will have to compete for market acceptance and market share.

We face significant competition in the United States, and we expect the intensity of competition will increase over time.

Our primary competitors are Bio Compression Systems, Inc.

and Lympha Press USA.

Our primary competitors are Bio Compression Systems, Inc., Lympha Press USA, Hill-Rom, Philips Medical and Electromed.

Other competitors include Airos Medical, Inc.

and NormaTec Industries.

If we expand internationally, we expect that Arjo AB would become a competitor, in addition to other potential international competitors.

Many of the companies developing or marketing competing products enjoy several competitive advantages, including:

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To the extent that the prevalence of high deductible insurance plans and higher copay and coinsurance plans continue to grow in the private payer market, the seasonal variations in our revenue could become even more pronounced.

Further, seasonality trends may be significantly different than historical trends as a result of the COVID-19 pandemic and related impacts.

Further, seasonality trends have been, and may continue to be, significantly different than historical trends as a result of the COVID-19 pandemic and related impacts.

Other factors that may cause fluctuation in our quarterly results or variations from our forecasts include:

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Physicians and other clinicians, who are responsible for prescribing our products for patients, are expected to create and maintain the medical records that form the basis for the claims we submit to Medicare and other insurers.

Any failure by physicians and other clinicians to properly document the medical records for patients using our products could invalidate claims, impair our ability to collect submitted claims and subject us to overpayment liabilities, False Claims Act liabilities and other penalties including exclusion from the Medicare, Medicaid or private insurance programs.

Any failure to properly document the medical records for patients using our products could invalidate claims, impair our ability to collect submitted claims and subject us to overpayment liabilities, False Claims Act liabilities and other penalties including exclusion from the Medicare, Medicaid or private insurance programs.

Our payer relations group is responsible for verifying and managing patient claims.

This group works with physicians and other clinicians to educate physicians and other clinicians on their record keeping responsibilities.

From time to time our payer relations group identifies situations where the physician documentation could be questioned by Medicare or other insurers, and revises its procedures to strengthen our compliance systems based on our experience with Medicare contractors, Medicaid, insurers, physicians and other clinicians.

If our procedures are not sufficient to detect deficiencies in the medical records of patients or such procedures are not updated in a timely manner before claims are submitted to Medicare or other insurers, or if the Medicare program or other insurer disagrees with the way physicians and other clinicians document the medical necessity support for prescribing our products, we could face potential liabilities for submitting claims based on inadequate records, even though those records are prepared and maintained by physicians and other clinicians.

From time to time our payer relations group identifies situations where the documentation could be questioned by Medicare or other insurers, and revises its procedures to strengthen our compliance systems based on our experience with Medicare contractors, Medicaid, insurers, physicians and other clinicians.

If our procedures are not sufficient to detect deficiencies in the medical records of patients or such procedures are not updated in a timely manner before claims are submitted to Medicare or other insurers, or if the Medicare program or other insurer disagrees with the way the medical necessity support for prescribing our products has been documented, we could face potential liabilities for submitting claims based on inadequate records.

The size of the market for our products is an estimate, and may be smaller than we believe.

Our estimate of the total addressable market for our products is based on a number of internal and third-party estimates.

In addition, our internal estimates are based in large part on current trends in diagnosing lymphedema and chronic venous insufficiency.

While we believe these factors have historically provided and may continue to provide us with effective tools in estimating the total market for lymphedema, chronic venous insufficiency and our products, these estimates may not be correct and the conditions supporting our estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.

In addition, our internal estimates are based in large part on current trends in diagnosing lymphedema, chronic venous insufficiency and bronchiectasis.

While we believe these factors have historically provided and may continue to provide us with effective tools in estimating the total market for lymphedema, chronic venous insufficiency, bronchiectasis and our products, these estimates may not be correct and the conditions supporting our estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.

As a result, our estimates of the total addressable market for our products may prove to be incorrect.

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Successful growth is also dependent upon our ability to implement appropriate financial and management controls, systems and procedures.

In order to manage our operations and growth, we will need to continue to improve our operational and management controls, reporting and information technology systems

and financial internal control procedures.

In order to manage our operations and growth, we will need to continue to improve our operational and management controls, reporting and information technology systems and financial internal control procedures.

If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and there could be an adverse impact on our business.

We may experience a disruption of our business activities due to senior executive transitions.

Effective June 8, 2020, Daniel L.

Reuvers became our President and Chief Executive Officer and a member of the Board of Directors, succeeding our long-time Chief Executive Officer Gerald R.

Recently hired executives may view the business differently than prior members of management, and over time may make changes to our strategic focus, operations, business plans, existing personnel and their responsibilities.

We can give no assurances that we will be able to properly manage any such shift in focus, or that any changes to our business would ultimately prove successful.

In addition, effective September 30, 2020, our former Chief Operating Officer, Robert J.

Folkes, left the Company.

Leadership transitions and management changes can be inherently difficult to manage and may cause uncertainty or a disruption to our business or may increase the likelihood of turnover in key officers and employees.

Our success depends in part on having a successful leadership team.

If we cannot effectively manage leadership transitions and management changes, it could make it more difficult to successfully operate our business and pursue our business goals.

We can give no assurances that we will be able to retain the services of any of our current executives or other key employees.

If we do not succeed in attracting well-qualified employees, retaining and motivating existing employees or integrating new executives and employees, our business could be materially and adversely affected.

Our ability to maintain our competitive position depends on our ability to attract, integrate and retain key executives and highly qualified personnel.

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Changes in reimbursement coding could impair our ability to receive reimbursement for our products.

Our Flexitouch Plus system controller is reimbursed under HCPCS code E0652, and our Entre system controller is reimbursed under HCPCS code E0651.

Garments that cover various parts of the body are used with these systems and billed using HCPCS codes E0667, E0668 and E0669, other than our head and neck garments, which do not currently have billing codes assigned.

Our Flexitouch Plus system controller is reimbursed under HCPCS code E0652, our Entre system controller is reimbursed under HCPCS code E0651 and our AffloVest device is reimbursed under HCPCS code E0483.

Garments that cover various parts of the body are used with these systems and billed using HCPCS codes E0667, E0668, E0656 and E0669, other than our head and neck garments, which do not currently have billing codes assigned.

HCPCS is a standardized system used by all U.S.

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The facilities may be harmed or rendered inoperable by natural or man-made disasters (such as tornadoes, flooding, fire and power outages), vulnerabilities in our technology or cyber-attacks against our information systems (such as ransomware), which may render it difficult or impossible for us to perform our research, development, manufacturing and commercialization activities for some period of time.

The inability to perform those activities, combined with our limited inventory of reserve raw materials and finished product, may result in the inability to continue manufacturing our products during such periods and the loss of customers or harm to our reputation.

The inability to perform those activities, combined with our limited inventory of reserve raw materials and finished product, may

result in the inability to continue manufacturing our products during such periods and the loss of customers or harm to our reputation.

Our insurance for damage to our property and the disruption of our business may not be sufficient to cover all of our potential losses, and this insurance may not continue to be available to us on acceptable terms, or at all.

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In the event of a natural disaster, including a major earthquake, blizzard or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, we may be unable to continue our operations for a period of time in the affected area, which could have an adverse effect on our future operating results.

We may pursue acquisitions and our potential inability to successfully integrate newly acquired companies or businesses could adversely affect our financial results.

Our potential inability to successfully integrate newly acquired companies or businesses could adversely affect our financial results.

In September 2021, we acquired the assets of the AffloVest respiratory therapy business (the “AffloVest Acquisition”).

We may pursue acquisitions of other companies or their businesses in the future.

If we complete acquisitions, we face many risks commonly encountered with growth through acquisitions.

In the AffloVest Acquisition and in any other acquisitions we may complete, we face many risks commonly encountered with growth through acquisitions.

These risks include:

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To the extent we do not successfully avoid or overcome the risks or problems related to any acquisitions, our results of operations and financial condition could be adversely affected.

Future acquisitions also could impact our financial position and capital needs, and could cause substantial fluctuations in our quarterly and yearly results of operations.

Future acquisitions also could impact our financial position and capital needs, and could cause substantial fluctuations

in our quarterly and yearly results of operations.

Acquisitions could include significant goodwill and intangible assets, which may result in future impairment charges that would reduce our stated earnings.

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In addition, as part of the payment processing process, we transmit our patients' and clinicians' credit and debit card information to our third-party payment processor.

We may in the future become subject to lawsuits or other proceedings for purportedly fraudulent transactions arising out of the actual or alleged theft of our patients' credit or debit card information if the security of our third-party credit card payment processor is breached.

We may in the future become

subject to lawsuits or other proceedings for purportedly fraudulent transactions arising out of the actual or alleged theft of our patients' credit or debit card information if the security of our third-party credit card payment processor is breached.

We and our third-party credit card payment processor are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply.

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The increased number of Medicare contractors, with their focus on recovering overpayments and identifying fraud, creates increased risk to providers like us that submit claims to federal government programs.

The Office of Inspector General and the Department of Justice also initiate their own investigations into possible violations of applicable laws and regulations.

Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including debarment, suspension or exclusion from Medicare, Medicaid and other government reimbursement programs, any of which would have a material adverse effect on our business.

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The premarket approval application process is much more demanding than the 510(k) premarket notification process and requires the payment of significant user fees.

A premarket approval application must be supported by valid scientific evidence, which typically requires extensive data to demonstrate the reasonable assurance of safety and

effectiveness of the device.

A premarket approval application must be supported by valid scientific evidence, which typically requires extensive data to demonstrate the reasonable assurance of safety and effectiveness of the device.

The approval process involves FDA review of information, including but not limited to, technical, pre-clinical (bench and/or animal), clinical trials, manufacturing and labeling.

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The disadvantage is that it may require more data than a 510(k) and most often will include human clinical data.

The FDA is increasingly moving devices with slightly different proposed indication statements or different technological features off the 510(k) path and on to the de novo path resulting in more time and expense for the company.

The FDA is increasingly moving devices with slightly different proposed indication

statements or different technological features off the 510(k) path and on to the de novo path resulting in more time and expense for the company.

Both the 510(k) and premarket approval processes can be expensive and lengthy and require the payment of significant fees, unless an exemption applies.

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In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis.

For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA published new guidance on the 510(k) regulatory pathway in 2014, which alters the manner in which the 510(k) regulatory pathway is administered and interpreted.

For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA published new guidance on the 510(k) regulatory pathway in 2014, which altered the manner in which the 510(k) regulatory pathway is administered and interpreted.

The FDA intends these reform actions to improve the efficiency and transparency of the clearance process, as well as bolster patient safety.

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Such suits, known as qui tam actions, have increased significantly in the healthcare industry in recent years.

We were recently served with a qui tam action, which alleges that we

violated the Federal Anti-Kickback Statute and the Federal False Claims Act.

See Item 3., “Legal Proceedings,” for additional information regarding this action.

Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer's products from reimbursement under government programs, criminal fines and imprisonment.

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In addition, the ACA provides that the government may assert that a claim, including items or services resulting from a violation of the Federal Anti-Kickback Statute, constitutes a false or fraudulent claim for purposes of the false claims statutes.

Because of the breadth of these laws and the narrowness of the safe harbors and exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Because of the breadth of these laws and the narrowness of the safe harbors and exceptions, some of our business activities could be subject to challenge under one or more of such laws.

Such a challenge, regardless of the outcome, could have a material adverse effect on our business, business relationships, reputation, financial condition and results of operations.

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Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (and up to an aggregate of $1.0 million per year for "knowing failures to report"), for all payments, transfers of value or ownership or investment interests not reported in an annual submission.

Manufacturers are required to collect data and are required to submit their data reports to CMS for each calendar year by the 90th day of the subsequent calendar year.

Manufacturers are required to collect data and are

required to submit their data reports to CMS for each calendar year by the 90th day of the subsequent calendar year.

Certain states mandate implementation of compliance programs and/or the tracking and reporting of gifts, compensation and other remuneration to physicians or other healthcare professionals.

The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company many violate one or more of the requirements.

The Federal Civil Monetary Penalties Law prohibits, in part, the offering or giving of remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary's selection of a particular supplier of items or services reimbursable by a Federal or state governmental program.

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If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment, restructuring, or restricting of our operations.

Any penalties, damages, fines, curtailment or restructuring or our operations could harm our ability to operate our business and our financial results.

Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from operation of our business.

Any penalties, damages, fines, curtailment or restructuring of our operations could harm our ability to operate our business and our financial results.

Responding to any action or threat of action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from operation of our business.

Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove costly.

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To continue operating our business under our direct-to-patient and -provider model, we must maintain our Durable Medical Equipment certification from the Accreditation Commission for Health Care.

In May 2008, we became a Durable, Medical Equipment, Prosthetics, Orthotics, and Supplies accredited supplier by the

Accreditation Commission for Health Care.

In May 2008, we became a Durable, Medical Equipment, Prosthetics, Orthotics, and Supplies accredited supplier by the Accreditation Commission for Health Care.

This accreditation status must be renewed every three years through a recredentialing process that includes an on-site review.

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The products we currently market have been cleared by the FDA for specific treatments.

We train our marketing and direct sales force to not promote our products for uses outside of the FDA-cleared indications for use, known as "off-label uses."

We train our employees in appropriate and lawful promotion of our products, within our approved indications and to be truthful and not misleading.

We cannot, however, prevent a physician from using our products off-label, when in the physician's independent professional medical judgment, he or she deems it appropriate.

does not restrict or regulate a physician's choice of treatment.

The FDA does not restrict or regulate a physician's choice of treatment.

There may be increased risk of injury to patients if physicians use our products off-label.

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Claims for durable medical equipment, prosthetics, orthotics and supplies, including claims under the DME Competitive Bidding Program, are reduced by 2% based upon whether the date-of-service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.

This 2% reduction based on the sequestration was suspended in 2020 due to the public health emergency, and Congress recently extended the sequestration moratorium through March 31, 2021, but the 2% reduction will go back into effect at some point.

This 2% reduction based on the sequestration was suspended in 2020 due to the public health emergency, and Congress extended the sequestration moratorium through March 31, 2021.

From April 1, 2021 through June 30, 2021, the reduction went back into effect at a 1% reduction level, and beginning July 1, 2021, the reduction returned to a 2% reduction level.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures.

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Additional state and federal health care reform measures that may be adopted in the future could have a material adverse effect on our industry generally and on our customers.

Any changes in, or uncertainty with respect to future reimbursement rates, or changes in hospital admission rates could impact our customers' demand for our products and services, which in turn could impact our ability to successfully commercialize our products, or could limit or eliminate our spending on certain development projects.

Any changes in, or uncertainty with respect to future

reimbursement rates, or changes in hospital admission rates could impact our customers' demand for our products and services, which in turn could impact our ability to successfully commercialize our products, or could limit or eliminate our spending on certain development projects.

These changes could adversely affect our business and results of operations.

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● state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payer, including commercial insurers;

state laws that require device companies to comply with the industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise

restrict payments that may be made to healthcare providers;

state laws that require device companies to comply with the industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers;

state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures;

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Federal or state governments may impose additional restrictions or adopt interpretations of existing laws that could have a material adverse effect on us.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under such laws, it is possible that some of our business activities, including certain sales and marketing practices and financial arrangements, including the provision of stock options as partial compensation for consulting services, with physicians, some of whom use or purchase our products, and other customers, could be subject to challenge under one or more of such laws.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from governmental healthcare programs, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely impact our business.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under such laws, some of our business activities, including certain sales and marketing practices and financial arrangements, including the provision of stock options as partial compensation for consulting services, with physicians, some of whom use or purchase our products, and other customers, could be subject to challenge under one or more of such laws.

earnings, and the curtailment or restructuring of our operations, any of which could adversely impact our business.

Failure to comply with regulations affecting the transmission, security and privacy of health information could result in significant penalties.

Numerous federal and state laws and regulations, including HIPAA and HITECH, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or more broadly personally identifiable information.

Numerous federal and state laws and regulations, including HIPAA and the HITECH Act, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or more broadly personally identifiable information.

HIPAA and the HITECH Act require us to comply with standards for the use and disclosure of health information within our company and with third parties.

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Failure to comply with privacy and data security laws and regulations could subject us to substantial penalties and our business, operations and financial condition could be adversely affected.

In addition to the HIPAA and HITECH regulations described above, a number of U.S.

In addition to the HIPAA and HITECH Act regulations described above, a number of U.S.

states have also enacted data privacy and data security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of sensitive personal information, such as social security numbers, medical and financial information and other personal information.

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We may be subject to product liability claims if our products cause, or merely appear to have caused, patient injury or death.

In addition, an injury that is

caused by the activities of our suppliers, such as those who provide us with components and materials, may be the basis for a claim against us.

In addition, an injury that is caused by the activities of our suppliers, such as those who provide us with components and materials, may be the basis for a claim against us.

Product liability claims may be brought against us by patients, clinicians or others selling or otherwise coming into contact with our products, among others.

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These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm

to our reputation.

It is not always possible to identify and deter employee and other third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.

Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.

It is not always possible to identify and deter employee and other third-party misconduct, and the steps we take to detect, prevent and remedy any such activity may not protect us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.

If any such actions are threatened or instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate.

We may be unable to obtain or maintain international regulatory registrations or approvals for our current or future products and indications, which could adversely impact our business.

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In certain countries we intend to rely upon third-party distributors to obtain all required regulatory registrations and approvals, and these distributors may be unable to obtain or maintain such registrations or approvals.

Our distributors in these countries may also incur significant costs in attempting to obtain and in maintaining foreign regulatory approvals or registrations, which could increase the difficulty of attracting and retaining qualified distributors.

Our distributors in these countries may also incur significant costs in

attempting to obtain and in maintaining foreign regulatory approvals or registrations, which could increase the difficulty of attracting and retaining qualified distributors.

If these distributors experience delays in receiving necessary registrations or approvals to market our products outside the United States, or if they fail to receive those registrations or approvals, we may be unable to market our products or enhancements in certain international markets effectively, or at all.

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Although we cannot predict the ultimate impact of any such new laws and regulations, they will likely result in additional costs, and may require us to change how we manufacture our products, which could have an adverse impact on our business.

Rules, regulations and policies concerning mandatory COVID-19 vaccination could materially and adversely affect our business, financial condition and results of operations.

While proposed federal orders and standards related to mandatory vaccination and/or testing for employees and contractors have been stayed, we cannot predict the eventual outcome or impact on us, our suppliers, our contractors or our customers.

Additional vaccine and testing mandates may be announced in jurisdictions in which we operate or by healthcare facilities and clinics.

While it is not currently possible to predict with any certainty the exact impact new regulations would have on us, our suppliers, our contractors and our customers, the implementation of such government mandated vaccination or testing mandates may impact our ability to retain current employees and attract new employees and result in labor disruptions.

Further, our suppliers may be subject to, or voluntarily impose, vaccine mandates, which could result in disruptions in our business and supply chain.

In addition, we currently have a mandatory vaccination requirement for all employees and independent contractor trainers, which has negatively impacted our ability to retain and recruit employees and contractors and could continue to have this negative impact.

Our maintenance of this requirement and the implementation of other requirements may result in further employee attrition, including attrition of critically skilled workforce, and difficulty securing future workforce needs, which could have a material adverse effect on our business, financial condition, and results of operations.

Financial Condition, Credit and Tax Risks

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The rules governing the standards that must be met for our management and our independent registered public accounting firm to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

In connection with our and our independent registered public accounting firm’s

evaluations of our internal control over financial reporting, we may need to upgrade our systems, including information technology;

In connection with our and our independent registered public accounting firm’s evaluations of our internal control over financial reporting, we may need to upgrade our systems, including

information technology;

implement additional financial and management controls, reporting systems and procedures;

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We may need substantial additional funding and may be unable to raise capital when needed, which could force us to delay or reduce our commercialization efforts or product development programs.

We believe our cash, cash equivalents, marketable securities and cash flows from operations, together with the Credit Agreement will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.

We believe our cash, cash equivalents and cash flows from operations will be sufficient to meet our working capital, capital expenditure and debt repayment and related interest payment requirements for at least the next twelve months.

However, we have based these estimates on assumptions that may prove to be incorrect, and we could spend our available financial resources much faster than we currently expect.

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If we raise additional funds by issuing equity securities, our stockholders may experience dilution.

Any future debt financing into which we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make

certain investments and engage in certain merger, consolidation or asset sale transactions.

Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

Any debt financing

or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us.

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Any of these factors could harm our operating results.

We incurred additional indebtedness in connection with the AffloVest acquisition and may not be able to meet all of our debt obligations, and the phase-out, replacement or unavailability of LIBOR and/or other interest rate benchmarks could adversely affect our indebtedness.

We incurred additional indebtedness in connection with the AffloVest acquisition.

As a result of the increase in our debt, demands on our cash resources have increased.

The increased level of debt could, among other things:

● require us to dedicate a large portion of our cash flow from operations to the servicing and repayment of our debt, thereby reducing funds available for working capital, capital expenditures, research and development expenditures and other general corporate requirements;

● limit our ability to obtain additional financing to fund future working capital, capital expenditures, research and development expenditures and other general corporate requirements;

● limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

● restrict our ability to make strategic acquisitions or dispositions or to exploit business opportunities;

● place us at a competitive disadvantage compared to our competitors that have less debt;

● adversely affect the market price of our common stock.

Further, our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.

In addition, our financial condition, results of operations and cash flows could be significantly affected by changes in interest rates and actions taken by the Federal Reserve or changes in the London Interbank Offered Rate ("LIBOR") or its replacement.

Future increases in market interest rates would increase our interest expense.

Borrowings under our Credit Agreement currently bear interest at variable rates based on either a base rate or a fluctuating rate of interest determined by reference to LIBOR, plus, in each case, an applicable margin.

LIBOR is subject to a phase-out period that currently extends to June 30, 2023 for most tenors.

While our Credit Agreement provides a hardwired mechanism for determining an alternative rate of interest when no tenors of LIBOR are available, any such alternative, successor, or replacement rate may not be similar to, or produce the same value or economic equivalence of, LIBOR or have the same volume or liquidity as did LIBOR prior to its discontinuance or unavailability, which may increase our overall interest expense.

We will continue to monitor the situation and address the potential reference rate changes in future debt obligations that we may incur, but the potential effect of the phase-out or replacement of LIBOR on our cost of capital cannot yet be determined and any increase in the interest we pay and a corresponding increase in our costs of capital or otherwise could have a material adverse impact on our financial condition, results of operations or cash flows.

Our credit facility contains covenants that restrict our business and financing activities, and the property that secures our obligations under the credit facility may be subject to foreclosure.

Our revolving credit facility contains a number of 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.

The credit facility also requires us to maintain compliance with a maximum leverage ratio and a minimum liquidity covenant.

Our credit facility contains a number of 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.

The credit facility also requires us to maintain compliance with a maximum leverage ratio, a minimum fixed charge coverage ratio, a minimum EBITDA covenant and a minimum liquidity covenant.

These provisions impose significant operating and financial restrictions on us and may limit our ability to compete effectively, take advantage of new business opportunities or take other actions that may be in our best interests.

Our ability to obtain additional or other financing or to dispose of certain assets could also be negatively impacted because we have pledged substantially all of our assets as collateral in connection with the credit facility.

Our ability to comply with the provisions under the Credit Agreement may be affected by events beyond our control, and our inability to comply with any of these provisions could result in a default under the Credit Agreement.

Our ability to comply with the provisions under the Credit Agreement may be affected by events beyond our control, including as a result of the negative impacts of COVID-19, and our inability to comply with any of these provisions could result in a default under the Credit Agreement.

If such a default occurs, the lenders may elect to declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable, and they would have the right to terminate any commitments they have to provide further borrowings.

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Recently, there has been increased focus on the tests and standards related to classifying individuals as employees or independent contractors, including through judicial decisions, legislative proposals and private lawsuits in certain jurisdictions.

For example, California recently enacted a law (AB 5), which took effect January 1, 2020.

For example, California enacted a law (AB 5), which took effect January 1, 2020.

AB 5 significantly limits the types of workers who may be able to be classified as independent contractors under California law, including requiring the worker to perform work that is outside the usual course of the hiring company’s business in order to be classified as an independent contractor.

Other state legislatures and Congress are considering, and may enact, laws or regulations narrowing the scope of workers who may be classified as independent contractors.

As a result, there is significant uncertainty regarding

what the state and federal worker classification regulatory landscape may look like in coming years.

As a result, there is significant uncertainty regarding what the state and federal worker classification regulatory landscape may look like in coming years.

In the event federal or state taxing or other regulatory authorities, or a court, were to determine that the healthcare practitioners with whom we contract should be classified as employees, we might be liable for unpaid past taxes and other costs and subject to penalties.

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Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.

The legal systems of certain countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of

our patents generally.

The legal systems of certain countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents generally.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us.

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While an inadvertent lapse may sometimes be cured by payment of a late fee or by other means in accordance with the applicable rules, there are many situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

If we fail to maintain the patents and patent applications

directed to our products, our competitors might be able to enter the market earlier than should otherwise have been the case, which may have a material adverse effect on our business.

If we fail to maintain the patents and patent applications directed to our products, our competitors might be able to enter the market earlier than should otherwise have been the case, which may have a material adverse effect on our business.

We may become involved in lawsuits to protect our patents or other intellectual property rights, which could be expensive, time-consuming and ultimately unsuccessful.

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To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming.

In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is

unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

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Therefore, patent applications covering our technology or our products could have been filed by others without our knowledge.

Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our products or the use or manufacture of our products.

Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that

could cover our technologies, our products or the use or manufacture of our products.

We may also face a claim of misappropriation, if a third party believes that we inappropriately obtained and used trade secrets of such third parties.

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patent applications containing a claim not entitled to priority before March 16, 2013, there is a greater level of uncertainty in the patent law.

In September 2011, the Leahy-Smith America Invents Act, or

the American Invents Act, or AIA, was signed into law.

In September 2011, the Leahy-Smith America Invents Act, or the American Invents Act, or AIA, was signed into law.

The AIA includes a number of significant changes to U.S.

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system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention.

A third-party that files a patent application in the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours, even if we had made the invention before it was made by the third-party.

A third party that files a patent application

in the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours, even if we had made the invention before it was made by the third party.

This will require us to be cognizant, going forward, of the time from invention to filing of a patent application, but early filing of patent applications may not always be possible.

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We have received, and may receive in the future, confidential and proprietary information from third parties.

In addition, we employ, and may employ in the future, individuals who were previously employed at

other medical device companies.

In addition, we employ, and may employ in the future, individuals who were previously employed at other medical device companies.

We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise improperly used or disclosed confidential information of these third parties or our employees' former employers.

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We may also be subject to claims that former employees, consultants, independent contractors, collaborators or other third parties have an ownership interest in our patents or other intellectual property.

Litigation may be necessary to defend against these and other claims challenging our right to and use of confidential and proprietary information.

Litigation may be necessary to defend against these and other claims challenging our right to and use

of confidential and proprietary information.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose our rights therein.

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We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential collaborators or customers in our markets of interest.

At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion.

At times, competitors may adopt trade

names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion.

Further, there could be potential trade name or trademark infringement claims brought by owners of other trademarks or trade names that incorporate variations of our trademarks or trade names.

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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 1A. Risk Factors