What changed in this filing

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Item 1A. Risk Factors

2025-02-18 compared with 2024-02-20 · 123 added, 135 removed, 808 unchanged (24% of the section changed)

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Risks Related to Our Business, Operations and Strategy

Current or worsening economic conditions, including inflation, rising interest rates or a recession, could adversely affect our business and financial condition.

General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.

Further, current or worsening economic conditions may adversely impact payment terms or rates, and the amount spent on healthcare generally, which could result in decreased demand for our products.

Changes to the level of Medicare coverage or coverage criteria for our products could have an adverse effect on our business and results of operations.

Determinations of which products or services will be reimbursed under Medicare can be developed at the national level through a National Coverage Determination, or NCD, by CMS, or at the local level through a Local Coverage Determination, or LCD, by the two regional Durable Medical Equipment (DME) Medicare Administrative Contractors (MACs), which are private contractors that process and pay claims on behalf of CMS for different regions.

The NCD for Pneumatic Compression Devices (PCDs) was established on January 14, 2002 and the LCD for PCDs was established by the MACs on October 1, 2015.

On November 14, 2024 the LCD for PCDs was retired, and therefore the NCD will apply to all PCDs.

We are not able to predict how the application of the NCD to PCDs that were previously covered by the LCD will impact coverage determinations, but unfavorable interpretations may occur.

The remaining NCDs may be subject to review and revision from time to time, and a new LCD may be developed, which may not be favorable for coverage of our products.

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

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

Given the evolving nature of the healthcare industry and ongoing healthcare cost reforms, we are and will continue to be subject to changes in the level of Medicare coverage for our products, and unfavorable coverage determinations at the national or local level could adversely affect our business and results of operations.

If we are unable to achieve and maintain adequate levels of coverage or reimbursement for our products, our business and results of operations will be adversely affected.

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If we are forced to lower the price we charge for our products, our gross margins will decrease, which will adversely affect our business, financial condition and results of operations.

Also, insurance benefit levels vary substantially by health plan, meaning that some patients have high annual out-of-pocket medical costs, which may make it difficult for those patients to afford our products.

Also, insurance benefits vary substantially by health plan, meaning that some patients have high annual out-of-pocket medical costs, which may make it difficult for those patients to afford our products.

Third-party payers, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs.

In the United States, no uniform policy of coverage and reimbursement for our products exists among third-party payers.

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.

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.

If we are unable to expand coverage of our products by additional commercial payers, or if third-party payers that currently cover or reimburse for our products reverse or limit their coverage or reimbursement levels in the future, our business and results of operations could be adversely affected.

In the United States reimbursement for our products exists among the majority of third-party payers.

However, reimbursement trends and coverage for our products can differ significantly between third-party payers.

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 any 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.

If we are unable to expand coverage of our products by additional commercial payers, or if third-party payers that currently cover or reimburse for our products reverse

or limit their coverage or reimbursement in the future, our business and results of operations could be adversely affected.

Further, we believe that future coverage and reimbursement may be subject to increased restrictions, such as additional preauthorization requirements.

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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.

Changes to the level of Medicare coverage or coverage criteria for our products could have an adverse effect on our business and results of operations.

Determinations of which products or services will be reimbursed under Medicare can be developed at the national level through a National Coverage Determination, or NCD, by CMS, or at the local level through a Local Coverage Determination, or LCD, by the four regional Medicare Administrative Contractors, which are private contractors that process and pay claims on behalf of CMS for different regions.

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

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

If we are unable to expand, manage and maintain our direct sales and marketing organizations, as well as our relationships with distributors, we may not be able to generate anticipated revenue.

Our operating results are directly dependent upon the sales and marketing efforts of our employees and upon our relationships with our distributors and their sales and marketing efforts.

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

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.

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 and the first half of 2024.

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 Plus, Entre Plus and AffloVest systems.

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

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

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

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.

Our lymphedema products accounted for 88% and 86% of our revenue for the years ended December 31, 2023 and 2022, respectively.

We expect that sales of our lymphedema products will continue to account for a majority of our revenue going forward.

Therefore, our ability to execute our growth strategy will depend not only upon increasing awareness of lymphedema, but also on the adoption of our products to treat this condition.

Many physicians and clinicians may have experience with, and/or invested substantial resources in, developing expertise in traditional or alternative treatments for lymphedema, which may make them less willing to adopt our products.

If our lymphedema products fail to achieve wide market acceptance for any reason, our business, financial condition and results of operations could be adversely affected.

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.

We are increasingly dependent on sophisticated information technology and if we fail to effectively maintain or protect our information systems or data, including from cyber-attacks or data breaches, our business could be adversely affected.

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In addition, we accept payments for many of our sales through credit and debit card transactions, which are handled through a third-party payment processor.

As a result, we are subject to a number of risks related to credit and debit card payments, including that we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our products or experience an increase in our costs and expenses.

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

our costs and expenses.

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

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

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Failure to comply with these rules or requirements may result in fines and higher transaction fees, or we may lose the ability to accept credit and debit card payments from our patients, and there may be an adverse impact on our business.

Consolidation in the healthcare industry could lead to demands for price concessions, which may impact our ability to sell our products at prices necessary to support our current business strategies.

Healthcare costs have risen significantly over the past decade, which has resulted in or led to numerous cost reform initiatives by legislators, regulators and third-party payers.

Cost reform has triggered a consolidation trend in the healthcare industry to aggregate purchasing power, which may create more requests for pricing concessions in the future.

We expect that market demand, government regulation, third-party coverage and reimbursement policies and societal pressures will continue to change the healthcare industry worldwide, resulting in further business consolidations and alliances among our payers, which may exert increasing downward pressure on the prices of our products in the future.

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

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● increase clinician and consumer awareness of these diseases, which are often underserved;

● introduce the clinical and economic benefits of our solutions to physicians, therapists and other clinicians across several specialties and in various clinical settings;

● introduce the clinical and economic benefits of our solutions to physicians, clinical lymphatic therapists and other clinicians across several specialties and in various clinical settings;

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

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If these key opinion leaders choose to not support our products, our ability to achieve broad market acceptance for our products may be impaired.

If we are unable to expand, manage and maintain our direct sales and marketing organizations, as well as our relationships with distributors, we may not be able to generate anticipated revenue.

Our operating results are directly dependent upon the sales and marketing efforts of our employees and upon our relationships with our distributors and their sales and marketing efforts.

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

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.

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

Our lymphedema products accounted for 89% and 88% of our revenue for the years ended December 31, 2024 and 2023, respectively.

We expect that sales of our lymphedema products will continue to account for a majority of our revenue going forward.

Therefore, our ability to execute our growth strategy will depend not only upon increasing awareness of lymphedema, but also on the adoption of our products to treat this condition.

If our lymphedema products fail to achieve wide market acceptance for any reason, our business, financial condition and results of operations could be adversely affected.

Current or worsening economic conditions, including inflation, rising interest rates or a recession, could adversely affect our business and financial condition.

General global economic downturns and macroeconomic trends, including inflation, capital market volatility, interest rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.

Further, current or worsening economic conditions may adversely impact payment terms or rates, and the amount spent on healthcare generally, which could result in decreased demand for our products.

Our business, financial condition and results of operations may be negatively impacted by health epidemics or other outbreaks.

Health epidemics and other disease outbreaks have had, and in the future could have, a material adverse effect on our business, financial condition and results of operations.

In particular, such epidemics or outbreaks could result in a decline in the number of patients that healthcare facilities and clinics are able to treat, as well as staffing challenges.

The extent to which health epidemics and disease outbreaks could impact our business, financial condition and results of operations depends 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.

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.

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

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

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

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.

In particular, payers and physicians may see limitations in the design and results of the studies for a number of reasons, including 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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We cannot assure you that any data that we or others generate will be consistent with that observed in the existing studies or that results will be maintained beyond the time points studied.

We also cannot assure you that any data that may be collected will be compelling to the medical community because the data may not be scientifically meaningful or may not demonstrate that our products are attractive alternatives to traditional treatments.

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.

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.

patents covering various aspects of our Flexitouch system expired in 2017.

Given the expiration of these patents, third parties may be permitted to incorporate aspects of our Flexitouch system into their products or create substantially similar or generic versions of our Flexitouch system.

This could subject us to increased competition from products attempting to replicate our technology.

Moreover, these competitors could sell their competing products for a substantially lower price, which could substantially limit our opportunity to increase or maintain revenue from our Flexitouch system and, in fact, our revenue could be substantially reduced, causing a material adverse effect on our business.

Consolidation in the healthcare industry could lead to demands for price concessions, which may impact our ability to sell our products at prices necessary to support our current business strategies.

Healthcare costs have risen significantly over the past decade, which has resulted in or led to numerous cost reform initiatives by legislators, regulators and third-party payers.

Cost reform has triggered a consolidation trend in the healthcare industry to aggregate purchasing power, which may create more requests for pricing concessions in the future.

Changes in government trade policies, including additional tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations.

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Our competitors may develop and patent processes or products earlier than us, obtain regulatory clearance or approvals for competing devices more rapidly than us or develop more effective or less expensive products or technologies that render our technology or products obsolete or less competitive.

Current or future competitors could develop alternative technologies, including pharmaceuticals or surgeries, that treat the conditions that our products treat, which could impact our sales in the future.

We also face fierce competition in recruiting and retaining qualified sales, scientific, reimbursement and management personnel, particularly those with direct-to-patient and -provider experience.

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Developing products is expensive and time-consuming and could divert management's attention away from our business.

We may not be successful in developing new products or enhancements to existing products.

We may not be successful in developing new products or enhancements to

existing products.

Further, we may expend financial, management and operational resources on products that we are not able to successfully commercialize.

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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.

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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.

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.

We may be unable to manage our growth effectively.

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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.

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.

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There can be no assurance that our internal procedures to minimize risks that may arise from quality issues will be able to eliminate or mitigate occurrences of these issues and associated liabilities.

If the quality of our products does not meet the expectations of physicians or patients, then our brand and reputation could suffer and our business could be adversely impacted.

If the quality of our products does

not meet the expectations of physicians or patients, then our brand and reputation could suffer and our business could be adversely impacted.

If our facilities are damaged or become inoperable, we will be unable to continue to research, develop, manufacture and commercialize our products and, as a result, there will be an adverse impact on our business until we are able to secure a new facility.

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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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Our operations also are subject to state laws governing, among other things, distribution of medical equipment and certain types of home health activities, and we are required to obtain and maintain licenses in many states to act as a durable medical equipment supplier.

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.

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 sales, 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 claims submitted for payment of services rendered.

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● post-market approval studies;

● product import and export.

● product and component import and export.

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.

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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.

Such a device is commonly known as a ‘‘predicate device.’’ In 2019, the FDA released a final guidance for industry regarding 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.

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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 and in-depth 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 more 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.

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The advantage of the De Novo process is that it generally requires less data than a premarket approval.

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

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

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.

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

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

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● recalling our products or mandating a product correction;

● detaining our products at U.S.

● detaining our products or their components at U.S.

● delaying the introduction of our products into the market;

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

For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA published new guidance on the 510(k) regulatory pathway in 2014, and again in 2023 through draft guidance, which altered and clarified the manner in which the 510(k) regulatory pathway is administered and interpreted.

For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA published a draft guidance on the 510(k) regulatory pathway in 2014, finalized in 2019, 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.

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Regulatory enforcement or inquiries, or other increased scrutiny on us, could affect the perceived safety and efficacy of our products and dissuade patients and clinicians from using our products.

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 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 and Nimbl systems are 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.

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.

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Federal false claims laws prohibit, in part, any person from knowingly presenting or causing to be presented a false claim for payment to the federal government, or knowingly making or causing to be made a false statement to obtain payment.

The majority of states also have statutes or regulations similar to the Federal Anti-Kickback Statute and Federal False Claims Act, which apply to items or services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of payer.

The majority of states also have statutes or regulations similar to the Federal Anti-Kickback Statute and Federal False Claims Act that apply to items or services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of payer.

These false claims statutes allow any person to bring suit in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statutes) and to share in any amounts paid by the entity to the government in fines or settlement.

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

We are aware of two qui tam complaints against us, which allege violations related to the Federal Anti-Kickback Statute and the Federal False Claims Act.

See Item 3., “Legal Proceedings,” for additional information regarding these actions.

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

In addition, the ACA, among other things, amended the intent requirement of the Federal Anti-Kickback Statute and criminal healthcare fraud statutes.

A person or entity does not need to have actual knowledge of this statute or specific intent to violate it.

A person or entity does not need to have actual knowledge of this statute

or specific intent to violate it.

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

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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.

The ACA imposed 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.

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

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.

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.

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.

If we modify our FDA cleared devices, we may need to seek additional clearances or approvals, which, if not granted, would prevent us from selling our modified products.

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If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or premarket approval for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

Furthermore, the FDA's ongoing review of the 510(k) program may make it more difficult for us to make modifications to our previously cleared products, either by imposing more strict requirements on when a manufacturer must submit a new 510(k) for a modification to a previously cleared product, or by applying more onerous review criteria to such submissions.

Furthermore, the FDA's ongoing review of the 510(k) program may make it more difficult for us to make modifications to our previously cleared products, either by imposing more strict requirements as to when a manufacturer must submit a new 510(k) for a modification to a previously cleared product, or by applying more onerous review criteria to such submissions.

If the FDA requires us to cease marketing a modified device until we obtain a new 510(k) clearance or premarket approval, our business, financial condition, operating results and future growth prospects could be materially adversely affected.

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If our products are misused or used with improper technique, we may become subject to costly litigation by our clinicians or their patients.

We can be subject to lawsuits, whether or not our product is proven to be defective and whether or not our employees have adequately trained the physicians.

We can be subject to lawsuits, whether or not our product is proven to be defective and whether or not our employees have

adequately trained the physicians.

Product liability claims could divert management's attention from our core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance.

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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.

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● withdrawing 510(k) clearances or premarket approvals that have already been granted;

● refusal to grant import of our products or components;

● refusal to grant export approval for our products;

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This 2% reduction based on the sequestration was suspended in 2020 due to the public health emergency, and Congress extended the sequestration moratorium through March 31, 2022.

From April 1, 2022 through June 30, 2022, the reduction went back into effect at a 1% reduction level, and beginning July 1, 2022, the reduction returned to a 2% reduction level.

From April 1, 2022 through June 30, 2022, the reduction went back into effect at a 1% reduction level, and beginning July 1, 2022, the reduction returned to a 2%

reduction level.

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

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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 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;

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

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

Responding to any action or threat of action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and

divert our management's attention from the operation of our business.

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

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For example, several U.S.

territories and all 50 states now

have data breach laws that require timely notification to individual victims, and at times regulators, if a company has experienced the unauthorized access or acquisition of sensitive personal data.

territories and all 50 states now have data breach laws that require timely notification to individual victims, and at times regulators, if a company has experienced the unauthorized access or acquisition of sensitive personal data.

Other state laws contain additional disclosure obligations for businesses that collect personal information about residents and afford those individuals additional rights relating to their personal information that may affect our ability to use personal information or share it with our business partners.

For example, California has laws that g ive California residents certain privacy rights in the collection and disclosure of their personal information and requires businesses to make certain disclosures and take certain other acts in furtherance of those rights, and has recently created a new agency, the California Privacy Protection Agency, authorized to implement and enforce California’s privacy laws, which could result in increased privacy and information security regulatory actions.

states, such as Virginia, Utah, Connecticut, and Colorado, have passed consumer privacy laws that become effective in 2023.

For example, California has laws that g ive California residents certain privacy rights in the collection and disclosure of their personal information and requires businesses to make certain disclosures and take certain other acts in furtherance of those rights, and has created a new agency, the California Privacy Protection Agency, authorized to implement and enforce California’s privacy laws, which could result in increased privacy and information security regulatory actions.

states have passed, or are considering passing, consumer privacy laws.

We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.

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

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

Product liability claims may be brought against us by patients, clinicians or

others selling or otherwise coming into contact with our products, among others.

If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities and reputational harm.

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While we may attempt to manage our product liability exposure by proactively recalling or withdrawing from the market any defective products, any recall or market withdrawal of our products would delay the supply of those products to our distributors, clinicians and patients and may impact our reputation.

We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may

be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result.

We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result.

Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk when considering the use of our products, either of which could have an adverse impact on our business.

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

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

It is not always possible to identify and deter employee and other third-party misconduct, and the steps we take to detect, prevent and remedy any such activity may

not protect us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.

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

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

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

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

information technology;

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

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We 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.

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

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

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

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

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

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

● adversely affect the market price of our common stock.

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

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.

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

We believe our cash, cash equivalents 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.

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

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

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In addition, the imposition of sales and use taxes on our products going forward would effectively increase the cost of our products to our customers and may adversely affect demand for our products.

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

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, 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.

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 Plus system sales.

Risks Related to Our Intellectual Property

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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.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and further, competitors may export otherwise infringing products to territories where we have patent protection but enforcement rights are not as strong as those in the United States.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and further, competitors may export otherwise infringing products to territories where we have patent protection, but enforcement rights are not as strong as those in

the United States.

These products may compete with our products in jurisdictions where we do not have any issued patents, and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

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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

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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The United States Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent prosecution process.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on any issued patent and/or pending patent applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of a patent or patent application.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on any issued patent and/or pending patent applications are due to be paid to

the USPTO and foreign patent agencies in several stages over the lifetime of a patent or patent application.

We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees.

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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.

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.

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There may be third-party patents or patent applications with claims to products, materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our products, that we failed to identify.

For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States may remain confidential until issued as patents.

For example, certain applications filed in the United States that will not be filed outside the United States may remain confidential until issued as patents.

Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of approximately 18 months after the earliest filing.

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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 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.

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patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other medical device companies, our success is heavily dependent on intellectual property, particularly on obtaining and enforcing patents.

As is the case with other medical device companies, our success may be dependent on intellectual property, particularly on obtaining and enforcing patents.

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

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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.

In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.

addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.

Depending on decisions by the U.S.

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We have become aware from time to time that third parties may be infringing on our patents or other intellectual property rights.

Because of the expense and uncertainty of litigation, we have concluded in the past and may conclude in the future that even if a third party is infringing our patents or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our stockholders.

In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution.

Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing on our patents or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action will determine our enforcement posture.

Intellectual property rights do not address all potential threats to our competitive advantage.

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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

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

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.

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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.

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Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements with our directors and officers provide that we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law;

at our request, to the fullest extent permitted by Delaware law;

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.

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