What changed in this filing

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Item 1A. Risk Factors

2024-02-20 compared with 2023-02-21 · 106 added, 136 removed, 837 unchanged (22% of the section changed)

14 unchanged sentences

Therefore, reimbursement for our products can differ significantly from payer to payer and our products are not universally covered by third-party commercial payers.

In addition, payers, including Medicare, continually review existing technologies for continued coverage and can, without notice, deny or reverse coverage for existing products.

In addition, payers, including Medicare, continually review existing technologies for

continued coverage and can, without notice, deny or reverse coverage for existing products.

We believe a reduction or elimination of coverage or reimbursement of our products by Medicare would likely cause many commercial third-party payers to implement similar reductions or elimination of their coverage or reimbursement of our products.

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If we are unable to satisfy any new preauthorization requirements or adjust to any future new restrictions on our products, third-party coverage and reimbursement may be limited in the future, which could have an adverse impact on our business.

In addition, payers often conduct routine audits and request customer records and other documents to support our claims submitted for payment.

In addition, payers often conduct routine audits and request customer records and other documents to support claims submitted for payment.

Recent increases in the frequency and scope of such audits, as well as findings as a result of such audits, could lead to our inability to collect receivables, or require us to repay amounts previously received, which could adversely affect our business and results of operations.

6 unchanged sentences

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, Entre and AffloVest systems.

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

3 unchanged sentences

In the event of a supply disruption, our product inventories may be insufficient to supply our patients.

capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of our products, the supply of our products to customers and the development of any future products would be delayed, limited or prevented, which could have an adverse impact on our business.

If our third-party suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of our products, the supply of our products to customers and the development of any future products would be delayed, limited or prevented, which could have an adverse impact on our business.

Our revenue is primarily generated from our lymphedema products and we are therefore highly dependent on these products.

51 unchanged sentences

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

During most of 2020, 2021 and the first quarter of 2022, our direct sales force for our lymphedema product line experienced increased turnover and difficulty in recruiting qualified replacements.

Although we saw some level of recovery in 2022 after the first quarter, we cannot assure you that this recovery will continue or that we will be able to recruit and retain quality candidates for our direct sales force.

At the height of the pandemic, our direct sales force experienced increased turnover and difficulty in recruiting qualified replacements.

The recruiting and retention of our sales force remains an important element of our commercial execution.

Our future success depends largely on our ability to hire, train, retain and motivate skilled sales personnel with significant technical knowledge of lymphedema, chronic venous insufficiency and bronchiectasis.

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.

For our respiratory therapy products, we rely on DME providers for all aspects of sales, reimbursement, training and support.

Our future success with respect to our respiratory therapy products depends largely on our ability to maintain and expand relationships with our current, and to enter into relationships with new, distributors of our airway clearance products.

Our ability to continue to market, distribute, and sell our airway clearance products may be at risk if key or multiple of the DME providers choose to stop selling our products or if we are unable to enter into relationships with new distributors.

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, and our ability to maintain and expand relationships with our current, and enter into relationships with new, distributors of our airway clearance products.

Failure to do so 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 and our distributor relationships, we may not be able to effectively commercialize our products, which could have an adverse impact on our business.

Further, because we fully rely on DME providers related to sales of our AffloVest product, any disruption affecting those DMEs could adversely impact our results, such as the large DME provider that experienced slowed placements of AffloVest due to eligibility requirement changes that led to the decrease in our airway clearance product line revenue in 2023.

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

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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.

In particular, payers and physicians may see limitations in the design and results of the studies because certain studies were not specifically based on our products, involved a limited number of total subjects or subjects outside the control group and made "quality of life"

conclusions based upon criteria contained in patient questionnaires that required subjective conclusions.

Certain physicians and insurers may also prefer to see longer-term efficacy data than we have produced or are able to produce.

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If subsequent studies are not positive or consistent with our existing data, adoption of our products may suffer and, accordingly, our business could be adversely impacted.

The COVID-19 pandemic has had, and may continue to have, an adverse effect on our business, financial condition and results of operations.

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 particularly during most of 2020 and 2021, and during the first quarter of 2022.

We have also seen staffing challenges, both in our organization and at the clinics we serve, as another lingering consequence of the COVID-19 pandemic.

While we saw some level of recovery in 2022 after the first quarter, ongoing consequences of the pandemic remain uncertain.

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.

Given the evolving health, economic, social and governmental impacts of the COVID-19 pandemic, the potential impact that the COVID-19 pandemic could have on us remains uncertain, but it could have a material adverse effect on our business, financial condition and results of operations.

Our business, financial condition and results of operations may be negatively impacted by health epidemics or other outbreaks, such as the COVID-19 pandemic.

The United States economy in general and our business specifically were negatively affected by the COVID-19 pandemic, including a decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols, particularly during most of 2020 and 2021, and during the first quarter of 2022, and staffing challenges, both in our organization and at the clinics we serve, as another lingering consequence of the COVID-19 pandemic.

While we saw further recovery in 2023 the full consequences of the pandemic remain uncertain.

Further, the extent to which the COVID-19 pandemic, including any resurgence or variant strains of the virus, or other health epidemics and disease outbreaks, 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 the effects on our clinician customers and their patients, our suppliers and our payers, and the remedial actions, any vaccine mandates and stimulus measures adopted by governmental authorities.

Any health epidemics or other disease outbreaks could have a material adverse effect on our business, financial condition and results of operations.

patent protection covering various aspects of our Flexitouch system expired in 2017, and thus may subject us to increased competition and reduce or eliminate our opportunity to generate product revenue.

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There is also a concern that the imposition of additional tariffs by the United States could result in the adoption of tariffs by other countries.

The resulting trade war could have a significant adverse effect on world

trade and the world economy.

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.

25 unchanged sentences

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

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.

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

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

Other competitors include Medi, Airos Medical, Inc., NormaTec Industries and Koya Medical.

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

● significantly greater name recognition;

43 unchanged sentences

If physicians fail to properly document medical records for patients using our products, our business could be adversely impacted.

We bill Medicare Part B and other insurers directly for sales and rentals of lymphedema products.

We bill Medicare Part B, Medicaid, the Veterans Administration and other insurers directly for sales and rentals of lymphedema products.

As a result, we must comply with all laws, rules and regulations associated with filing claims with the Medicare program, including the Social Security Act, Medicare regulations, the Federal False Claims Act and the Civil Monetary Penalties Law, as well as a variety of additional federal and state laws.

During an audit, insurers typically expect to find explicit documentation in the medical record to support a claim.

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.

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 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.

8 unchanged sentences

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

In addition, changes in underlying causes or risk factors for diseases that our products treat, such as the impact of GLP-1 drugs on obesity, could impact our estimates of the total addressable market.

If the actual number of patients who would benefit from our products and the total addressable market for our products is smaller than we have estimated, our future growth could be adversely impacted.

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We invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them.

Many of our competitors have greater resources than we have that allows them to offer more competitive remuneration, which could adversely impact our ability to attract and retain experienced executives and other key employees.

We carry a "key person"

insurance policy only on our Chief Executive Officer.

Many of our competitors have greater

resources than we have that allows them to offer more competitive remuneration, which could adversely impact our ability to attract and retain experienced executives and other key employees.

We carry a "key person" insurance policy only on our Chief Executive Officer.

The replacement of any of our key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives and would harm our business.

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In addition, acts of terrorism, violence and other geo-political unrest could cause disruptions in our business or the businesses of our partners or the economy as a whole.

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.

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.

Acquisition activity involves substantial risks, and we may not be able to successfully integrate newly acquired companies or businesses.

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As a healthcare provider participating in governmental healthcare programs, we are subject to complex laws and regulations directed at preventing fraud and abuse, which subject our marketing, billing, documentation and other practices to government scrutiny.

To ensure compliance with Medicare, Medicaid and other regulations, government agencies or their contractors often conduct routine audits and request customer records and other documents to support our claims submitted for payment of services rendered.

Medicare has engaged a variety of contractors to audit claims submitted to the government, including Medicare Administrative Contractors, Recovery Audit Contractors, Supplemental Medical Review Contractors and Unified Program Integrity Contractors.

Recovery Audit Contractors are compensated based on a percentage of overpayments recovered from providers.

Recovery Audit Contractors are compensated based on a percentage of overpayments they find or collect.

Unified Program Integrity Contractors focus on potential fraud and frequently make referrals to the Office of Inspector General or the Department of Justice to pursue criminal or civil action against providers.

11 unchanged sentences

● establishment registration and product listing;

● testing, labeling, content and language of instructions for use and storage;

● testing, labeling, content and language of instructions for use, storage and servicing;

● clinical trials;

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Unless an exemption applies, each medical device we seek to distribute commercially in the United States requires marketing authorization from the FDA prior to distribution.

The two primary types of FDA marketing authorization applicable to a device are premarket notification, also called 510(k) clearance, and premarket approval.

The two primary types of FDA marketing authorizations applicable to a medical device are premarket notification, also called a 510(k) clearance, and premarket approval.

The type of marketing authorization is generally linked to the classification of the device.

When a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is "substantially equivalent"

to a legally marketed device previously found substantially equivalent through a 510(k) premarket notification, a legally marketed device which has been reclassified from high to low or moderate risk or a legally marketed device in commercial distribution before May 28, 1976 for which the FDA does not require the submission of a premarket approval application.

Such a device is commonly known as a ‘‘predicate device.’’ In 2019, the FDA released an optional Safety and Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device.

When a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is "substantially equivalent" to a legally marketed device previously found substantially equivalent through a 510(k) premarket notification, a legally marketed device which has been reclassified from high to low or moderate risk or a legally marketed device in commercial distribution before May 28, 1976 for which the FDA does not require the submission of a premarket approval application.

Such a device is commonly known as a ‘‘predicate device.’’ In 2019, the FDA released an optional Safety and

Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device.

The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence.

1 unchanged sentence

A premarket approval application must be submitted to the FDA if the device cannot be cleared through the 510(k) process.

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

The premarket approval application process is much more demanding and in-depth 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.

1 unchanged sentence

The FDA clearance and approval processes frequently take longer than anticipated due to increasing FDA demands for clarification of data or new data requirements.

If there is no predicate device that would permit the device to be cleared through the 510(k) path, then the FDA will automatically classify the device as a Class III high risk premarket approval device.

In the event of this possibility, the sponsor can request a risk-based classification determination for the device in accordance with the de novo process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.

If there is no predicate device that would permit the device to be cleared through the 510(k) path and the device is not 510(k)-exempt, then the FDA will automatically classify the device as a Class III high risk product which requires premarket approval.

In the event of this possibility, the sponsor can request a risk-based classification determination for the device in accordance with the FDA’s De Novo classification request process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.

A company files a De Novo request when it does not have a predicate to which it can claim substantial equivalence.

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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.

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

The FDA may move 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 and no FDA approval is required.

The FDA's 510(k) clearance process usually takes from approximately three to 12 months, but may take longer.

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The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all.

In the United States, our currently commercialized products are marketed pursuant to premarket clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FDCA.

In the United States, our currently commercialized products are marketed pursuant to 510(k) premarket clearances under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FDCA.

If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected our product introductions or modifications could be delayed or canceled, which could cause our sales to decline.

In addition, the FDA may determine that future products will require the more costly,

lengthy and uncertain premarket approval process.

In addition, the FDA may determine that future products will require the more costly, lengthy and uncertain premarket approval process.

Although we do not currently market any devices under a premarket approval the FDA may demand that we obtain a premarket approval prior to marketing certain of our future products.

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The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

● for non-premarket approval devices, failure of the applicant to demonstrate to the FDA's satisfaction that its products meet the definition of "substantial equivalence"

or meet the standard for the FDA to grant a petition for de novo classification;

● for non-premarket approval devices, failure of the applicant to demonstrate to the FDA's satisfaction that its products meet the definition of "substantial equivalence" or meet the standard for the FDA to grant a petition for De Novo classification;

● failure of the applicant to demonstrate that there is reasonable assurance that the medical device is safe or effective under the conditions of use prescribed, recommended or suggested in the proposed labeling;

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If we fail to obtain and maintain regulatory clearances or approvals our ability to sell our products and generate revenue will be materially harmed.

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 altered the manner in which the 510(k) regulatory pathway is administered and interpreted.

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, and again in 2023 through draft guidance, which altered and clarified 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.

This new guidance could impose additional regulatory requirements upon us which could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances.

and miscellaneous reforms which are further intended to clarify and improve medical device regulation both pre- and post-market.

Medical devices may only be promoted and sold for the indications for which they are approved or cleared.

Any new guidance could impose additional regulatory requirements upon us which could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances.

In addition, as part of the Food and Drug Administration Safety and Innovation Act, Congress reauthorized the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several "Medical Device Regulatory Improvements" and miscellaneous reforms which are further intended to clarify and improve medical device regulation both pre- and post-market.

Medical devices may only be promoted and sold for the indications for which they are approved or cleared unless an exemption applies.

In addition, even if the FDA has approved or cleared a product, it can take action affecting such product approvals or clearances if serious safety or other problems develop in the marketplace.

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If clinical studies of our future products do not produce results necessary to support regulatory clearance or approval in the United States or, with respect to our current or future products, elsewhere, we will be unable to expand the indications for or commercialize these products.

We will likely need to conduct additional clinical studies in the future to support new indications for our products or for clearances of new product lines, or for the approval of the use of our products in some foreign countries.

We will likely need to conduct additional clinical studies in the future to support new indications for our products or for clearances or approvals of new product lines, or for the approval of the use of our products in some foreign countries.

Clinical testing can take many years, can be expensive and carries uncertain outcomes.

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If we fail to comply with state and federal fraud and abuse laws, including anti-kickback, false claims and anti-inducement laws, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

The Federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, whether directly or indirectly and overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federal financed healthcare programs.

The statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution are drawn narrowly, and any remuneration to or from a prescriber or purchaser of healthcare products or services may be subject to scrutiny if they do not qualify for an exception or safe harbor.

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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.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians.

The ACA imposed new reporting and disclosure requirements on device and drug manufacturers for any "transfer of value"

made or distributed to prescribers and other healthcare providers.

In addition, there are many federal and state regulations covering payments made to physicians.

The ACA imposed new reporting and disclosure requirements on device and drug manufacturers for any "transfer of value" made or distributed to teaching hospitals and other qualified healthcare providers.

Device and drug manufacturers are also required to report and disclose any investment interests held by physicians and their immediate family members during the preceding calendar year.

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.

Failure to submit required information may result in significant civil monetary penalties 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.

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 may violate one or more of the requirements.

Certain states have their own versions of the Physician Payments Sunshine Act, and may also 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 manufacturer may 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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While it is our intent to comply with all applicable laws, the government may find that our marketing activities violate the Civil Monetary Penalties Law.

If we are found to be in noncompliance, we could be subject

to civil money penalties of up to $20,000 for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the Federal healthcare programs.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations.

If we are found to be in noncompliance, we could be subject to significant civil money penalties for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the Federal healthcare programs.

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.

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If we were found to be noncompliant, we could lose our licensure in that state.

Losing our licensure could subject us to financial penalties and/or prohibit us from selling our current or future products to patients in such state and our business, financial condition and results of operations could be adversely affected as a result of any such prohibition.

Losing any license could subject us to financial penalties and/or prohibit us from selling our current or future products to patients in a particular state and our business, financial condition and results of operations could be adversely affected as a result of any such prohibition.

Our products are currently made available to authorized users of the Department of Veterans Affairs Federal Supply Schedule and if we were no longer eligible to sell our products through such channel, our business may be adversely affected.

Our Flexitouch and Entre systems are eligible for reimbursement by the Department of Veterans Affairs and included on the Federal Supply Schedule pricing program, established by Section 603 of the Veterans Health Care Act of 1992.

Our Flexitouch Plus system is eligible for reimbursement by the Department of Veterans Affairs and included on the Federal Supply Schedule pricing program, established by Section 603 of the Veterans Health Care Act of 1992.

To be eligible for this program, we must comply with additional laws and requirements applicable to our operations and manufacturing processes.

Our Entre Plus system is available for purchase by the Department of Veterans Affairs off contract.

If we were to lose eligibility for reimbursement by the Department of Veterans Affairs, our business, financial condition and results of operations could be adversely affected.

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We may fail to report adverse events of which we become aware within the prescribed timeframe.

We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products.

We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event, if it is an adverse event that is unexpected, if the occurrence of the adverse event is not immediately associated with our product, or if an adverse event occurs subsequent to completing use of our product.

If we fail to comply with our reporting obligations, the FDA could take action including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearances, seizure of our products, or delay in clearance of future products.

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We may also choose to voluntarily recall a product if any material deficiency is found.

A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling defects or other deficiencies and issues.

A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling

defects or other deficiencies and issues.

Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our reputation and business, which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our patients' demands.

We may also be subject to liability claims, be required to bear other costs, or take other actions that may have a negative impact on our future sales and our ability to generate profits.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA.

Companies are required to maintain certain records of recalls and corrections, even if the recall or correction itself is not reportable to the FDA.

We may initiate voluntary recalls or corrections for our products in the future that we determine do not require notification of the FDA.

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We and many of our component manufacturers are required to comply with the FDA's Quality System Regulation, or QSR, which covers the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our devices.

The FDA audits compliance with the QSR through periodic announced and unannounced inspections of manufacturing and other facilities.

The FDA audits compliance with the QSR through periodic announced and unannounced inspections of manufacturing sites and other applicable facilities.

We and our component manufacturers have been, and anticipate in the future being, subject to such inspections.

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Any of these sanctions could adversely affect our business, financial condition and results of operations.

International Organization for Standardization, or ISO, and domestic regulatory authorities within foreign countries.

For any products that we sell outside the United States, those products and our operations would also be required to comply with standards set by foreign law, treaties and industrial standards bodies, such as the International Organization for Standardization, or ISO, and domestic regulatory authorities within foreign countries.

Foreign regulatory bodies may evaluate our products or the testing that our products undergo against these or other standards.

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From time to time, legislation is drafted and introduced that could significantly change the statutory provisions governing the clearance or approval, manufacture and marketing of a medical device.

In addition, FDA and other regulations and guidance are often revised or reinterpreted in ways that may significantly affect our business and our products, and new regulations or guidance documents may be promulgated.

In addition, FDA and other applicable regulations and guidance are often revised or reinterpreted in ways that may significantly affect our business and our products, and new regulations or guidance documents may be promulgated.

It is impossible to predict whether legislative changes will be enacted or regulations, guidance or interpretations changed or added, and what the impact of such changes or additions, if any, may be.

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Healthcare fraud and abuse and health information privacy and security laws potentially applicable to our operations include:

● the federal Anti-Kickback Statute, which applies to our marketing practices, educational programs, pricing policies and relationships with healthcare providers, by prohibiting, among other things, soliciting, receiving, offering or providing remuneration, whether directly or indirectly and overtly or covertly, intended to induce the referral of an individual for (i) the furnishing or the arranging for the furnishing of items or services reimbursable under a federal healthcare program, such as Medicare or Medicaid;

● the federal Anti-Kickback Statute, which applies to our marketing practices, educational programs, pricing policies and any relationships with healthcare providers, by prohibiting, among other things, soliciting, receiving, offering or providing remuneration, whether directly or indirectly and overtly or covertly, intended to induce the referral of an individual for (i) the furnishing or the arranging for the furnishing of items or services reimbursable under a federal healthcare program, such as Medicare or Medicaid;

or (ii) the purchase, lease or order of, or the arrangement or recommendation of the purchasing, leasing or ordering of, of an item or service reimbursable under a federal healthcare program.

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● HIPAA, as amended by HITECH, also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information;

● federal Open Payments (the Physician Payments Sunshine Act) requirements imposed by the ACA on device manufacturers regarding certain "transfers of value"

made or distributed to physicians, certain other healthcare providers, and teaching hospitals.

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

● federal Open Payments (the Physician Payments Sunshine Act) requirements imposed by the ACA on device manufacturers regarding certain "transfers of value" made or distributed to physicians, certain other healthcare providers, and teaching hospitals.

Failure to submit required information may result in significant civil monetary penalties for "knowing failures", for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an

annual submission.

Manufacturers must report detailed payment data and submit legal attestation to the accuracy of such data for each calendar year by the 90th day of the subsequent calendar year;

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The Privacy Standards and Security Standards under HIPAA establish a set of basic national privacy and security standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services.

Notably, whereas HIPAA previously directly regulated only these covered entities, the HITECH Act, which was signed into law as part of the stimulus package in February 2009, makes certain

of HIPAA's privacy and security standards also directly applicable to covered entities' business associates.

Notably, whereas HIPAA previously directly regulated only these covered entities, the HITECH Act, which was signed into law as part of the stimulus package in February 2009, makes certain of HIPAA's privacy and security standards also directly applicable to covered entities' business associates.

As a result, both covered entities and business associates are subject to significant civil and criminal penalties for failure to comply with Privacy Standards and Security Standards.

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We may need to comply with applicable laws in those jurisdictions that regulate the use and disclosure of individually identifiable information.

The Federal Communications Commission maintains oversight of the Federal Telephone Consumer Privacy Act (“TCPA”) governing how entities engage with consumers via telephone, including text communications, typically thought of as “telephone solicitations.” Several states have issued or may issue similar statutes or regulations.

These statutes mandate compliance with requirements such as limiting time of day for calls/outreach, restricting autodial processes, limiting or prohibiting robot-calling, and compliance with “do not call” registries, among other aspects.

Violations can subject our company to fines, penalties and consumer actions.

We may need to comply with applicable laws in these jurisdictions that regulate telephone and text messaging to consumers, including our patients, which may increase our costs of compliance.

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.

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We are exposed to the risk that our employees, distributors and other third parties, in spite of our compliance training and programs, may engage in fraudulent conduct or other illegal activity.

Misconduct by employees, distributors and other third parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violate FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA, manufacturing standards, federal and state healthcare fraud and abuse laws and regulations, or laws that require the reporting of financial information or data accurately.

Misconduct by employees, distributors and other third parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities that violate FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA, manufacturing standards, federal and state healthcare fraud and abuse laws and regulations, or laws that require the reporting of financial information or data accurately.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing and other abusive practices.

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Sales of our devices outside the United States are subject to foreign regulatory requirements that vary widely from country to country.

In addition, the FDA regulates exports of medical devices from the United States.

In addition, the FDA regulates exports of medical devices from the United States and foreign countries have varying import laws we need to comply with.

Complying with international regulatory requirements can be an expensive and time-consuming process and approval is not certain.

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We could become subject to stockholder or other third-party litigation, as well as investigations by the SEC, the stock exchange on which our securities are listed, or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions, payment of damages or other remedies.

The level of our indebtedness under our credit facility may adversely impact us, and the phase-out, replacement or unavailability of LIBOR and/or other interest rate benchmarks could adversely affect our indebtedness.

The level of our indebtedness under our credit facility may adversely impact us.

Our level of debt under our credit facility could, among other things:

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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 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.

Alternative, successor, or replacement rates following the planned phase-out of LIBOR in June 2023 may not be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as did, LIBOR (the current benchmark rate under our Credit Agreement), which may increase our overall interest expense.

In addition, the credit spread adjustments on any benchmark replacement to LIBOR under our credit facility may not produce substantially the same rate as current LIBOR based loans.

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 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.

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

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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.

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.

Any future funding requirements will depend on many factors, including:

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Any of these factors could harm our operating results.

A reclassification of our independent contractor trainers could require us to pay retroactive taxes and penalties, which could have a material adverse effect on our business, financial condition and operating results.

Prior to the inactivation of our independent contractor home trainers in May 2020, we contracted with over 560 licensed healthcare practitioners as home trainers, who educate our patients on the proper use of our solutions.

We have since reactivated a small number of healthcare practitioners in the same capacity as previously noted.

Because we consider these licensed practitioners to be independent contractors, as opposed to employees, under federal and applicable state laws, we do not withhold federal or state income or other employment related taxes or make federal or state unemployment tax or Federal Insurance Contributions Act payments.

Our contracts with these independent contractors obligate them to pay these taxes.

The classification of healthcare practitioners as independent contractors depends on the facts and circumstances of the relationship.

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 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.

In addition, in October 2022, the U.S.

Department of Labor published a Notice of Proposed Rulemaking that would rescind the current federal independent contractor rule (adopted by the Trump administration in 2021) and would apply a non-exhaustive six factor totality-of-the-circumstances analysis, and could, if enacted in its current form, result in the need to reclassify certain types of workers.

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.

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.

We also could, among other things, be required to withhold income taxes, to withhold and pay Social Security, Medicare and similar taxes, to pay unemployment and other related payroll taxes and to provide certain employee benefits, including workers’ compensation coverage and group medical benefits, or be forced to change our business model as it relates to the trainers to avoid various types of liability exposure associated with worker misclassification claims pursued by governmental agencies or through private legal action.

As a result, any determination that the trainers are our employees could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to liabilities related to state income, sales and use taxes, which could adversely affect our financial condition and results of operations and could decrease demand for our products.

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We may be unable to collect all of our Medicare accounts receivable.

At December 31, 2022, we had approximately $33.2 million of accounts receivable for sales of our Flexitouch system to patients covered by Medicare.

At December 31, 2023, we had approximately $17.1 million of accounts receivable for sales of our Flexitouch Plus system to patients covered by Medicare.

A portion of the related claims to Medicare are initially denied and enter the appeals process, where many are ultimately reviewed by an Administrative Law Judge.

The appeal process can be lengthy, lasting several years in most cases.

At December 31, 2022, we classified $23.1 million of our Medicare accounts receivable related to Flexitouch system sales as long-term assets on our balance sheet due to the estimated amount of receivables that will be paid more than one year from December 31, 2022, as a result of delays with the Administrative Law Judge appeal process.

A significant increase in Medicare denial of submitted claims or an increase in the proportion of Medicare denials that are upheld by an Administrative Law Judge could adversely affect our results of operations or cause us to reduce the carrying value of our Medicare accounts receivable related to Flexitouch system sales.

At December 31, 2023, we classified $10.9 million of our Medicare accounts receivable related to Flexitouch Plus system sales as long-term assets on our balance sheet due to the estimated amount of receivables that will be paid more than one year from December 31, 2023, as a result of delays with the Administrative Law Judge appeal process.

Risks Related to Our Intellectual Property

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In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

For example, many foreign countries have compulsory licensing laws, under which a patent owner must grant licenses to third

For example, many foreign countries have compulsory licensing laws, under which a patent owner must grant licenses to third parties.

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

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We may incorrectly determine that our products are not covered by a third-party patent.

Many patents may cover a marketed product, including but not limited to patents covering the product or portions thereof, methods of use or methods relating to the product, and production processes of or for the product.

The identification of all patents and their expiration dates relevant to the production and sale of a therapeutic product is extraordinarily complex and requires sophisticated legal knowledge in the relevant jurisdiction.

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Numerous U.S.

and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing and may develop our products.

As the medical device industry expands and more patents are issued, the risk increases

that our products may be subject to claims of infringement of the patent rights of third parties.

and foreign issued patents and

pending patent applications owned by third parties exist in the fields in which we are developing and may develop our products.

As the medical device industry expands and more patents are issued, the risk increases that our products may be subject to claims of infringement of the patent rights of third parties.

If a third-party claims that we infringe on their intellectual property or technology, we could face a number of issues, including:

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In addition, litigation or threatened litigation could result in significant demands on the time and attention of our management team, distracting them from the pursuit of other company business.

In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties, redesign our infringing products and processes or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

In addition, the uncertainties associated with

litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development collaborations that would help us bring our products to market.

In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties,

redesign our infringing products and processes or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development collaborations that would help us bring our products to market.

Changes in U.S.

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Obtaining and enforcing patents in the medical device industry involves both technological and legal complexity, and therefore is costly, time-consuming and inherently uncertain.

In addition, the United States has enacted and is currently implementing wide-ranging patent reform legislation.

In addition, the United States has enacted patent reform legislation and generally has patent related legislation in process.

Further, several judicial rulings have either narrowed the scope of patent protection available in certain circumstances or weakened the rights of patent owners in certain situations.

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● issued patents that we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;

the information learned from such activities to develop competitive products for sale in our major commercial markets;

● our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

● ownership of our patents or patent applications may be challenged by third parties;

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

Such an outcome could have a material adverse effect on our business.

Such an outcome could have a material adverse effect on our

Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.

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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.

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.

In addition, we have not registered our trademarks internationally, and the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States.

Over the long term, if we

are unable to successfully register our trademarks and trade names and/or establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.

Over the long term, if we are unable to successfully register our trademarks and trade names and/or establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.

Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.

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● speculation in the press or investment community;

● perceived impacts on our business, patient population and/or addressable market due to effect of changes to the causes or risk factors for diseases that our products treat, such as the impact of GLP-1 drugs on obesity;

● general economic, industry and market conditions, or other events or factors, many of which are beyond our control;

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In addition, the stock market has recently experienced significant volatility with respect to medical device and other life sciences company stocks.

The volatility of medical device and other medical technology company stocks often does not relate to the operating performance of the companies represented by the stock.

The volatility of medical device and other medical technology

company stocks often does not relate to the operating performance of the companies represented by the stock.

As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products, or to a lesser extent our markets.

Following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company, as has been the case with us.

Such litigation can result in substantial costs and diversion of management attention and resources, which could significantly harm

our profitability and reputation and could expose us to liability or impact negatively our business, financial condition, operating results, and prospects.

Such litigation can result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation and could expose us to liability or impact negatively our business, financial condition, operating results, and prospects.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

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These provisions include:

● authorizing the issuance of "blank check"

preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

● authorizing the issuance of "blank check" preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

● limiting the removal of directors by the stockholders;

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Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe such person's conduct was unlawful and that we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

Unresolved Staff Comments.

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