What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-18 compared with 2024-02-20 · 69 added, 91 removed, 227 unchanged (41% of the section changed)

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Our solutions deliver cost-effective, clinically proven, long-term treatment for people with these chronic diseases.

Our current lymphedema products are the Flexitouch Plus and Entre Plus systems and our airway clearance product is the AffloVest.

Our current lymphedema products are the Flexitouch Plus, Entre Plus and Nimbl systems and our airway clearance product is the AffloVest.

A predecessor to our Flexitouch system received 510(k) clearance from the U.S.

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

Nimbl, our next-generation pneumatic compression platform, received 510(k) clearance in June 2024 and, beginning in October 2024, is commercially available throughout the United States for the treatment of upper extremity lymphedema with planned expansion to lower extremity in 2025.

Sales and rentals of our lymphedema products represented 89% and 88% of our revenue in the years ended December 31, 2024 and 2023, respectively.

On September 8, 2021, we acquired the assets of the AffloVest airway clearance product line from International Biophysics Corporation (“IBC”), a privately-held company which developed and manufactured AffloVest.

On September 8, 2021, we acquired the assets of the AffloVest airway clearance product line.

AffloVest is a portable, wearable vest that provides airway clearance to treat patients with chronic respiratory conditions such as bronchiectasis or conditions resulting from neuromuscular disorders.

For the years ended December 31, 2024 and 2023, sales of AffloVest represented 11% and 12% of our revenue, respectively.

To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of our direct sales force, training resources, reimbursement capabilities and clinical expertise.

To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of our direct sales force, DME sales team, patient education team, reimbursement capabilities and clinical expertise.

We market our lymphedema products in the United States using a direct-to-patient and -provider model.

The AffloVest device is sold through respiratory durable medical equipment providers throughout the United States that service patients and bill third-party payers for the product.

We also employ a small group of respiratory specialists, who educate DME representatives, provide product demonstrations for targeted clinicians and support technical

questions related to the AffloVest.

As of December 31, 2023, we employed 254 field sales representatives for our lymphedema products and a team of 16 supporting our airway clearance products.

This compares to 241 field sales representatives (excluding 9 key account managers) for our lymphedema products and a team of 10 specialists supporting our airway clearance products as of December 31, 2022.

We also employ a small group of respiratory specialists, who educate DME representatives, provide product demonstrations for targeted

clinicians and support technical questions related to the AffloVest.

As of December 31, 2024, we employed 169 account managers and 111 specialists for our lymphedema products and a team of 18 specialists supporting our airway clearance products.

This compares to 150 account managers and 104 specialists for our lymphedema products and a team of 16 specialists supporting our airway clearance products as of December 31, 2023.

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

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We conduct final assembly of the garments used with our products, perform quality assurance and ship our products from our facility in Minnesota.

The AffloVest device continued to be manufactured and shipped by IBC on our behalf pursuant to a Transition Services Agreement through April 30, 2022.

On May 1, 2022, we began manufacturing and shipping the AffloVest device from our Minnesota-based facility.

We manufacture and ship the AffloVest device from our Minnesota-based facility.

In July 2022, we launched Kylee™, a free mobile application that allows for patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources.

For the year ended December 31, 2023, we generated revenue of $274.4 million and had net income of $28.5 million, compared to revenue of $246.8 million and a net loss of $17.9 million for the year ended December 31, 2022, and revenue of $208.1 million and a net loss of $11.8 million for the year ended December 31, 2021.

For the year ended December 31, 2024, we generated revenue of $293.0 million and had net income of $17.0 million, compared to revenue of $274.4 million and net income of $28.5 million for the year ended December 31, 2023, and revenue of $246.8 million and a net loss of $17.9 million for the year ended December 31, 2022.

Our primary sources of capital since our initial public offering in 2016 have been from operating income, bank financing and our public offering in February 2023.

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Components of our Results of Operations

We derive revenue from sales and rentals of our Flexitouch Plus and Entre Plus systems to patients in the United States.

We derive revenue from sales and rentals of our Flexitouch Plus, Entre Plus and Nimbl systems to patients in the United States.

Revenue growth has been driven by increased clinician, patient and payer awareness of lymphedema and the clinical efficacy of our Flexitouch Plus system, and the launch of our Entre Plus system in March 2023.

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However, any reversal in these recent trends could have a negative impact on our future revenue.

We sell or rent our Flexitouch Plus and Entre Plus systems either directly to patients or to the Veterans Administration on behalf of patients, who are referred to us by physicians, therapists or nurses.

We sell or rent our Flexitouch Plus, Entre Plus and Nimbl systems either directly to patients or to the Veterans Administration on behalf of patients, who are referred to us by physicians, clinical lymphatic therapists or nurses.

We bill payers, such as private insurers, Medicare, or Medicaid, on behalf of our patients and bill patients directly for their cost-sharing amounts, including any portion of an unsatisfied deductible and any copayments or co-insurance.

We bill the Veterans Administration directly for the purchase or lease of our product on behalf of the patient.

Approximately 10% of our revenue in each of 2023 and 2022 came from the Veterans Administration.

Approximately 11% of our revenue in 2024 and 10% of our revenue in 2023

came from the Veterans Administration.

Approximately 18% of our revenue in 2024 and 24% of our revenue in 2023 came from Medicare patients.

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Revenue Recognition

We derive revenue from the sales and rentals of our proprietary line of Flexitouch Plus and Entre Plus systems, and from sales of our AffloVest product.

We derive lymphedema product revenue from the sales and rentals of our proprietary line of Flexitouch Plus, Entre Plus and Nimbl systems.

We recognize revenue when control of the product has been transferred to our customer, in the amount of the expected consideration to be received for the product.

Expected consideration is estimated as follows:

● Flexitouch Plus and Entre Plus systems.

● Flexitouch Plus, Entre Plus and Nimbl systems.

Expected consideration to be received is estimated based on a detailed review of historical pricing adjustments and collections.

Specifically, payment history of the applicable payer, as well as historical patient collections, serve as primary sources of information in estimating expected consideration.

● AffloVest product.

Expected consideration to be received is based on agreements in place with DME providers.

We update our assessment of collectability on a quarterly basis, with any adjustments for Flexitouch Plus and Entre Plus systems being reflected as sales and rental revenue and AffloVest products being reflected as bad debt expense within reimbursement, general and administrative expenses in the Consolidated Statements of Operations in the period of adjustment.

We update our assessment of collectability on a quarterly basis, with any adjustments for Flexitouch Plus, Entre Plus and Nimbl systems being reflected as sales and rental revenue in the Consolidated Statements of Operations in the period of adjustment.

If in the future we determine that another method is more reasonable, or if another method for calculating these input assumptions is prescribed by authoritative guidance, the expected consideration associated with the sales and rentals of our products could change significantly.

Changes in contractual pricing, payment trends and rebate structures would impact, either positively or negatively, our sales and rental revenue.

Stock-Based Compensation

The fair value of stock options is estimated at the date of grant, using the Black-Scholes option-pricing model.

We recognize the fair value of each award as an expense on a straight-line basis over the requisite service period, which is generally the vesting period of the equity grant.

The Black-Scholes valuation model requires the input of highly subjective assumptions, including the expected term of the option, the expected volatility of the price of our common stock, the risk-free interest rate and the expected dividend yield.

These estimates involve inherent uncertainties and the significant application of management's judgment.

If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

We determined weighted-average valuation assumptions as follows:

● Expected term .

We use the "simplified method" to determine the expected term of the stock option.

● Expected volatility .

Expected volatility for grants issued in and prior to the first fiscal quarter of 2021 was estimated using the average historical volatility of public companies of similar size and industry over a similar period as the expected term assumption used for our options.

Beginning in the second fiscal quarter of 2021, we had sufficient historical data to transition to utilizing our average historical volatility over a similar period as the expected term assumption used for our options as the expected volatility.

● Risk-free interest rate .

The risk-free interest rate is based on the yields of U.S.

Treasury securities with maturities similar to the expected term of the options for each option group.

● Expected dividend yield .

We have never declared or paid any cash dividends on our common stock and do not presently plan to pay cash dividends on our common stock in the foreseeable future.

Consequently, we use an expected dividend yield of zero.

If in the future we determine that another method is more reasonable, or if another method for calculating these input assumptions is prescribed by authoritative guidance, the fair value calculated for our stock options could change significantly.

Higher volatility and longer expected lives would result in an increase to stock-based compensation expense determined at the date of grant.

Stock-based compensation expense affects our cost of revenue, sales and marketing expenses, research and development expenses, and reimbursement, general and administrative expenses.

We estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior and other factors.

Quarterly changes in the estimated forfeiture rate can have a significant effect on reported stock-based compensation expense, as the cumulative effect of adjusting the rate for all expense amortization is recognized in the period the forfeiture estimate is changed.

If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the consolidated financial statements.

If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the consolidated financial statements.

The effect of forfeiture adjustments was insignificant for the years ended December 31, 2023, 2022 and 2021.

We will continue to use significant judgment in evaluating the expected term, volatility and forfeiture rate related to our stock-based compensation.

Results of Operations

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(In thousands)

Consolidated Statement

Condensed Consolidated Statement

of Operations Data:

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Total operating expenses

Income (loss) from operations

Other expense

Income (loss) before income taxes

Income tax (benefit) expense

Net income (loss)

Income from operations

Interest income

Interest expense

Income before income taxes

Income tax expense (benefit)

“N.M.” Not Meaningful

Revenue increased $18.6 million, or 7%, to $293.0 million in the year ended December 31, 2024, compared to $274.4 million in the year ended December 31, 2023.

The increase in revenue was attributable to an increase of $29.5 million, or 14%, in sales and rentals of the lymphedema product line, partially offset by a decrease of $1.8 million, or 5%, in sales of the airway clearance product line in the year ended December 31, 2023, compared to the year ended December 31, 2022.

The increase in the lymphedema product line revenue in the year ended December 31, 2023, was attributable to increasing productivity of our field sales team and enhancing our portfolio through the development and introduction of new products.

The decrease in the airway clearance product line revenue in the year ended December 31, 2023, was attributable to one large DME provider experiencing slowed placements of our AffloVest system due to the expiration of the COVID-19 Public Health Emergency (PHE) waiver and a return to “pre-public health emergency” eligibility requirements.

Revenue from the Veterans Administration represented 10% of total revenue for each of the years ended December 31, 2023 and 2022.

The increase in revenue was attributable to an increase of $17.6 million, or 7%, in sales and rentals of the lymphedema product line and an increase of $0.9 million, or 3%, in sales of the airway clearance product line in the year ended December 31, 2024, compared to the year ended December 31, 2023.

The increase in the lymphedema product line revenue in the year ended December 31, 2024, was attributable to the growth of our field sales team and ongoing technology and workflow initiatives.

The increase in the airway clearance product line revenue was primarily attributable to the onboarding of a new DME partner in 2024.

Revenue from the Veterans Administration represented 11% and 10% of total revenue for the years ended December 31, 2024 and 2023, respectively.

Revenue from Medicare represented 18% and 24% of total revenue for the years ended December 31, 2024 and 2023, respectively.

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Cost of Revenue and Gross Margin

Cost of revenue increased $8.5 million, or 12%, to $79.3 million during the year ended December 31, 2023, compared to $70.8 million during the year ended December 31, 2022.

The increase in cost of revenue was primarily attributable to the increase in sales and rentals of the lymphedema product line.

Gross margin was 71% in each of the years ended December 31, 2023 and 2022.

Cost of revenue decreased $3.0 million, or 4%, to $76.3 million during the year ended December 31, 2024, compared to $79.3 million during the year ended December 31, 2023.

The decrease in cost of revenue was primarily attributable to lower manufacturing and warranty costs.

Gross margin was 74% and 71% in the years ended December 31, 2024 and 2023, respectively.

Sales and Marketing Expenses

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The increase was primarily attributable to a:

● $0.5 million increase in IT & service fees;

● $0.4 million increase in expenses for new product introductions;

● $2.5 million increase in personnel-related compensation expense;

● $0.2 million increase in educational grants.

These increases were partially offset by a $0.3 million decrease in travel and entertainment expenses and a $0.3 million decrease related to sales meetings and tradeshows.

● $1.6 million increase in travel and entertainment expenses;

● $0.6 million increase in expenses related to meetings and tradeshows ;

● $0.4 million increase in general office and printing expenses.

These increases were partially offset by a $0.2 million decrease in educational grants.

Research and Development Expenses

Research and development (“R&D”) expenses increased $0.7 million, or 10%, to $7.8 million during the year ended December 31, 2023, compared to $7.1 million during the year ended December 31, 2022, which was primarily attributable to an increase in personnel-related expenses.

Research and development (“R&D”) expenses increased $1.0 million, or 13%, to $8.8 million during the year ended December 31, 2024, compared to $7.8 million during the year ended December 31, 2023, which was primarily attributable to a $0.6 million increase in professional fees and a $0.5 million increase in personnel-related expenses.

These increases were partially offset by a $0.1 million decrease in clinical studies.

Reimbursement, General and Administrative Expenses

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● $2.8 million increase in IT related expenses;

● $0.2 million increase in travel and entertainment expenses.

These increases were partially offset by a $1.4 million decrease in occupancy costs, depreciation expense and professional fees.

● $1.3 million increase occupancy costs, depreciation expense and professional fees.

Intangible Asset Amortization and Earn-out

Intangible asset amortization and earn-out expenses decreased $14.4 million to $0.1 million during the year ended December 31, 2023, compared to $14.4 million during the year ended December 31, 2022.

The decrease was due to a benefit of $2.5 million being recorded for the fair value of the earn-out for the twelve months ended December 31, 2023, as actual revenues for the second year earn-out calculation were lower than the estimated 2023 revenues that were used in forecasting the earn-out liability at December 31, 2022.

This compares to an earn-out expense of $11.9 million for the twelve months ended December 31, 2022.

Other Expense, Net

Other expense, net was $2.3 million for the year ended December 31, 2023, compared to $2.7 million for the year ended December 31, 2022.

The decrease was primarily attributable to an increase in interest income.

Intangible asset amortization and earn-out expense increased $2.4 million to $2.5 million during the year ended December 31, 2024, compared to $0.1 million during the year ended December 31, 2023.

The increase was related to there being no earn-out expense in the twelve months ended December 31, 2024, as final payment under the AffloVest acquisition earn-out arrangement was made on November 28, 2023, and therefore there was no change in fair value of an earn-out expense recorded in the twelve months ended December 31, 2024, compared to a decrease in the fair value of the earn-out expense of $2.5 million for the twelve months ended December 31, 2023, due to the lower than expected airway clearance product revenue.

Interest Income and Interest Expense

Interest income increased $1.5 million, or 81%, to $3.4 million during the year ended December 31, 2024, compared to $1.9 million during the year ended December 31, 2023, primarily due to a higher cash balance and the movement of cash into a higher yielding Institutional Insured Liquid Deposit demand account in August 2023.

Interest expense decreased $2.1 million, or 50%, to $2.1 million during the year ended December 31, 2024, compared to $4.1 million during the year ended December 31, 2023, primarily due to the decrease in the outstanding balance of our term loan.

Income Tax Expense

We recorded an income tax benefit of $12.7 million and an income tax expense of $2.4 million for the years ended December 31, 2023 and 2022, respectively.

The current year tax benefit was primarily driven by the release of the valuation allowance related to the future realization of deferred tax assets.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

Based on this evaluation, as of December 31, 2023, we reduced the valuation allowance related to the future realization of deferred tax assets, in part because in the current year we achieved three years of cumulative pretax income in the U.S.

federal tax jurisdiction, and therefore management determined that there was sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $19.4 million are realizable.

We recorded an income tax expense of $6.5 million and an income tax benefit of $12.7 million for the years ended December 31, 2024 and 2023, respectively.

The primary driver of the change was the fact that we did not have a release of a valuation allowance on our deferred tax assets for 2024, while in 2023 there was a release of a valuation allowance to recognize the full value of our deferred tax assets because there was sufficient positive evidence to conclude that it was more likely than not that additional deferred taxes were realizable.

Our business is affected by seasonality.

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Liquidity and Capital Resources

As of December 31, 2023, we had cash and cash equivalents of $61.0 million and net accounts receivable of $54.1 million compared to cash and cash equivalents of $21.9 million and net accounts receivable of $77.9 million as of December 31, 2022.

As of December 31, 2024, we had cash of $94.4 million and net accounts receivable of $44.9 million compared to cash of $61.0 million and net accounts receivable of $54.1 million as of December 31, 2023.

Our primary sources of capital since our initial public offering in 2016 have been from operating income, bank financing and our public offering in February 2023.

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Financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the year ended December 31, 2024, was $40.7 million, resulting from net income of $17.0 million, non-cash net income adjustments of $16.0 million and a change in operating assets and liabilities of $7.7 million.

The positive non-cash net income adjustments consisted primarily of $7.8 million of stock-based compensation expense, $6.8 million of depreciation and amortization expense, $1.1 million of deferred income taxes and $0.3 million of loss on disposal of property and equipment and intangibles.

Cash provided relating to the change in operating assets and liabilities primarily consisted of a decrease in accounts receivable of $9.2 million, a decrease in inventories of $3.9 million and an increase in accrued payroll and related taxes of $1.1 million, partially offset by an increase in prepaid expenses and other assets of $3.9 million, a decrease in income taxes payable of $1.4 million and a decrease in accounts payable of $1.1 million.

Net cash provided by operating activities during the year ended December 31, 2023, was $35.9 million, resulting from net income of $28.5 million and a change in operating assets and liabilities of $15.1 million, which were partially offset by non-cash net income adjustments of $7.8 million.

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The negative non-cash net income adjustments consisted primarily of $19.4 million of deferred income taxes and a $2.5 million change in the fair value of earn-out liability, partially offset by $7.5 million of stock-based compensation expense and $6.5 million of depreciation and amortization expense.

Net cash provided by operating activities during the year ended December 31, 2022, was $5.2 million, resulting from a net loss of $17.9 million and non-cash net income adjustments of $27.7 million, which were offset by a change in net operating assets and liabilities of $4.6 million.

The non-cash net income adjustments primarily consisted of $11.9 million change in fair value of earn-out liability, $9.6 million of stock-based compensation expense, and $6.3 million of depreciation and amortization expense.

Changes in operating assets and liabilities were unfavorably impacted by increasing accounts receivable, net investment in leases and continued investment in inventory designed to meet future projected demand, partially offset by an increase in current liabilities.

Net Cash Used in Investing Activities

Net cash used in investing activities during the year ended December 31, 2024, was $2.5 million, primarily consisting of $2.4 million in purchases of property and equipment primarily related to tenant improvements, production tooling and office equipment and $0.1 million related to the acquisition of patents and other intangible assets.

Net cash used in investing activities during the year ended December 31, 2023, was $2.5 million, primarily consisting of $2.3 million in purchases of property and equipment primarily related to production tooling and office equipment and $0.2 million related to the acquisition of patents and other intangible assets.

Net cash used in investing activities during the year ended December 31, 2022, was $1.9 million, primarily consisting of $1.8 million in purchases of property and equipment primarily related to office equipment, production tooling and tenant improvements and $0.1 million related to the acquisition of patents and other intangible assets.

Net Cash Provided by (Used in) Financing Activities

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities during the year ended December 31, 2024, was $4.8 million, primarily consisting of payments of $3.5 million for the repurchase of our common stock and payments of $3.0 million on our term loan, partially offset by $1.7 million in proceeds from the issuance of common stock under our Employee Stock Purchase Plan (the “ESPP”).

Net cash provided by financing activities during the year ended December 31, 2023, was $5.7 million, primarily consisting of net proceeds from the offering of our common stock of $34.6 million, $8.3 million in borrowings under our term loan, and $1.5 million in proceeds from the issuance of common stock under the ESPP, partially offset by payments of $25.0 million on the revolving credit facility, $10.6 million on the AffloVest earn-out, and $3.0 million on our term loan.

Net cash used in financing activities during the year ended December 31, 2022, was $9.6 million, primarily consisting of payments of $6.0 million on our term loan and a payment of $5.0 million on the AffloVest earn-out, partially offset by $1.4 million in proceeds from exercises of common stock options and the issuance of common stock under the ESPP.

Credit Agreement

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On September 8, 2021, in connection with the closing of the acquisition of the AffloVest business, we borrowed the $30.0 million term loan and utilized that borrowing, together with a draw of $25.0 million under the revolving credit facility and cash on hand, to fund the purchase price.

On February 22, 2022, we entered into a Second Amendment Agreement (the “Second Amendment”), which further amends the Credit Agreement.

On February 22, 2022, we entered into a Second Amendment Agreement (the “Second Amendment”), which further amended the Credit Agreement.

The Second Amendment modified the maximum leverage ratio, the minimum fixed charge coverage ratio and the minimum consolidated EBITDA covenants under the Credit Agreement, and added a minimum liquidity covenant, through the quarter ended June 30, 2023.

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All tenors of term SOFR are subject to a credit spread adjustment of 0.10% (“Adjusted Term SOFR”).

On August 1, 2023, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”), which further amends the Credit Agreement.

On August 1, 2023, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”), which further amended the Credit Agreement.

The Fourth Amendment, among other things, decreased the commitment fees payable under the revolving credit facility and eliminated the temporary increase in the applicable margin for Adjusted Term SOFR loans.

The Fourth Amendment also eliminated the liquidity financial covenant and modified the remaining financial covenants to reflect the termination of the temporary covenant relief period that was in place until June 30, 2023 pursuant to the Second Amendment.

In addition, the Fourth Amendment provided for an additional term loan in the amount of $8.25 million, which we used for a paydown of the revolving

credit facility.

In addition, the Fourth Amendment provided for an additional term loan in the amount of $8.25 million, which we used for a paydown

of the revolving credit facility.

The Fourth Amendment also extended the maturity date of the term loans and revolving credit facility under the Credit Agreement from September 8, 2024 to August 1, 2026.

On November 1, 2024, we entered into a Fifth Amendment Agreement (the “Fifth Amendment”), which further amended the Credit Agreement.

The Fifth Amendment permits the Company to make payments to repurchase shares of its common stock, as long as the Company is not in default before and after giving effect to such repurchases, and as long as such repurchases do not exceed $30.0 million.

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

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For additional information regarding the Credit Agreement, including interest rates, fees and maturities, see Note 11 – “Credit Agreement” of the consolidated financial statements contained in this report.

Share Repurchase Program

On October 30, 2024, our Board of Directors authorized a program to repurchase up to $30.0 million of common stock.

Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both.

The timing and number of shares to be purchased will be based on the price of our common stock, general business and market conditions and other investment considerations and factors.

The share repurchase program expires on October 31, 2026.

The program does not obligate us to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice.

During the three months ended December 31, 2024, we repurchased 195,518 shares for approximately $3.5 million.

We used cash on hand to fund these repurchases.

As of December 31, 2024, approximately $26.5 million remained authorized under the stock repurchase program.

Future Cash Requirements

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(2) We currently lease approximately 150,000 square feet of office space for our corporate headquarters in Minneapolis, Minnesota, under a lease that expires in February 2031 and approximately 63,000 square feet of office, assembly and warehouse space at another facility in Minneapolis, Minnesota, under a lease that expires in March 2027.

We entered into a fleet vehicle program for certain members of our field sales organization in 2016.

At December 31, 2023, we did not have any vehicles under this program with current lease commitments.

Furthermore, we lease office equipment from time-to-time based on our needs and these commitments are classified as operating leases.

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● expansion of our operations;

● IT investments to scale our business;

● response of competitors to our solutions and applications;

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Historically, we have experienced increases in our expenditures consistent with the growth in our revenue, operations and personnel, and we anticipate that our expenditures will continue to increase as we expand our business.

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

Inflation and changing prices did not have a material effect on our business during the year ended December 31, 2024, and we do not expect that inflation or changing prices will materially affect our business for at least the next twelve months.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis