What changed in this filing

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Item 1. Financial Statements

2024-08-05 compared with 2024-05-06 · 120 added, 77 removed, 434 unchanged (31% of the section changed)

36 unchanged sentences

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

none issued and outstanding as of March 31, 2024 and December 31, 2023

none issued and outstanding as of June 30, 2024 and December 31, 2023

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

23,761,897 shares issued and outstanding as of March 31, 2024;

23,966,748 shares issued and outstanding as of June 30, 2024;

23,600,584 shares issued and outstanding as of December 31, 2023

7 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except share and per share data)

14 unchanged sentences

Total operating expenses

Loss from operations

Other expense

Loss before income taxes

Income tax benefit

Net loss per common share

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

Income (loss) from operations

Other income (expense)

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) per common share

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

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

2 unchanged sentences

(In thousands, except share data)

Balances, March 31, 2024

Stock-based compensation

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

Common shares issued for employee stock purchase plan

Net income for the period

Balances, June 30, 2024

Balances, December 31, 2023

1 unchanged sentence

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

Net loss for the period

Common shares issued for employee stock purchase plan

Net income for the period

Balances, June 30, 2024

Balances, March 31, 2023

Stock-based compensation

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

Common shares issued for employee stock purchase plan

Net loss for the period

Balances, June 30, 2023

Balances, December 31, 2022

2 unchanged sentences

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

Common shares issued for employee stock purchase plan

Net loss for the period

Balances, March 31, 2023

Balances, June 30, 2023

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

Cash flows from operating activities

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

Net income (loss)

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

Depreciation and amortization

12 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities

Purchases of property and equipment

Proceeds from sale of property and equipment

Intangible assets expenditures

1 unchanged sentence

Cash flows from financing activities

Payments on earn-out

Payments on note payable

Proceeds from exercise of common stock options

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

Proceeds from issuance of common stock at market

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents – beginning of period

31 unchanged sentences

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

The results for the three months ended March 31, 2024, are not necessarily indicative of results to be expected for the year ending December 31, 2024, or for any other interim period or for any future year.

The results for the six months ended June 30, 2024, are not necessarily indicative of results to be expected for the year ending December 31, 2024, or for any other interim period or for any future year.

The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

8 unchanged sentences

Significant Accounting Policies

There were no material changes in our significant accounting policies during the three months ended March 31, 2024.

There were no material changes in our significant accounting policies during the six months ended June 30, 2024.

See Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, for information regarding our significant accounting policies.

12 unchanged sentences

(In thousands)

At March 31, 2024

At June 30, 2024

At December 31, 2023

7 unchanged sentences

Our patents and other intangible assets are summarized as follows:

At March 31, 2024

At June 30, 2024

(In thousands)

17 unchanged sentences

Total intangible assets

Amortization expense was $ 0.9 million and $ 1.0 million for the three months ended March 31, 2024 and 2023, respectively.

Amortization expense was $ 1.0 million for each of the three months ended June 30, 2024 and 2023, and $ 1.9 million for each of the six months ended June 30, 2024 and 2023, of which $ 0.3 million in each of the three months ended June 30, 2024 and 2023, and $ 0.6 million in each of the six months ended June 30, 2024 and 2023, were recorded in cost of sales revenue.

Future amortization expenses are expected as follows:

(In thousands)

2024 (April 1 - December 31)

2024 (July 1 - December 31)

In the third quarter of 2023, we performed our annual goodwill impairment test utilizing both the qualitative and quantitative approach described in FASB ASU No.

2021-03, “Intangibles—Goodwill and Other (Topic 350) – Accounting Alternative for Evaluating Triggering Events.” Based on the testing using the qualitative approach, it was determined that it was not more likely than not that the fair value of the reporting unit was less than the carrying value.

unit was less than the carrying value.

As a result, it was not deemed necessary to proceed to the quantitative test and no impairment was recognized.

2 unchanged sentences

(In thousands)

At March 31, 2024

At June 30, 2024

At December 31, 2023

In-transit inventory

Legal and consulting

In-transit inventory

Clinical studies

3 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

30 unchanged sentences

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

As of March 31, 2024, we had outstanding borrowings of $ 28.5 million under the Credit Agreement, comprised entirely of the term loan.

At March 31, 2024, all outstanding borrowings were subject to interest at a rate calculated at Adjusted Term SOFR plus an applicable margin, for an interest rate of 7.16 % .

As of June 30, 2024, we had outstanding borrowings of $ 27.8 million under the Credit Agreement, comprised entirely of the term loan.

At June 30, 2024, all outstanding borrowings were subject to interest at a rate calculated at Adjusted Term SOFR plus an applicable margin, for an interest rate of 7.18 % .

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

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

Maturities of the term loan for the next three years as of June 30, 2024, were as follows:

(In thousands)

2024 (April 1 - December 31)

2024 (July 1 - December 31)

Deferred financing fees

3 unchanged sentences

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

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

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

As of June 30, 2024, the Credit Agreement contained a number of restrictions and covenants, including that we maintain compliance with a maximum consolidated total leverage ratio, a minimum fixed charge coverage ratio and a minimum consolidated EBITDA covenant.

As of June 30, 2024, we were in compliance with all covenants under the Credit Agreement.

Commitments and Contingencies

13 unchanged sentences

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

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

The remaining lease terms vary from approximately one to seven years as of June 30, 2024.

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

8 unchanged sentences

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

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

The remaining lease terms as of June 30, 2024, ranged from less than one year to approximately four years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities.

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

3 unchanged sentences

(In thousands)

At March 31, 2024

At June 30, 2024

At December 31, 2023

4 unchanged sentences

Weighted average discount rate

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental cash flow information for our operating leases:

Cash paid for operating lease liabilities

Non-cash right of use assets obtained in exchange for new operating lease obligations

The table below reconciles the undiscounted cash flows for the periods presented to the operating lease liabilities recorded on the Condensed Consolidated Balance Sheet for the periods presented:

(In thousands)

2024 (April 1 - December 31)

2024 (July 1 - December 31)

Total minimum lease payments

3 unchanged sentences

Non-current obligations under operating lease liabilities

Operating lease costs were $ 0.9 million for each of the three months ended March 31, 2024 and 2023.

Operating lease costs were $ 0.9 million for each of the three months ended June 30, 2024 and 2023.

Operating lease costs were $ 1.8 million for each of the six months ended June 30, 2024 and 2023.

Major Vendors

We had purchases from one vendor that accounted for 23 % of our total purchases for the three months ended March 31, 2024 and purchases from one vendor that accounted for 29 % of our total purchases for the three months ended March 31, 2023.

We had purchases from one vendor that accounted for 17 % of our total purchases for the three months ended June 30, 2024, and purchases from one vendor that accounted for 20 % of our total purchases for the six months ended June 30, 2024.

We had purchases from two vendors that accounted for 30 % of our total purchases for the three months ended June 30, 2023, and purchases from one vendor that accounted for 24 % of our total purchases for the six months ended June 30, 2023.

Purchase Commitments

We issued purchase orders prior to March 31, 2024, totaling $ 25.7 million for goods that we expect to receive within the next year.

We issued purchase orders prior to June 30, 2024, totaling $ 28.8 million for goods that we expect to receive within the next year.

Retirement Plan

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

We recorded an expense related to our discretionary contributions to the 401(k) plan of $ 0.7 million and $ 0.4 million for the three months ended March 31, 2024 and 2023, respectively.

We recorded an expense related to our discretionary contributions to the 401(k) plan of $ 0.4 million and $ 0.3 million for the three months ended June 30, 2024 and 2023, respectively, and $ 1.1 million and $ 0.7 million for the six months ended June 30, 2024 and 2023, respectively.

Legal Proceedings

15 unchanged sentences

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

The lawsuit seeks unspecified damages.

The Weaver Lawsuit seeks unspecified damages.

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

1 unchanged sentence

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

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

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

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

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

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

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

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

The Court has scheduled a settlement hearing for August 28, 2024 to consider whether to grant final approval to the settlement.

Pursuant to the settlement, we will adopt, implement and maintain certain corporate governance reforms and have agreed to pay approximately $ 0.5 million in fees and expenses related to this lawsuit.

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

Stockholders' Equity

5 unchanged sentences

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

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

In addition, all awards granted under our 2007 Omnibus

Stock Plan and our 2003 Stock Option Plan that were outstanding when the 2016 Plan became effective and that are forfeited, expired, cancelled, settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan.

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

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

As of March 31, 2024, 6,451,155 shares were available for future grant pursuant to the 2016 Plan.

As of June 30, 2024, 6,615,454 shares were available for future grant pursuant to the 2016 Plan.

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

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

We recorded stock-based compensation expense of $ 2.0 million for each of the three months ended March 31, 2024 and 2023.

We recorded stock-based compensation expense of $ 1.9 million and $ 1.8 million for the three months ended June 30, 2024 and 2023, respectively and $ 3.9 million and $ 3.8 million for the six months ended June 30, 2024 and 2023, respectively.

This expense was allocated as follows:

Three Months Ended

Six Months Ended

(In thousands)

6 unchanged sentences

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

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ 0.1 million and $ 0.3 million for the three months ended March 31, 2024 and 2023, respectively.

At March 31, 2024, there was approximately $ 0.1 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 1.0 years.

Our stock option activity for the three months ended March 31, 2024, was as follows:

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ 0.1 million and $ 0.2 million for the three months ended June 30, 2024 and 2023, respectively and $ 0.2 million and $ 0.5 million for the six months ended June 30, 2024 and 2023, respectively.

At June 30, 2024, there was approximately $ 0.1 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 1.0 years.

Our stock option activity for the six months ended June 30, 2024, was as follows:

Exercise Price

4 unchanged sentences

Cancelled/Expired

Balance at March 31, 2024

Options exercisable at March 31, 2024

Balance at June 30, 2024

Options exercisable at June 30, 2024

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

1 unchanged sentence

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

Options exercisable of 479,622 as of March 31, 2023, had a weighted-average exercise price of $ 44.60 per share.

Options exercisable of 435,559 as of June 30, 2023, had a weighted-average exercise price of $ 44.67 per share.

Time-Based Restricted Stock Units

1 unchanged sentence

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

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $ 1.4 million and $ 1.3 million for the three months ended March 31, 2024 and 2023, respectively.

At March 31, 2024, there was approximately $ 9.9 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 2.2 years.

Our time-based restricted stock unit activity for the three months ended March 31, 2024, was as follows:

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $ 1.5 million and $ 1.3 million for the three months ended June 30, 2024 and 2023, respectively, and $ 2.9 million and $ 2.6 million for the six months ended June 30, 2024 and 2023, respectively.

At June 30, 2024, there was approximately $ 8.3 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.9 years.

Our time-based restricted stock unit activity for the six months ended June 30, 2024, was as follows:

Average Grant

2 unchanged sentences

Balance at December 31, 2023

Balance at March 31, 2024

Balance at June 30, 2024

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

5 unchanged sentences

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

Stock-based compensation expense recognized for PSUs was $ 0.4 million and $ 0.2 million for the three months ended March 31, 2024 and 2023, respectively.

At March 31, 2024, there was approximately $ 3.1 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.5 years.

Our PSU activity for the three months ended March 31, 2024, was as follows:

Stock-based compensation expense recognized for PSUs was $ 0.2 million and $ 0.1 million for the three months ended June 30, 2024 and 2023, respectively, and $ 0.6 million and $ 0.3 million for the six months ended June 30, 2024 and 2023, respectively.

At June 30, 2024, there was approximately $ 1.5 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.2 years.

Our PSU activity for the six months ended June 30, 2024, was as follows:

Average Grant

2 unchanged sentences

Balance at December 31, 2023

Balance at March 31, 2024

Balance at June 30, 2024

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

8 unchanged sentences

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

As of March 31, 2024, 1,605,871 shares were available for future issuance under the ESPP.

We recognized stock-based compensation expense associated with the ESPP of $ 0.1 million and $ 0.2 million for the three months ended March 31, 2024 and 2023, respectively.

As of June 30, 2024, 1,497,964 shares were available for future issuance under the ESPP.

We recognized stock-based compensation expense associated with the ESPP of $ 0.1 million for each of the three months ended June 30, 2024 and 2023, and $ 0.2 million and $ 0.3 million for the six months ended June 30, 2024 and 2023, respectively.

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

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

Airway clearance products

Our revenue by channel, inclusive of sales and rental revenue, for the three months ended March 31, 2024 and 2023, are summarized in the following table:

Our revenue by channel, inclusive of sales and rental revenue, for the three and six months ended June 30, 2024 and 2023, are summarized in the following table:

Three Months Ended

Six Months Ended

(In thousands)

10 unchanged sentences

As the rental contract resides with the patients, we have elected the portfolio approach, at the payer level, to determine the expected consideration, which considers the impact of early terminations.

While the contract is with the

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

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

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

1 unchanged sentence

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

Rental revenue for the three months ended March 31, 2024 and 2023, was primarily from private insurers.

Sales-type lease revenue and the associated cost of revenue for the three months ended March 31, 2024 and 2023, was:

Three Months Ended March 31,

Rental revenue for the three months ended June 30, 2024 and 2023, was primarily from private insurers.

Sales-type lease revenue and the associated cost of revenue for the three and six months ended June 30, 2024 and 2023, was:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

5 unchanged sentences

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

The effective tax rate for the three months ended March 31, 2024, was a benefit of 21.4 % , compared to a benefit of 60.7 % for the three months ended March 31, 2023.

The effective tax rate for the three months ended June 30, 2024, was an expense of 29.2 % , compared to an expense of 108.3 % for the three months ended June 30, 2023.

The primary driver of the change in our effective tax rate was attributable to the fact that we did not have a full valuation allowance on our deferred tax assets for the current year period, while the prior year period reported a full valuation allowance.

We recorded an income tax benefit of $ 0.6 million and an income tax benefit of $ 2.9 million for the three months ended March 31, 2024 and 2023, respectively.

income tax expense of $ 1.8 million and $ 1.3 million for the three months ended June 30, 2024 and 2023, respectively.

The effective tax rate for the six months ended June 30, 2024, was an expense of 36.0 % , compared to a benefit of 44.5 % for the six months ended June 30, 2023.

Additionally, in the prior year period we had year-to-date losses that we expected to realize, which drove a tax benefit.

We recorded an income tax expense of $ 1.2 million and an income tax benefit of $ 1.6 million for the six months ended June 30, 2024 and 2023, respectively.

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

1 unchanged sentence

The Company currently is not under examination in any jurisdictions.

Net Loss Per Share

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

Net Income (Loss) Per Share

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

Three Months Ended

Six Months Ended

(In thousands, except share and per share data)

Net income (loss)

Weighted-average shares outstanding

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

Net loss per share - Basic

Net loss per share - Diluted

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

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

Net income (loss) per share - Basic

Net income (loss) per share - Diluted

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

Three Months Ended

Six Months Ended

Restricted stock units

7 unchanged sentences

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1).

The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2).

The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical

or similar assets or liabilities in non-active markets or other observable inputs (Level 2).

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

As of March 31, 2024, our obligations under the AffloVest Acquisition earn-out arrangements had been paid in full.

As of June 30, 2024, our obligations under the AffloVest Acquisition earn-out arrangements had been paid in full.

Prior to the determination of the actual amount of the earn-out, the earn-out liability was valued by employing a Monte Carlo Simulation model in a risk-neutral framework, which is a Level 3 input.

9 unchanged sentences

Fair value adjustments

Earn-out liability at March 31, 2023

Earn-out liability at June 30, 2023

On May 25, 2023, the Company paid $ 5.0 million, plus an imputed interest payment of $ 250,000 , relating to the initial earn-out.

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements