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What changed in LENSAR, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LENSAR, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+378 added−386 removedSource: 10-K (2024-03-04) vs 10-K (2023-03-16)

Top changes in LENSAR, Inc.'s 2023 10-K

378 paragraphs added · 386 removed · 295 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

76 edited+5 added−18 removed222 unchanged
Biggest changeRegulations implementing the new regime were originally scheduled to come into 22 force in July 2023, but the MHRA has recently postponed the mandatory deadline until July 2024. Medical devices bearing CE marks issued by EU notified bodies under the EU Medical Devices Regulation or EU Medical Devices Directive are now subject to transitional arrangements.
Biggest changeMedical devices bearing CE marks issued by EU notified bodies under the EU Medical Devices Regulation or EU Medical Devices Directive are now subject to transitional arrangements. Devices certified under the EU Medical Devices Regulation may be placed on the market in Great Britain under the CE mark June 30, 2030.
More recently, and where the magnitude of astigmatism is higher, toric IOLs may be used to both correct the patient’s near or far vision and address any pre-existing astigmatism. Laser-Assisted Cataract Surgery. In the last 10 to 15 years, special laser systems have been developed to assist surgeons in performing or facilitating the various aspects of the cataract procedures.
More recently, and where the magnitude of astigmatism is higher, toric IOLs may be used to both correct the patient’s near or far vision and address any pre-existing astigmatism. Laser-Assisted Cataract Surgery. In the last 10 to 15 years, special laser systems have been developed to assist surgeons in performing or facilitating the various aspects of cataract procedures.
We are focused on continuous innovation and continue to develop our proprietary, next generation system, the ALLY System. Our ALLY System is designed to combine our current core femtosecond laser technology features with enhanced laser capabilities into a single small unit that allows surgeons to perform a femtosecond laser assisted cataract procedure in a single operating room.
We are focused on continuous innovation and continue to develop our proprietary, next-generation femtosecond laser, the ALLY System. Our ALLY System is designed to combine our current core femtosecond laser technology features with enhanced capabilities into a single small unit that allows surgeons to perform a femtosecond laser assisted cataract procedure in a single operating room.
We believe this improves the efficiency and reproducibility of the procedure for surgeons. • Wireless Transfer of Pre-Operative Data : Pre-operative diagnostic data can be transferred wirelessly from many preoperative corneal topographers and diagnostic devices to our system, which can guide more precise astigmatism planning and reduce or eliminate risks associated with transcription errors and manually marking the eye. • Pre-Operative Data Analysis : With the assistance of our clinical applications and clinical outcomes groups, practices’ individualized astigmatism treatment protocols can be refined and customized based on site specific pre-, intra-, and post-operative data, with the objective to help surgeons to deliver incrementally better patient outcomes over time as compared to earlier generations. • Cataract Density Imaging : Another unique aspect of our Augmented Reality imaging system is the ability of the system to grade and compare the cataract density and tissue specific areas to treat within the lens nucleus.
We believe this improves the efficiency and reproducibility of the procedure for surgeons. • Wireless Transfer of Pre-Operative Data : Pre-operative diagnostic data can be transferred wirelessly from many preoperative corneal topographers and diagnostic devices to our system, which can guide more precise astigmatism planning and reduce or eliminate risks associated with transcription errors and manually marking the eye. 13 • Pre-Operative Data Analysis : With the assistance of our clinical applications and clinical outcomes groups, practices’ individualized astigmatism treatment protocols can be refined and customized based on site specific pre-, intra-, and post-operative data, with the objective to help surgeons to deliver incrementally better patient outcomes over time as compared to earlier generations. • Cataract Density Imaging : Another unique aspect of our Augmented Reality imaging system is the ability of the system to grade and compare the cataract density and tissue specific areas to treat within the lens nucleus.
Other Healthcare Laws Although none of the procedures performed using our products are currently covered by any government or commercial third-party payors, applicable agencies and regulators may nonetheless interpret that we are subject to numerous state and federal healthcare fraud and abuse laws, including anti-kickback, false claims and transparency laws with respect to payments and other transfers of value made to physicians and other licensed healthcare professionals, that are intended to reduce waste, fraud and abuse in the health care industry and analogous state laws that may apply to healthcare items and services by any payors including private insurers and self-pay patients.
Other Healthcare Laws Although none of the procedures performed using our products are currently covered by any government or commercial third-party payors, applicable agencies and regulators may nonetheless interpret that we are subject to 22 numerous state and federal healthcare fraud and abuse laws, including anti-kickback, false claims and transparency laws with respect to payments and other transfers of value made to physicians and other licensed healthcare professionals, that are intended to reduce waste, fraud and abuse in the health care industry and analogous state laws that may apply to healthcare items and services by any payors including private insurers and self-pay patients.
We believe this incentivizes the entire employee base in relation to the successful achievement of the Company’s goals. o Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process. o All full-time employees are eligible for health insurance, paid and unpaid leaves, a retirement plan with company match and immediate vesting, and disability insurance.
We believe this incentivizes the entire employee base in relation to the successful achievement of the Company’s goals. o Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process. 26 o All full-time employees are eligible for health insurance, paid and unpaid leaves, a retirement plan with company match and immediate vesting, and disability insurance.
We do not directly bill any third-party payors; instead, we receive payment from the physician practice, hospital or other facility that uses our devices. Cataract surgery, including the implantation of a basic, single focus IOL, is reimbursed by Medicare but at a relatively low level and that level of reimbursement further declined in recent years.
We do not directly bill any third-party payors; instead, we receive payment from the physician practice, hospital or other facility that uses our 23 devices. Cataract surgery, including the implantation of a basic, single focus IOL, is reimbursed by Medicare but at a relatively low level and that level of reimbursement further declined in recent years.
This enhanced view, which reflects each patient’s own unique eye 13 size and shape, allows surgeons to identify relevant anatomy and specific biometric measurements within the patient’s eye, enabling them to precisely place the laser pulses necessary to accomplish the desired treatment. Surgeons are then able to develop better-informed approaches and subsequent treatment for refractive cataract surgical procedures.
This enhanced view, which reflects each patient’s own unique eye size and shape, allows surgeons to identify relevant anatomy and specific biometric measurements within the patient’s eye, enabling them to precisely place the laser pulses necessary to accomplish the desired treatment. Surgeons are then able to develop better-informed approaches and subsequent treatment for refractive cataract surgical procedures.
Additionally, there has been a recent trend of increased regulation of payments and transfers of value provided to healthcare professionals or entities and many 23 EU member states have adopted national “Sunshine Acts” which impose reporting and transparency requirements (often on an annual basis), similar to the requirements in the United States, on medical device manufacturers.
Additionally, there has been a recent trend of increased regulation of payments and transfers of value provided to healthcare professionals or entities and many EU member states have adopted national “Sunshine Acts” which impose reporting and transparency requirements (often on an annual basis), similar to the requirements in the United States, on medical device manufacturers.
The discovery of previously unknown problems with any of our products, including unanticipated adverse events or 19 adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
To support these commercial efforts, in the United States, we anticipate adding additional field sales professionals, including clinical outcome specialists, and expanding our marketing support and commitment to 14 physician and staff training programs to optimize results and communicate the strengths of our cataract surgery solutions. Outside the United States, we expect to expand the geographical reach of our distributors.
To support these commercial efforts, in the United States, we anticipate adding additional field sales professionals, including clinical outcome specialists, and expanding our marketing support and commitment to physician and staff training programs to optimize results and communicate the strengths of our cataract surgery solutions. Outside the United States, we expect to expand the geographical reach of our distributors.
A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed 17 prior to May 28, 1976 (pre-amendments device) and for which a premarket approval application, or PMA, is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process.
A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a premarket approval application, or PMA, is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process.
The ACA, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
The ACA, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot 24 program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing. Human Capital We are committed to revolutionizing refractive eye surgery.
Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to 25 complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing. Human Capital We are committed to revolutionizing refractive eye surgery.
We believe the clinical data supporting the effectiveness of our laser system in assisting surgeons to achieve desired outcomes will motivate additional patients to seek, and additional surgeons to offer, these more advanced procedures that include implantation of a premium IOL. • Focus on innovation to facilitate surgeon adoption.
We believe the clinical data supporting the effectiveness of our laser system in assisting surgeons to achieve desired outcomes will motivate additional patients to seek, and additional surgeons to offer, these more advanced procedures that include implantation of a premium IOL. 12 • Focus on innovation to facilitate surgeon adoption.
Moreover, we must maintain and grow market acceptance for our laser system and convince physicians and patients that the out-of-pocket costs associated with procedures that use our laser systems will produce their targeted results. If we are unable to accomplish those goals, our business could suffer.
Moreover, we must maintain and grow market acceptance for our laser systems and convince physicians and patients that the out-of-pocket costs associated with procedures that use our laser systems will produce their targeted results. If we are unable to accomplish those goals, our business could suffer.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and 20 that any claims made about the performance and safety of the device are supported by suitable evidence.
Additionally, we pay Oertli an hourly fee for their work under the Development Agreement. We have also entered into a long-term supply agreement with Oertli for the phacoemulsification component of our ALLY System. Competition We participate in the highly competitive global market for treatments for cataracts.
Additionally, we pay Oertli an hourly fee for their work under the 15 Development Agreement. We have also entered into a long-term supply agreement with Oertli for the phacoemulsification component of our ALLY System. Competition We participate in the highly competitive global market for treatments for cataracts.
In addition to improving visual outcomes, our systems are designed to improve the efficiency and simplify the procedure for surgeons by including pre-programmable surgeon preferences, wireless integration with pre-operative diagnostic data, cataract density imaging, and accurate laser incision planning.
In addition 11 to improving visual outcomes, our systems are designed to improve the efficiency and simplify the procedure for surgeons by including pre-programmable surgeon preferences, wireless integration with pre-operative diagnostic data, cataract density imaging, and accurate laser incision planning.
To provide work/life support and resources for employees, we provide access to two Employee Assistance Programs. • Competitive Pay and Benefits : Our compensation programs are designed to align the compensation of our employees with our corporate performance and to provide the proper incentives to attract, retain, and motivate 26 employees to achieve superior results.
To provide work/life support and resources for employees, we provide access to two Employee Assistance Programs. • Competitive Pay and Benefits : Our compensation programs are designed to align the compensation of our employees with our corporate performance and to provide the proper incentives to attract, retain, and motivate employees to achieve superior results.
In addition to patent applications we have filed related to our System, we have pursued and consummated agreements with third parties to acquire patent rights, such as those described below, which provide 15 important exclusivity with respect to our development and commercialization of our ALLY system.
In addition to patent applications we have filed related to our System, we have pursued and consummated agreements with third parties to acquire patent rights, such as those described below, which provide important exclusivity with respect to our development and commercialization of our ALLY system.
Surgeons typically offer the option of an advanced IOL to patients explaining that it is not covered by Medicare and will be an out-of-pocket expense. Use of our LENSAR Laser System and ALLY System is often accompanied by the implantation of an 24 advanced IOL.
Surgeons typically offer the option of an advanced IOL to patients explaining that it is not covered by Medicare and will be an out-of-pocket expense. Use of our LENSAR Laser System and ALLY System is often accompanied by the implantation of an advanced IOL.
The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the investigational protocol is scientifically sound.
The IDE application must be supported by appropriate data, such as animal and laboratory testing 18 results, showing that it is safe to test the device in humans and that the investigational protocol is scientifically sound.
A PMA 18 application, which is intended to demonstrate that a device is safe and effective, must be supported by extensive data, including extensive technical and manufacturing data and data from preclinical studies and human clinical trials.
A PMA application, which is intended to demonstrate that a device is safe and effective, must be supported by extensive data, including extensive technical and manufacturing data and data from preclinical studies and human clinical trials.
Our material registered and unregistered trademarks include: LENSAR, ALLY Adaptive Cataract Treatment System, INTELLIAXIS, INTELLIAXIS REFRACTIVE CAPSULORHEXIS, STREAMLINE, LENSAR CATARACT LASER WITH AUGMENTED REALITY AND DESIGN, ALLY Adaptive Cataract Treatment System Design, and LENSDOCTOR SOFTWARE, INTELLIAXIS-C, and INTELLIAXIS-L.
Our material registered and unregistered trademarks include: LENSAR, ALLY Adaptive Cataract Treatment System, INTELLIAXIS, INTELLIAXIS-C, INTELLIAXIS-L, INTELLIAXIS REFRACTIVE CAPSULORHEXIS, STREAMLINE, LENSAR CATARACT LASER WITH AUGMENTED REALITY AND DESIGN, ALLY Adaptive Cataract Treatment System, ALLY Adaptive Cataract Treatment System logo, and LENSDOCTOR SOFTWARE.
In 2022, Market Scope referenced data from a clinical study of 6,000 patients performed by Warren Hill, MD that estimates that approximately 70 – 90% of cataract patients present with addressable astigmatism prior to cataract surgery. To reduce the need for prescription distance or reading glasses following cataract surgery, it is important that little or no astigmatism remain.
In 2023, Market Scope referenced data from a clinical study of 6,000 patients performed by Warren Hill, MD that estimates that approximately 70 – 90% of cataract patients present with addressable astigmatism prior to cataract surgery. To reduce the need for prescription distance or reading glasses following cataract surgery, it is important that little or no astigmatism remain.
We designed the ergonomics of the system and its wireless capabilities to enable the system to integrate seamlessly into a surgeon’s existing surgical environment. According to Market Scope’s 2022 annual survey, over 80% of U.S. cataract surgeons, indicated the importance of data transfer between diagnostic devices as ‘required’ to ‘nice to have’. • Precision and reproducibility .
We designed the ergonomics of the system and its wireless capabilities to enable the system to integrate seamlessly into a surgeon’s existing surgical environment. According to Market Scope’s 2023 annual survey, over 80% of U.S. cataract surgeons, indicated the importance of data transfer between diagnostic devices as ‘required’ to ‘nice to have’. • Precision and reproducibility .
The overall cost of the ALLY System, may, however, increase due to, among other factors, pricing increases in component parts for our systems resulting from inflationary pressures and related macroeconomic conditions. 11 Our Strengths We attribute our current and anticipated future success to the following factors: • Disruptive technology platform providing improved visual outcomes.
The overall cost of the ALLY System, may, however, increase due to, among other factors, pricing increases in component parts for our systems resulting from inflationary pressures and macroeconomic conditions. Our Strengths We attribute our current and anticipated future success to the following factors: • Disruptive technology platform providing improved visual outcomes.
Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-declare the conformity of its products with the essential requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure requires the intervention of a notified body.
Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-assess the conformity of its products with the essential requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure requires the intervention of a notified body.
On April 5, 2017, the EU Medical Devices Regulation was adopted with the aim of ensuring better protection of public health and patient safety. The EU Medical Devices Regulation establishes a uniform, transparent, predictable and sustainable regulatory framework across the EU for medical devices and ensure a high level of safety and health while supporting innovation.
On April 5, 2017, the EU Medical Devices Regulation was adopted with the aim of ensuring better protection of public health and patient safety. The EU Medical Devices Regulation establishes a uniform, transparent, predictable and sustainable regulatory framework across the EU for medical devices and ensures a high level of safety and health while supporting innovation.
Until Eudamed is fully functional, the corresponding provisions of the EU Medical Devices Directive continue to apply.
Until Eudamed is fully functional, the corresponding provisions of the EU 21 Medical Devices Directive continue to apply.
We believe work-life balance is integral to our employees performing at their best. Given our smaller business orientation, we require individual employees to have broader skillsets and enthusiastic and self-effacing dedication to our team-based working groups. We offer development opportunities that align with professional and personal goals.
We believe work-life balance is integral to our employees performing at their best. Given our smaller business orientation, we require individual employees to have broader skillsets and enthusiastic and collaborative dedication to our team-based working groups. We offer development opportunities that align with professional and personal goals.
Our ALLY System currently is cleared for marketing only in the United States, and our growth, market presence and ability to sell the ALLY System will depend on, among other factors, whether the ALLY System receives regulatory clearance in other regions outside the United States and the timing of these clearances or certifications.
Our ALLY System currently is cleared for marketing in the United States, India, and the Philippines, and our growth, market presence and ability to sell the ALLY System will depend on, among other factors, whether the ALLY System receives regulatory clearance in other regions outside the United States and the timing of these clearances or certifications.
We have entered into various purchase orders, as well as a limited number of long-term supply agreements, for the manufacture and supply of certain components. These arrangements commit us to a remaining minimum purchase obligation of approximately $5.8 million as of December 31, 2022. We expect to meet these requirements. We generally do not maintain large volumes of finished goods.
We have entered into various purchase orders, as well as a limited number of long-term supply agreements, for the manufacture and supply of certain components. These arrangements commit us to a remaining minimum purchase obligation of approximately $6.5 million as of December 31, 2023. We expect to meet these requirements. We generally do not maintain large volumes of finished goods.
We believe there is significant opportunity for us to expand our presence in these countries and other countries where we have no or only a limited number of installed systems. For the year ended December 31, 2022, one customer accounted for 10% of our revenue and no customers accounted for 10% or more of our accounts receivable, net.
We believe there is significant opportunity for us to expand our presence in these countries and other countries where we have no or only a limited number of installed systems. For the year ended December 31, 2023, one customer accounted for 13% of our revenue and no customers accounted for more than 10% of our accounts receivable, net.
In the United States, we sell our products through a direct sales organization that, as of December 31, 2022, consisted of approximately 45 commercial team professionals, including regional sales managers, clinical applications and outcomes specialists, field service, marketing, technical and customer support personnel.
In the United States, we sell our products through a direct sales organization that, as of December 31, 2023, consisted of approximately 60 commercial team professionals, including regional sales managers, clinical applications and outcomes specialists, field service, marketing, technical and customer support personnel.
As of December 31, 2022, we owned approximately 173 issued patents and 114 pending patent applications globally. This portfolio covers key aspects of our technology, including the augmented reality imaging and processing, iris registration and patient interface features of our system. We have also filed and acquired significant patent rights relating to our next generation cataract treatment system.
As of December 31, 2023, we owned approximately 212 issued patents and 112 pending patent applications globally. This portfolio covers key aspects of our technology, including the augmented reality imaging and processing, iris registration and patient interface features of our system. We have also filed and acquired significant patent rights relating to our next generation cataract treatment system.
We have 123 issued foreign patents in a total of 12 countries and regions, including China, Macau, Taiwan, Germany, France, United Kingdom, Italy, Australia, Canada and the European Patent Office.
We have 154 issued foreign patents in a total of 15 countries and regions, including China, Macau, Taiwan, Germany, France, United Kingdom, Italy, Australia, Canada and the European Patent Office.
As of December 31, 2022, we had a total of approximately 270 systems installed in a total of 16 countries, with approximately 40% of those systems in the United States where we have a direct sales relationship with our customers, and with China, South Korea, and Germany representing our largest markets outside the United States, where we sell our products through distributor relationships.
As of December 31, 2023, we had a total of approximately 305 systems installed in a total of 16 countries, with approximately 45% of those systems in the United States where we have a direct sales relationship with our customers, and with China, South Korea, and Germany representing our largest markets outside the United States, where we sell our products through distributor relationships.
The regulation foresees a three-year transitional period and will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek 25 advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
Pursuing marketing of medical devices 20 in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation when our current certificate expire. Medical Devices Directive In the EU, there is currently no premarket government review of medical devices.
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation. Medical Devices Directive In the EU, there is currently no premarket government review of medical devices.
We are continuing to innovate through the ALLY System, which combines all of the features from our LENSAR Laser System with a dual-pulse laser, integrated in a small, compact cataract treatment system that is designed to allow surgeons to perform a femtosecond laser assisted cataract procedure in a single operating room.
The ALLY System combines all of the features from our LENSAR Laser System with a dual-pulse laser, integrated in a small, compact cataract treatment system that is designed to allow surgeons to perform a femtosecond laser assisted cataract procedure in a single operating room.
Additionally, when looking at the average procedures per installed device, each of our systems averaged 503 procedures in 2022 compared to the estimated industry average of 362 procedures per year per installed device, based on a 2022 Cataract Surgical Equipment Market Report.
Additionally, when looking at the average procedures per installed device, each of our systems averaged 445 procedures in 2023 compared to the estimated industry average of 382 procedures per year per installed device, based on a 2023 Cataract Surgical Equipment Market Report.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export approvals for our products; or • criminal prosecution.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export approvals for our products; or • criminal prosecution. 19 Requirements for Surgical Lasers as Radiation Emitting Products In addition to the requirements that apply to medical devices, our devices must also comply with an independent set of requirements that apply to radiation emitting electronic products, which includes lasers.
For example, we have approximately 14 pending US patent applications, 9 issued US patents, 49 pending foreign and PCT applications, and 15 issued foreign patents related to integrated systems. • Proven management team and board of directors. Our senior management team and board of directors consists of seasoned medical device professionals with deep industry experience.
For example, we have approximately 14 pending US patent applications, 11 issued US patents, 53 pending foreign and PCT applications, and 17 issued foreign patents related to integrated systems. • Proven management team and board of directors. Our senior management team and board of directors consist of seasoned medical device professionals with deep industry experience.
The ALLY System’s enhanced laser feature includes the ability to perform laser procedures much faster as well as enabling broader application ability due to it being the only commercial femtosecond laser incorporating a dual pulse laser.
The ALLY System’s enhanced features include the ability to perform laser procedures much faster, as well as enabling broader applications due to it being the only commercial femtosecond laser incorporating a dual-pulse laser.
Based on the 2022 Cataract Surgical Equipment Market Report, it was estimated that we would achieve 16.3% market share in femtosecond laser assisted cataract surgery in 2022 in terms of revenue.
Based on the 2023 Cataract Surgical Equipment Market Report, it was estimated that we would achieve 12.2% market share in femtosecond laser assisted cataract surgery in 2023 in terms of revenue.
Following the transitional period, compliance with the UK regulations will be a prerequisite to be able to affix the UKCA mark to medical devices, without which they cannot be sold or marketed in Great Britain.
However, UKCA marking will not be recognized in the EU. Following the transitional periods, compliance with the UK regulations will be a prerequisite to be able to affix the UKCA mark to medical devices, without which they cannot be sold or marketed in Great Britain.
According to the 2022 Cataract Surgical Equipment Market Report, there were an estimated 2,527 femtosecond laser systems installed at the end of 2022, of which 2,330 were in markets that we service. The number of total femtosecond laser systems installed is expected to grow to over 3,447 devices by 2027.
According to the 2023 Cataract Surgical Equipment Market Report, there were an estimated 2,664 femtosecond laser systems installed at the end of 2023, of which 2,448 were in markets that we service. The number of total femtosecond laser systems installed is expected to grow to over 3,613 devices by 2028.
According to the 2022 Cataract Surgical Equipment Market Report, global estimated cataract/refractive lens exchange surgical procedures are expected to grow from 27.7 million in 2022 to 37.6 million in 2027. In the United States, cataract surgery is expected to increase from almost 4.7 million procedures in 2022 to approximately 5.8 million in 2027.
According to the 2023 Cataract Surgical Equipment Market Report, global estimated cataract surgery and refractive lens exchange surgical procedures (cataract surgery) are expected to grow from 30.8 million in 2023 to 37.2 million in 2028. In the United States, cataract surgery is expected to increase from almost 4.9 million procedures in 2023 to approximately 5.8 million in 2028.
By contrast, worldwide laser-assisted cataract surgery is expected to grow from an estimated 914,000 procedures in 2022 to an estimated 1.3 million procedures in 2027. There are approximately 10,000 ophthalmic surgeons in the United States focused on performing cataract procedures.
By contrast, worldwide laser-assisted cataract surgery is expected to grow from just over 1 million procedures in 2023 to an estimated 1.4 million procedures in 2028. There are approximately 110,000 ophthalmic surgeons in the United States focused on performing cataract procedures.
As of December 31, 2022, we owned approximately 50 U.S. patents, 34 pending U.S. patent applications, 123 issued foreign patents, and 80 pending foreign and Patent Cooperation Treaty applications. Our patents are expected to expire between 2026 and 2038, with some design patents expiring in 2046.
As of December 31, 2023, we owned approximately 58 U.S. patents, 33 pending U.S. patent applications, 154 issued foreign patents, and 79 pending foreign and Patent Cooperation Treaty applications. Our patents are expected to expire between 2026 and 2040, with some design patents expiring in 2046.
Moreover, surgeon reimbursement for these standard procedures continues to decline. More advanced procedures, such as laser-assisted cataract surgery and the use of toric and multifocal premium IOLs, can address these additional vision challenges but are generally not covered by Medicare or other third-party payors.
More advanced procedures, such as laser-assisted cataract surgery and the use of toric and multifocal premium IOLs, can address these additional vision challenges but are generally not covered by Medicare or other third-party payors. Accordingly, patients are required to pay the additional cost associated with the use of these advanced technologies.
We currently have and intend to have long-term supply agreements or sufficient supply of raw material inventory to adequately source the expected near-term demand of our ALLY System.
We currently have and intend to have long-term supply agreements or sufficient supply of raw material inventory to adequately source the expected near-term demand of our ALLY System. We strive to maintain enough inventory of our various component parts to avoid the impact of any supply chain disruptions.
However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the EU Medical Devices Regulation, in particular the obligations described below. 21 The EU Medical Devices Regulation requires that before placing a device, other than a custom-made device, on the market, manufacturers (as well as other economic operators such as authorized representatives and importers) must register by submitting identification information to the electronic system (Eudamed), unless they have already registered.
The EU Medical Devices Regulation requires that before placing a device, other than a custom-made device, on the market, manufacturers (as well as other economic operators such as authorized representatives and importers) must register by submitting identification information to the electronic system (Eudamed), unless they have already registered.
We believe the ALLY System's surgical efficiencies and combined functions the ALLY System offers could help drive broader penetration into the overall cataract surgery market and could potentially create a paradigm shift in the treatment of cataracts and management of astigmatism in cataract surgery.
With that in mind, the ALLY System was designed to offer more functionality and better performance than other laser systems. We believe the ALLY System's surgical efficiencies and combined functions could help drive broader penetration into the overall cataract surgery market and could potentially create a paradigm shift in the treatment of cataracts and management of astigmatism in cataract surgery.
We expect this system could be a considerable advancement and will provide significant surgical workflow and financial benefit to a surgeon’s practice and ASC or hospital. We believe several converging marketplace factors will encourage adoption of our ALLY System.
Based on studies with ALLY System users, this system provides significant surgical workflow time savings and financial benefit to a surgeon’s practice and ASC or hospital. We believe several converging marketplace factors will encourage adoption of our ALLY System.
Under the terms of the Ireland/Northern Ireland Protocol, the EU regulatory requirements continue to apply to medical devices placed on the Northern Ireland market. On June 26, 2022, the MHRA published its response to a 10-week consultation on the future regulation of medical devices in the United Kingdom.
On June 26, 2022, the MHRA published its response to a 10-week consultation on the future regulation of medical devices in the United Kingdom.
We believe that the principal competitive factors in our market include: • improved outcomes for patients; • acceptance by surgeons; • ease of use and reliability; • product price and availability of reimbursement; • product bundling and multiple product purchasing agreements; • technical leadership; • effective marketing and distribution; and • speed to market.
We believe that the principal competitive factors in our market include: • improved outcomes for patients; • acceptance by surgeons; • ease of use and reliability; • product price and availability of reimbursement; • product bundling and multiple product purchasing agreements; • technical leadership; • effective marketing and distribution; and • speed to market. 16 Regulation United States We manufacture and market medical devices and, therefore, are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in foreign jurisdictions.
We have designed our ALLY System to have a small footprint, allowing it to be placed in any operating room or in-off surgery suite, to allow the surgeon to switch seamlessly and quickly between femtosecond laser and phacoemulsification device without moving patients from room-to-room.
This configuration results in significant interruption in the patient flow, by requiring the patient to be moved from one room to the next during the course of the procedure. 10 We have designed our ALLY System to have a small footprint, allowing it to be placed in any operating room or in-office surgery suite, to allow the surgeon to switch seamlessly and quickly between femtosecond laser and the surgeon’s existing phacoemulsification device without moving patients from room-to-room.
Our ALLY System received clearance from the FDA in June 2022, and we executed a controlled and targeted initial launch of the ALLY System beginning in August 2022.
Our ALLY System received clearance from the FDA in June 2022, and we executed a controlled and targeted initial launch of the ALLY System beginning in August 2022. The ALLY System is available to all U.S. cataract surgeons and has also received regulatory clearance in India and the Philippines.
Over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products.
We have modified aspects of some of our devices since receiving regulatory clearance and we have made the determination that new 510(k) clearances or pre-market approvals were not required. 17 Over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products.
Devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until May 26, 2025, provided that the requirements of the transitional provisions are fulfilled. In particular, the certificate in question must still be valid.
In accordance with its recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the EU Medical Devices Regulation transitional provisions may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled.
Accordingly, we are delivering the ALLY System to surgeons in the initial launch with the phacoemulsification features disabled and/or removed. Currently, almost all cataract procedures, whether manual or laser-assisted, involve the use of a phacoemulsification system to fracture and remove the cataract.
Currently, almost all cataract procedures, whether manual or laser-assisted, involve the use of a phacoemulsification system to fracture and remove the cataract.
Many of these competitors are large public companies or divisions of publicly-traded companies and have several competitive advantages, including: • greater financial and human resources for product development and sales and marketing; • significantly greater name recognition; • their own IOLs; • longer operating histories; and • more established sales and marketing programs and distribution networks. 16 Because of the size of the cataract market, we expect that companies will continue to dedicate significant resources to developing and commercializing competing products, and we anticipate that our current marketed products and any future products will be subject to intense competition.
Many of these competitors are large public companies or divisions of publicly-traded companies and have several competitive advantages, including: • greater financial and human resources for product development and sales and marketing; • significantly greater name recognition; • their own IOLs; • longer operating histories; and • more established sales and marketing programs and distribution networks.
A serious incident is defined as any malfunction or deterioration in the characteristics and/or performance of a device, as well as any inadequacy in the labeling or the instructions for use which, directly or indirectly, might lead to or might have led to the death of a patient or user or of other persons or to a serious deterioration in their state of health or a serious public health threat.
A serious incident is any malfunction or deterioration in the characteristics and/or performance of a device on the market (e.g., inadequacy in supplied by the manufacturer, undesirable side-effect), which, directly or indirectly, might lead to either the death or serious deterioration of the health of a patient or user or other persons or to a serious public health threat.
Early data suggests performing a sterile femtosecond-laser-assisted cataract surgery, or FLACS, procedure using the ALLY System resulted in approximately 5-minute time savings or $472 per case and shortened the surgical day.
Early data suggests performing a sterile femtosecond-laser-assisted cataract surgery, or FLACS, procedure using the ALLY System resulted in approximately 8-minute time savings for the surgeon, 19-minute time savings for the surgical staff, and 51-minute savings for the patient, allowing surgeons to shorten their surgery day or treat more patients.
Primarily all of our workforce is based at our corporate headquarters in Orlando, Florida except for our commercial organization, which is spread throughout the United States based upon geographic responsibility. • Culture : We value our employees and the individual and collective contributions employees make to the Company.
As of December 31, 2023, we had approximately 130 employees that support our manufacturing, research and development, commercial and administrative functions. Primarily all of our workforce is based at our corporate headquarters in Orlando, Florida except for our commercial organization, which is spread throughout the United States based upon geographic responsibility.
The following chart shows procedure volume per year from 2015 to 2022: Procedures per Year Source: Management. • Improved visual outcomes that drive more advanced, patient-pay procedures.
The following chart shows procedure volume per year from 2015 to 2023: Procedures per Year Source: Management. • Improved visual outcomes that drive more advanced, patient-pay procedures. Standard cataract procedures are generally covered by Medicare and other third-party payors, including commercial health plans.
This regulation, which entered into force in January 2022 and will become applicable from January 12, 2025 onwards, intends to boost cooperation among EU member states in assessing health technologies, including new medicinal products as well as certain high-risk medical devices, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas.
Once applicable, it will have a phased implementation depending on the concerned products. The Regulation intends to boost cooperation among EU member states in assessing health technologies, including certain high-risk medical devices, and provide the basis for cooperation at the EU level for joint clinical assessments in these areas.
Standard cataract procedures are generally covered by Medicare and other third-party payors, including commercial health plans. 12 However, based on the 2022 Market Scope IOL Market Report, approximately 71.8% of U.S. patients receiving a standard cataract procedure do not have significant astigmatism addressed surgically and must rely on glasses for distance or near vision.
However, based on the 2023 Market Scope IOL Market Report, approximately 83% of global patients receiving a standard cataract procedure do not have significant astigmatism addressed surgically and must rely on glasses for distance or near vision. Moreover, surgeon reimbursement for these standard procedures continues to decline.
However, devices certified under the EU Medical Devices Directive may be placed on the market until either the certificate expires or for three years after the new regulations take effect, whichever is sooner. Following these transitional periods, all medical devices will require a UK Conformity Assessed, or UKCA, mark.
However, devices certified under the EU Medical Devices Directive may be placed on the market June 30, 2030. Following these transitional periods, it is anticipated that all medical devices will require a UK Conformity Assessed, or UKCA, mark. Manufacturers may choose to use the UKCA mark on a voluntary basis until prior to the mandatory deadlines.
For EU member states, in December 2021, Regulation No 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU, was adopted.
For EU member states, in December 2021, Regulation No 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim.
In addition, we submitted the ALLY System for certification in the European Union, or EU, in September 2022 and intend to submit additional marketing or certification applications outside the United States in an effort to commercialize the ALLY System in additional countries and operating regions.
The ALLY System has also received regulatory approval in India and the Philippines. In September 2022, we submitted the ALLY System for certification in the European Union, or EU, and, in 2023, submitted documentation to distributors in South Korea, Taiwan, and China for additional marketing or certification applications.
Manufacturing We manufacture our ALLY System, and previously manufactured our LENSAR Laser System, at a facility in Orlando, Florida. In connection with the commercial launch of the ALLY System, we modified our manufacturing operations from producing the LENSAR Laser System to the ALLY System.
We submitted the ALLY System for certification in the European Union, or EU, in September 2022 and, in 2023, submitted documentation to distributors in South Korea, Taiwan, and China for additional marketing or certification applications. 14 Manufacturing We manufacture our ALLY System, and previously manufactured our LENSAR Laser System, at a facility in Orlando, Florida.
Over 45% of employees have been with the Company five or more years, and over 25% have been with the Company 10 or more years.
Nearly 40% of employees have been with the Company five or more years, and over 20% have been with the Company 10 or more years. In 2023, we experienced a full-time employee turnover rate of approximately 10%. • Culture : We value our employees and the individual and collective contributions employees make to the Company.
Removed
The ALLY System is expected to be made widely available to U.S. cataract surgeons in 2023, and we intend to submit additional marketing or certification applications outside the United States in an effort to commercialize the ALLY System in additional countries and operating regions.
Added
Because of the size of the cataract market, we expect that companies will continue to dedicate significant resources to developing and commercializing competing products, and we anticipate that our current marketed products and any future products will be subject to intense competition.
Removed
Our ability to place systems in 2022 was limited by supply chain constraints that delayed the delivery of certain ALLY System raw materials and the completion and testing of ALLY Systems for use as launch-stock inventory. The FDA clearance is the first stage of a planned, two step commercial release strategy.
Added
However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the EU Medical Devices Regulation, in particular the obligations described below.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFailure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, certifications or approvals; withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our products; and in the most serious cases, criminal penalties. 45 We may not receive, or may be delayed in receiving, the necessary clearances, certifications or approvals for our future products, or modifications to our current products, and failure to timely obtain necessary additional clearances, certifications or approvals for our ALLY System and future products or modifications to our current products would adversely affect our ability to grow our business.
Biggest changeFailure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, certifications or approvals; withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our products; and in the most serious cases, criminal penalties.
Our ability to maintain and increase market acceptance of our products depends on a number of factors, including: • our ability to provide visual outcomes and economic data that show the safety, efficacy and cost effectiveness, including other patient benefits from use, of our LENSAR Laser System, ALLY System or other future products; • acceptance by cataract surgeons and others in the medical community of our LENSAR Laser System and ALLY System; • the potential and perceived advantages and disadvantages of our LENSAR Laser System and ALLY System as compared to competing products; • the willingness of patients to pay out-of-pocket for procedures in which our LENSAR Laser System, ALLY System or other future products is used but for which limited reimbursement by third-party payors, including government authorities, is available; • the effectiveness of our sales and marketing efforts, and of those of our international distributors; • the prevalence and severity of any complications associated with using our LENSAR Laser System or ALLY System; • the ease of use, reliability and convenience of our LENSAR Laser System and ALLY System relative to competing products; • competitive response and negative selling efforts from providers of competing products; • quality of outcomes for patients in procedures in which surgeons use our LENSAR Laser System and ALLY System; • the results of clinical trials and post-market clinical studies relating to the use of our LENSAR Laser System and ALLY System; • the technical leadership of our research and development teams; • the absence of third party blocking intellectual property; • our ability to introduce our products to the market with speed and on time with our projected timelines; • pricing pressure, including from larger, well-capitalized and product-diverse competitors, corporate-owned ASCs, group purchasing organizations, and government payors; and • the availability of coverage and adequate reimbursement for procedures using our LENSAR Laser System, ALLY System or other future products from third-party payors, including government authorities.
Our ability to maintain and increase market acceptance of our products depends on a number of factors, including: • our ability to provide visual outcomes and economic data that show the safety, efficacy, cost effectiveness and other patient benefits from use of our LENSAR Laser System, ALLY System or other future products; • acceptance by cataract surgeons and others in the medical community of our LENSAR Laser System and ALLY System; • the potential and perceived advantages and disadvantages of our LENSAR Laser System and ALLY System as compared to competing products; • the willingness of patients to pay out-of-pocket for procedures in which our LENSAR Laser System, ALLY System or other future products is used but for which limited reimbursement by third-party payors, including government authorities, is available; • the effectiveness of our sales and marketing efforts, and of those of our international distributors; • the prevalence and severity of any complications associated with using our LENSAR Laser System or ALLY System; • the ease of use, reliability and convenience of our LENSAR Laser System and ALLY System relative to competing products; • competitive response and negative selling efforts from providers of competing products; • quality of outcomes for patients in procedures in which surgeons use our LENSAR Laser System and ALLY System; • the results of clinical trials and post-market clinical studies relating to the use of our LENSAR Laser System and ALLY System; • the technical leadership of our research and development teams; • the absence of third party blocking intellectual property; • our ability to introduce our products to the market with speed and on time with our projected timelines; • pricing pressure, including from larger, well-capitalized and product-diverse competitors, corporate-owned ASCs, group purchasing organizations, and government payors; and • the availability of coverage and adequate reimbursement for procedures using our LENSAR Laser System, ALLY System or other future products from third-party payors, including government authorities.
For example, under the Internal Revenue Code of 1986, as amended, and the related rules and regulations, each corporation that was a member of the PDL consolidated U.S. federal income tax reporting group during any taxable period or portion of any taxable period ending on or before the effective time of the Spin-Off is jointly and severally liable for the U.S. federal income tax liability of the entire PDL consolidated tax reporting group for that taxable period.
For example, under the Internal Revenue Code of 1986, as amended, or the Code, and the related rules and regulations, each corporation that was a member of the PDL consolidated U.S. federal income tax reporting group during any taxable period or portion of any taxable period ending on or before the effective time of the Spin-Off is jointly and severally liable for the U.S. federal income tax liability of the entire PDL consolidated tax reporting group for that taxable period.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities or notified bodies, which may include any of the following sanctions: • untitled letters or warning letters; • fines, injunctions, consent decrees and civil penalties; • recalls, termination of distribution, administrative detention, or seizure of our products; • customer notifications or repair, replacement or refunds; • operating restrictions or partial suspension or total shutdown of production; • delays in or refusal to grant our requests for future clearances, certifications or approvals (including foreign regulatory approvals) of new products, new intended uses, or modifications to existing products; • withdrawals or suspensions of our current 510(k) clearances, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities or notified bodies, which may include any of the following sanctions: • untitled letters or warning letters; • fines, injunctions, consent decrees and civil penalties; • recalls, termination of distribution, administrative detention, or seizure of our products; • customer notifications or repair, replacement or refunds; • operating restrictions or partial suspension or total shutdown of production; • delays in or refusal to grant our requests for future clearances, certifications or approvals (including foreign regulatory approvals) of new products, new intended uses, or modifications to existing products; • withdrawals or suspensions of our current 510(k) clearances or certifications, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors, including, among other things: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the ability of our board of directors to determine to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • limitations on the removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairperson of our board of directors, the chief executive officer, the president (in absence of a chief executive officer) or our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors is required to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • the ability of our board of directors, by majority vote, to amend the amended and restated bylaws, which may allow our board of directors to take additional actions to prevent a hostile acquisition and inhibit the ability of an acquirer from amending the amended and restated bylaws to facilitate a hostile acquisition; and 68 • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors, including, among other things: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the ability of our board of directors to determine to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • limitations on the removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairperson of our board of directors, the chief executive officer, the president (in absence of a chief executive officer) or our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors is required to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • the ability of our board of directors, by majority vote, to amend the amended and restated bylaws, which may allow our board of directors to take additional actions to prevent a hostile acquisition and inhibit the ability of an acquirer from amending the amended and restated bylaws to facilitate a hostile acquisition; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
We may experience delays in our ongoing clinical trials for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical trials, including related to the following: • we may be required to submit an Investigational Device Exemption (“IDE”) application to FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and FDA may reject our IDE application and notify us that we may not begin clinical trials, and similar risks may apply in foreign jurisdictions; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators, Institutional Review Boards, or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; • we may not reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • clinical trials may produce negative or inconclusive results, and we may decide, or regulators or notified bodies may require us, to conduct additional clinical trials or abandon product development programs; • the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors, including those manufacturing products or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; 52 • we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; • we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB (or other reviewing bodies), regulatory authorities, or both, for re-examination; • regulators, IRBs, other reviewing bodies, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical trials may be greater than we anticipate; • clinical sites may not adhere to the clinical protocol or may drop out of a clinical trial; • we may be unable to recruit a sufficient number of clinical trial sites; • regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval or certification policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for certification or approval; and • our current or future products may have undesirable side effects or other unexpected characteristics.
We may experience delays in our ongoing clinical trials for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical trials, including related to the following: • we may be required to submit an Investigational Device Exemption, or IDE, application to FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and FDA may reject our IDE application and notify us that we may not begin clinical trials, and similar risks may apply in foreign jurisdictions; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators, Institutional Review Boards, or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; • we may not reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • clinical trials may produce negative or inconclusive results, and we may decide, or regulators or notified bodies may require us, to conduct additional clinical trials or abandon product development programs; • the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors, including those manufacturing products or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; 51 • we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB (or other reviewing bodies), regulatory authorities, or both, for re-examination; • regulators, IRBs, other reviewing bodies, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical trials may be greater than we anticipate; • clinical sites may not adhere to the clinical protocol or may drop out of a clinical trial; • we may be unable to recruit a sufficient number of clinical trial sites; • regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval or certification policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for certification or approval; and • our current or future products may have undesirable side effects or other unexpected characteristics.
In addition, failure to comply with applicable FDA (or other regulatory authorities) requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; suspension or withdrawal of approvals or certifications; seizures or recalls of our products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; the FDA’s (or foreign regulatory authorities’ or notified bodies’) refusal to grant pending or future clearances, certifications or approvals for our products; clinical holds; refusal to permit the import or export of our products; and criminal prosecution of us or our employees.
In addition, failure to comply with applicable FDA (or other regulatory authorities) requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; 48 suspension or withdrawal of approvals or certifications; seizures or recalls of our products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; the FDA’s (or foreign regulatory authorities’ or notified bodies’) refusal to grant pending or future clearances, certifications or approvals for our products; clinical holds; refusal to permit the import or export of our products; and criminal prosecution of us or our employees.
If a dispute arises with a distributor or if a distributor is terminated by us or goes out of business, it may take time to locate an alternative distributor, to seek appropriate regulatory approvals and to train new personnel to market our LENSAR Laser System, and our ALLY System upon receiving regulatory clearance in the applicable region, as well as our ability to sell those systems in the region formerly serviced by such terminated distributor could be harmed.
If a dispute arises with a distributor or if a distributor is terminated by us or goes out of business, it may take time to locate an alternative distributor, to seek appropriate regulatory approvals and to train new personnel to market our LENSAR Laser System, and our ALLY System upon receiving regulatory clearance or certification in the applicable region, as well as our ability to sell those systems in the region formerly serviced by such terminated distributor could be harmed.
We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA (or similar foreign authorities) when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned 50 in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.
We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA (or similar foreign authorities) when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.
In addition, the success of our ALLY System or any other new product offering or product enhancements we pursue will depend on several factors, including our ability to: • properly identify and anticipate cataract surgeon and patient needs; • develop and introduce new products and product enhancements in a timely manner; • exclude competition based on our intellectual property rights; • avoid infringing upon the intellectual property rights of third-parties; • demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials; • obtain the necessary regulatory clearances, certifications or approvals for expanded indications, new products or product modifications; • be fully FDA (or other regulatory authority)-compliant with manufacturing and marketing of new devices or modified products; • provide adequate training to potential users of these products; 30 • receive adequate coverage and reimbursement for procedures performed with our ALLY System or any other products we may develop in the future; and • develop an effective and dedicated sales and marketing team.
The success of our ALLY System or any other new product offering or product enhancements we pursue will depend on several factors, including our ability to: • properly identify and anticipate cataract surgeon and patient needs; • develop and introduce new products and product enhancements in a timely manner; • exclude competition based on our intellectual property rights; • avoid infringing upon the intellectual property rights of third-parties; • demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials; • obtain the necessary regulatory clearances, certifications or approvals for expanded indications, new products or product modifications; • be fully FDA (or other regulatory authority)-compliant with manufacturing and marketing of new devices or modified products; • provide adequate training to potential users of these products; • receive adequate coverage and reimbursement for procedures performed with our ALLY System or any other products we may develop in the future; and • develop an effective and dedicated sales and marketing team.
Data breaches could result in a violation of applicable U.S. and international privacy, data protection and other laws, and subject us to individual or consumer class action litigation and governmental investigations and proceedings by federal, state and local regulatory entities in the United States and by international regulatory entities, resulting in exposure to material civil or criminal liability, or both.
Data breaches could result in a violation of applicable U.S. and international privacy, data protection and other laws, and subject us to individual or 41 consumer class action litigation and governmental investigations and proceedings by federal, state and local regulatory entities in the United States and by international regulatory entities, resulting in exposure to material civil or criminal liability, or both.
Although none of the procedures using our products are currently covered by any state, federal or foreign government healthcare programs or other third-party payors, applicable agencies and regulators may interpret that our commercial, 56 research and other financial relationships with healthcare providers and institutions are nonetheless subject to various federal, state and foreign laws intended to prevent healthcare fraud and abuse, including the following: • the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs.
Although none of the procedures using our products are currently covered by any state, federal or foreign government healthcare programs or other third-party payors, applicable agencies and regulators may interpret that our commercial, 55 research and other financial relationships with healthcare providers and institutions are nonetheless subject to various federal, state and foreign laws intended to prevent healthcare fraud and abuse, including the following: • the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs.
Using these third parties poses a number of risks, such as: • they may not perform to our standards or legal requirements; • they may not produce reliable results; • they may not perform in a timely manner; • they may not maintain confidentiality of our proprietary information; • disputes may arise with respect to ownership of rights to technology developed with our partners, and those dispute may be resolved against us; and • disagreements could cause delays in, or termination of, the research, development or commercialization of our products or result in litigation or arbitration. 65 Moreover, some third parties are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, in addition to country-specific privacy and data security risk given current legal and regulatory environments.
Using these third parties poses a number of risks, such as: • they may not perform to our standards or legal requirements; • they may not produce reliable results; • they may not perform in a timely manner; • they may not maintain confidentiality of our proprietary information; • disputes may arise with respect to ownership of rights to technology developed with our partners, and those dispute may be resolved against us; and • disagreements could cause delays in, or termination of, the research, development or commercialization of our products or result in litigation or arbitration. 64 Moreover, some third parties are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, in addition to country-specific privacy and data security risk given current legal and regulatory environments.
If we fail to comply with our reporting obligations, the FDA (or similar foreign authorities) could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, certification or approval, seizure of our products or delay in clearance, certification or approval of future products.
If we fail to comply with our reporting obligations, the FDA (or similar foreign authorities) could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation 49 of our device clearance, certification or approval, seizure of our products or delay in clearance, certification or approval of future products.
Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts. We are also subject to certain anti-takeover provisions under the Delaware General Corporation Law, or DGCL.
Even in the absence of a takeover attempt, the existence of these 68 provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts. We are also subject to certain anti-takeover provisions under the Delaware General Corporation Law, or DGCL.
Even if this is not the case, our current actions may subsequently be determined to be insufficient by various stakeholders, and we may be subject to investor or regulator engagement on our ESG initiatives and disclosures, even if such initiatives are currently voluntary. Item 1B. Unresolve d Staff Comments. None.
Even if this is not the case, our current actions may subsequently be determined to be insufficient 71 by various stakeholders, and we may be subject to investor or regulator engagement on our ESG initiatives and disclosures, even if such initiatives are currently voluntary. Item 1B. Unresolve d Staff Comments. None.
In addition, the FDA or other regulatory agencies may change their policies, adopt additional regulations, revise existing regulations, or take other actions that 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.
In addition, the FDA or other regulatory agencies may change their policies, adopt additional regulations, revise existing regulations, or take other actions that may prevent or delay approval or clearance 44 of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis.
Our international business operations are subject to a number of risks, including: • difficulties in staffing and managing our international operations; • increased competition as a result of more products and procedures receiving regulatory approval, certification or clearance or otherwise becoming free to market in international markets; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • reduced or varied protection for intellectual property rights in some countries; • export restrictions, trade regulations, and foreign tax laws; • fluctuations in currency exchange rates; • foreign certification and regulatory clearance or approval requirements; • difficulties in developing effective marketing campaigns in unfamiliar international markets; • customs clearance and shipping delays; • political, social, and economic instability abroad, including the ongoing war between Russia and Ukraine, potential conflict between China and Taiwan, terrorist attacks, and security concerns in general; • preference for locally produced products; • potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • the burdens of complying with a wide variety of foreign laws and different legal standards; and • increased financial accounting and reporting burdens and complexities.
Our international business operations are subject to a number of risks, including: • difficulties in staffing and managing our international operations; • increased competition as a result of more products and procedures receiving regulatory approval, certification or clearance or otherwise becoming free to market in international markets; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • reduced or varied protection for intellectual property rights in some countries; • export restrictions, trade regulations, and foreign tax laws; • fluctuations in currency exchange rates; • foreign certification and regulatory clearance or approval requirements; • difficulties in developing effective marketing campaigns in unfamiliar international markets; • customs clearance and shipping delays; • political, social, and economic instability abroad, including the ongoing war between Russia and Ukraine, conflicts in the Middle East, potential conflict between China and Taiwan, terrorist attacks, and security concerns in general; • preference for locally produced products; • potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • the burdens of complying with a wide variety of foreign laws and different legal standards; and • increased financial accounting and reporting burdens and complexities.
However, there is no uniform policy of coverage and reimbursement among payors in 37 the United States. Therefore, coverage and reimbursement for procedures can differ significantly from payor to payor. Many private payors require extensive documentation of a multi-step diagnosis before authorizing procedures using our products.
However, there is no uniform policy of coverage and reimbursement among payors in the United States. Therefore, coverage and reimbursement for procedures can differ significantly from payor to payor. Many private payors require extensive documentation of a multi-step diagnosis before authorizing procedures using our products.
Any product liability claims brought against us, with or without merit, could divert management’s attention from our business, be expensive to defend, result in sizable damage awards against us, damage our reputation, increase our product liability insurance rates, prevent us from securing continuing coverage, or prevent or interfere with commercialization of our products.
Any product liability claims brought against us, with or without merit, could divert management’s attention from our business, be expensive to defend, result in sizable damage awards against us, damage our reputation, increase our product liability insurance rates, prevent us from securing continuing 37 coverage, or prevent or interfere with commercialization of our products.
There can be no assurances that the privacy and security-related measures and safeguards we have put in place in relation to these third parties will be effective to protect us and/ or the relevant personal data from the risks associated with the third-party processing of such data.
There can be no assurances that the privacy and security-related measures and safeguards we have put in place in relation to these third parties will be effective to protect us and/ or the relevant personal information from the risks associated with the third-party processing of such data.
Furthermore, we are required to verify that our suppliers maintain facilities, procedures and operations that comply with our quality standards and applicable regulatory requirements. The FDA enforces the QSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may 49 include the facilities of subcontractors.
Furthermore, we are required to verify that our suppliers maintain facilities, procedures and operations that comply with our quality standards and applicable regulatory requirements. The FDA enforces the QSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may include the facilities of subcontractors.
To the extent our collaborators or the CROs fail to enroll participants for our clinical trials, fail to conduct the study to GCP standards 53 or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both.
To the extent our collaborators or the CROs fail to enroll participants for our clinical trials, fail to conduct the study to GCP standards or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both.
Our future compliance with the annual internal control report 70 requirement will depend on the effectiveness of our financial reporting and data systems and controls across our operating subsidiaries. We cannot be certain that these measures will ensure that we design, implement and maintain adequate controls over our financial processes and reporting in the future.
Our future compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our operating subsidiaries. We cannot be certain that these measures will ensure that we design, implement and maintain adequate controls over our financial processes and reporting in the future.
Pursuant to this allocation, we may be responsible for taxes that we would not have otherwise incurred, or that we would have incurred but in different amounts or at different times, on a standalone basis outside of the PDL consolidated group, and the amount of such 44 taxes could be significant.
Pursuant to this allocation, we may be responsible for taxes that we would not have otherwise incurred, or that we would have incurred but in different amounts or at different times, on a standalone basis outside of the PDL consolidated group, and the amount of such taxes could be significant.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results, cause us to fail to meet our financial reporting obligations, or cause us to suffer adverse regulatory consequences or violate applicable stock exchange listing rules.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results, 70 cause us to fail to meet our financial reporting obligations, or cause us to suffer adverse regulatory consequences or violate applicable stock exchange listing rules.
In addition, clinical trials that are conducted in countries outside the United States may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement of non-U.S.
In addition, clinical trials that are conducted in countries outside the United States may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory 52 requirements and the engagement of non-U.S.
Specifically, any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires a new 510(k) clearance or, possibly, approval of a PMA.
Specifically, any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires a 45 new 510(k) clearance or, possibly, approval of a PMA.
For example, manufacturing and product quality issues may arise as we increase production rates at our manufacturing facility or launch new products. Also, we may not manufacture the right product mix to meet customer demand as we introduce new products.
For example, manufacturing and product quality issues may arise as we increase production rates at our manufacturing facility or launch new products. Also, we may not manufacture the right product mix to meet 39 customer demand as we introduce new products.
Other factors that may cause fluctuations in our quarterly and annual results include: • fluctuations in the demand for the more advanced, patient-pay procedures in which our systems are used; • adoption of our LENSAR Laser Systems and ALLY Systems; • our ability to establish and maintain an effective and dedicated sales organization in the United States and network of independent distributors outside the United States; • pricing pressure applicable to our products from competitor pricing; • results of clinical research and trials on our products or competitive products; • the mix of sales and leases of our systems; • timing of delivery of systems, new product offerings, acquisitions, licenses or other significant events by us or our competitors; • decisions by surgeons, hospitals and ASCs to defer acquisitions of systems in anticipation of the introduction of new products or product enhancements by us or our competitors; 39 • sampling by and additional training requirements for cataract surgeons upon the commercialization of a new product by us or one of our competitors; • regulatory approvals, clearances or certifications and legislative changes affecting the products we may offer or those of our competitors; • interruption in the manufacturing or distribution of our systems; • delays in, or failure of, component and raw material deliveries by our suppliers; • the ability of our suppliers to timely provide us with an adequate supply of components; • the effect of competing technological, industry and market developments; and • changes in our ability to obtain regulatory clearance, certification or approval for our product candidates.
Other factors that may cause fluctuations in our quarterly and annual results include: • fluctuations in the demand for the more advanced, patient-pay procedures in which our systems are used; • adoption of our LENSAR Laser Systems and ALLY Systems; • our ability to establish and maintain an effective and dedicated sales organization in the United States and network of independent distributors outside the United States; • pricing pressure applicable to our products from competitor pricing; • results of clinical research and studies on our products or competitive products; • the mix of sales and leases of our systems; 38 • timing of delivery of systems, new product offerings, acquisitions, licenses or other significant events by us or our competitors; • decisions by surgeons, hospitals and ASCs to defer acquisitions of systems in anticipation of the introduction of new products or product enhancements by us or our competitors; • sampling by and additional training requirements for cataract surgeons upon the commercialization of a new product by us or one of our competitors; • regulatory approvals, clearances or certifications and legislative changes affecting the products we may offer or those of our competitors; • interruption in the manufacturing or distribution of our systems; • delays in, or failure of, component and raw material deliveries by our suppliers; • the ability of our suppliers to timely provide us with an adequate supply of components; • the effect of competing technological, industry and market developments; and • changes in our ability to obtain regulatory clearance, certification or approval for our product candidates.
However, a failure or delay in obtaining registration or regulatory clearance, certification or approval in one country may have a negative effect on the regulatory process in others. The clinical trial process is lengthy and expensive with uncertain outcomes.
However, a failure or delay in obtaining registration or regulatory clearance, certification or approval in one country may have a negative effect on the regulatory process in others. 50 The clinical trial process is lengthy and expensive with uncertain outcomes.
MACRA also introduced a Quality Payment Program for Medicare physicians, nurses and other “eligible clinicians” (as defined in MACRA) that adjusts overall reimbursement under the PFS based on certain performance categories.
MACRA also introduced a Quality Payment Program for Medicare physicians, nurses and other “eligible clinicians” (as defined in 36 MACRA) that adjusts overall reimbursement under the PFS based on certain performance categories.
In addition, a variety of our software systems are cloud-based 41 data management applications, hosted by third-party service providers whose security and information technology systems are subject to similar risks.
In addition, a variety of our software systems are cloud-based data management applications, hosted by third-party service providers whose security and information technology systems are subject to similar risks.
We may experience loss from a customer’s failure to make payments according to the contractual lease terms or some other material decrease in the practice revenues and surgical procedure volume.
We may 35 experience loss from a customer’s failure to make payments according to the contractual lease terms or some other material decrease in the practice revenues and surgical procedure volume.
The future operation, success and growth of our business depends on streamlined processes made available through our uninhibited access to information systems, global communications, internet activity and other network processes.
The future operation, success and growth of our business 40 depends on streamlined processes made available through our uninhibited access to information systems, global communications, internet activity and other network processes.
In addition, we may commit to certain initiatives or goals and we may not ultimately be able to achieve such commitments or goals due to factors that are within or outside of our 71 control.
In addition, we may commit to certain initiatives or goals and we may not ultimately be able to achieve such commitments or goals due to factors that are within or outside of our control.
This situation may impact the way we are conducting our business in the EU and the EEA and the ability of our notified body to timely review and process our regulatory submissions and perform its audits. 55 Enacted and future healthcare legislation may increase the difficulty and cost for us to commercialize our ALLY Adaptive Cataract Treatment System or other products we may develop in the future and may affect the prices we may set.
This situation may impact the way we are conducting our business in the EU and the EEA and the ability of our notified body to timely review and process our regulatory submissions and perform its audits. 54 Enacted and future healthcare legislation may increase the difficulty and cost for us to commercialize our ALLY Adaptive Cataract Treatment System or other products we may develop in the future and may affect the prices we may set.
Vendors from whom we purchase hardware or software may not indemnify us in the event that such hardware or software is accused of infringing a third-party’s patent or trademark or of misappropriating a third-party’s trade secret. 61 Since patent applications are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our products.
Vendors from whom we purchase hardware or software may not indemnify us in the event that such hardware or software is accused of infringing a third-party’s patent or trademark or of misappropriating a third-party’s trade secret. 60 Since patent applications are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our products.
We have historically sold and leased a significant portion of our LENSAR Laser Systems outside of the United States through a network of independent distributors and intend to increase our international presence in Germany, China 35 and South Korea, as well as other international markets, including through sales and leases of our ALLY System once regulatory clearance in these regions has been obtained.
We have historically sold and leased a significant portion of our LENSAR Laser Systems outside of the United States through a network of independent distributors and intend to increase our international presence in Germany, China 34 and South Korea, as well as other international markets, including through sales and leases of our ALLY System once regulatory clearance in these regions has been obtained.
Regulatory clearance or approval by the FDA does not ensure registration, clearance, certification or approval by regulatory authorities or notified bodies in other countries, and registration, clearance, certification or approval by one 51 or more foreign regulatory authorities or notified bodies does not ensure registration, clearance, certification or approval by regulatory authorities or notified bodies in other foreign countries or by the FDA.
Regulatory clearance or approval by the FDA does not ensure registration, clearance, certification or approval by regulatory authorities or notified bodies in other countries, and registration, clearance, certification or approval by one or more foreign regulatory authorities or notified bodies does not ensure registration, clearance, certification or approval by regulatory authorities or notified bodies in other foreign countries or by the FDA.
Our success will depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how and obtaining and maintaining other intellectual property rights. 58 We may not be able to obtain or maintain intellectual property or other proprietary rights necessary to our business or in a form that provides us with a competitive advantage.
Our success will depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how and obtaining and maintaining other intellectual property rights. 57 We may not be able to obtain or maintain intellectual property or other proprietary rights necessary to our business or in a form that provides us with a competitive advantage.
Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require 63 costly efforts to protect our technology. To the extent our intellectual property or other proprietary information protection is incomplete, we are exposed to a greater risk of direct competition.
Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require 62 costly efforts to protect our technology. To the extent our intellectual property or other proprietary information protection is incomplete, we are exposed to a greater risk of direct competition.
In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, 59 including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable.
In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, 58 including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable.
Increasing scrutiny and stakeholder expectations regarding environmental, social, and governance matters may cause us to incur expenses and liabilities or otherwise adversely impact our business, financial condition, or operations. Companies across industries are facing increasing scrutiny from a variety of stakeholders related to their environmental, social, and governance (“ESG”) practices.
Increasing scrutiny and stakeholder expectations regarding environmental, social, and governance matters may cause us to incur expenses and liabilities or otherwise adversely impact our business, financial condition, or operations. Companies across industries are facing increasing scrutiny from a variety of stakeholders related to their environmental, social, and governance, or ESG, practices.
The 34 long-term loss of these suppliers, or their long-term inability to provide us with an adequate supply of components or products, could potentially cause delay in the manufacture of our products, thereby impairing our ability to meet the demand of our customers and causing significant harm to our business.
The 33 long-term loss of these suppliers, or their long-term inability to provide us with an adequate supply of components or products, could potentially cause delay in the manufacture of our products, thereby impairing our ability to meet the demand of our customers and causing significant harm to our business.
Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. 57 We are subject to anti-corruption, anti-bribery and similar laws and any violations by us of such laws could result in fines or other penalties.
Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. 56 We are subject to anti-corruption, anti-bribery and similar laws and any violations by us of such laws could result in fines or other penalties.
We may be subject to state, federal and foreign laws relating to data privacy and security in the conduct of our business, including state breach notification laws, the Health Insurance Portability and Accountability Act, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, the EU’s General Data Protection Regulation 2016/679 and applicable national supplementing laws, or GDPR, and the California Consumer Privacy Act, or CCPA, as amended by the California Privacy Rights Act, or CPRA.
We may be subject to state, federal and foreign laws relating to data privacy and security in the conduct of our business, including state breach notification laws, the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or, collectively, HIPAA, the EU’s General Data Protection Regulation 2016/679 and applicable national supplementing laws, or GDPR, and the California Consumer Privacy Act, as amended by the California Privacy Rights Act, or, collectively, CCPA.
If patients are not adequately satisfied with the results of such procedures, they or their surgeons may be less willing to recommend these procedures to other patients. 31 Additionally, weak or uncertain economic conditions may cause individuals to be less willing to pay for advanced cataract procedures.
If patients are not adequately satisfied with the results of such procedures, they or their surgeons may be less willing to recommend these procedures to other patients. 30 Additionally, weak or uncertain economic conditions may cause individuals to be less willing to pay for advanced cataract procedures.
For example, as a result of the transition towards the new regime, notified body review times have lengthened, and product introductions could be delayed, which could adversely affect our ability to grow our business in a timely manner.
For example, as a result of the transition towards the new regime, notified body review times have lengthened, and product introductions or modifications could be delayed, which could adversely affect our ability to grow our business in a timely manner.
Despite our existing security procedures and controls, if our network were compromised, it could give rise to unwanted media attention, materially damage our customer relationships, decrease sales and leases of our products, increase overhead costs, harm our business, reputation, results of operations, cash flows and financial condition, result in fines or litigation, and may increase the costs we incur to protect against such information security breaches, such as increased investment in technology, the costs of compliance with consumer protection laws and costs resulting from consumer fraud.
Despite our existing security procedures and controls, if our network were compromised, it could give rise to unwanted media attention, materially damage our customer relationships, decrease sales and leases of our products, increase overhead costs, harm our business, reputation, results of operations, cash flows and financial condition, result in regulatory investigations and enforcement actions, result in fines or litigation, and may increase the costs we incur to protect against such information security breaches, such as increased investment in technology, the costs of compliance with consumer protection laws and costs resulting from consumer fraud.
If we cannot rely on existing mechanisms for transferring personal data from the EEA, or other jurisdictions, we could be prevented from transferring personal data of individuals in those regions; we could suffer additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; we will have to implement revised standard contractual clauses for existing arrangements within required time frame; and/or it could otherwise adversely affect the manner in which we provide our services and thus materially affect our operations and financial results.
If we cannot rely on existing mechanisms for transferring personal data from the EEA, or other jurisdictions, we could be prevented from transferring personal data of individuals in those regions; we could suffer additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; we will have to implement revised SCCs for existing arrangements within required time frame; and/or it could otherwise adversely affect the manner in which we provide our services and thus materially affect our operations and financial results.
In those countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to a third party, which could materially diminish the value of those patents. This could limit our potential revenue 64 opportunities.
In those countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to a third party, which could materially diminish the value of those patents. This could limit our potential revenue 63 opportunities.
Non-compliance events that could result in abandonment or lapse of a patent or patent application include 60 failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.
Non-compliance events that could result in abandonment or lapse of a patent or patent application include 59 failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.
In addition to the factors discussed in this “Risk Factors” section of this Annual Report, these factors include: • a shift in our investor base; • actual or anticipated fluctuations in our quarterly financial condition and operating performance; • the operating and stock price performance of similar companies; • introduction of new products by us or our competitors; • success or failure of our business strategy; 69 • our ability to obtain financing as needed; • changes in accounting standards, policies, guidance, interpretations or principles; • the overall performance of the equity markets; • the number of shares of our common stock publicly owned and available for trading; • threatened or actual litigation or governmental investigations; • changes in laws or regulations affecting our business, including tax legislation; • announcements by us or our competitors of significant acquisitions or dispositions; • any major change in our board of directors or management; • changes in earnings estimates by securities analysts or our ability to meet earnings guidance; • publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; • large volumes of sales of our shares of common stock by existing stockholders; • short sales of our common stock; • investor perception of us and our industry; and • changes in financial markets or general economic conditions, including the effects of recession or slow economic growth in the U.S. and abroad, interest rates, fuel prices, international currency fluctuations, corruption, political instability, acts of war, including the ongoing war between Russia and Ukraine, acts of terrorism, and the ongoing COVID-19 pandemic or other public health crises.
In addition to the factors discussed in this “Risk Factors” section of this Annual Report, these factors include: • a shift in our investor base; • actual or anticipated fluctuations in our quarterly financial condition and operating performance; • the operating and stock price performance of similar companies; • introduction of new products by us or our competitors; • success or failure of our business strategy; • our ability to obtain financing as needed; • changes in accounting standards, policies, guidance, interpretations or principles; • the overall performance of the equity markets; • the number of shares of our common stock publicly owned and available for trading; • threatened or actual litigation or governmental investigations; 69 • changes in laws or regulations affecting our business, including tax legislation; • announcements by us or our competitors of significant acquisitions or dispositions; • any major change in our board of directors or management; • changes in earnings estimates by securities analysts or our ability to meet earnings guidance; • publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; • large volumes of sales of our shares of common stock by existing stockholders; • short sales of our common stock; • investor perception of us and our industry; and • changes in financial markets or general economic conditions, including the effects of recession or slow economic growth in the U.S. and abroad, interest rates, fuel prices, international currency fluctuations, corruption, political instability, acts of war, including the ongoing war between Russia and Ukraine and the conflicts in the Middle East, acts of terrorism, natural disasters and public health crises, such as a resurgence of COVID-19.
In addition, market conditions impacting financial institutions could impact our ability to access some or all of our cash, cash equivalents and marketable securities, and we may be unable to obtain alternative funding when needed and on acceptable terms, if at all. 32 As of the date of this Annual Report, we expect our current cash and cash equivalents, together with cash generated from the future sale and lease of our products, to be sufficient to operate our business for at least one year from the date of issuance of these financial statements.
In addition, market conditions impacting financial institutions could impact our ability to access some or all of our cash, cash equivalents and marketable securities, and we may be unable to obtain alternative funding when and as needed and on acceptable terms, if at all. 31 As of the date of this Annual Report, we expect our current cash and cash equivalents, together with cash generated from the future sale and lease of our products, to be sufficient to operate our business for at least one year from the date of issuance of the financial statements included in this Annual Report.
Ransomware attacks, including those from organized criminal threat actors, nation-states, and nation-state supported actors, are becoming increasingly prevalent and severe, and if made against us could lead to significant interruptions in our operations, loss of data and income, reputational loss, diversion of funds, and may also result in fines, litigation and unwanted media attention.
Ransomware attacks, including those from organized criminal threat actors, nation-states, and nation-state supported actors, are becoming increasingly prevalent and severe, and if made against us could lead to significant interruptions in our operations, loss of Confidential Information and income, reputational loss, diversion of funds, and may also result in fines, litigation and unwanted media attention.
If we fail to obtain any required licenses or make any necessary changes to our 62 products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products.
If we fail to obtain any required licenses or make any necessary changes to our 61 products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products.
Members of our management and our board of directors hold a significant portion of our common stock and may sell their shares of our common stock to the extent not restricted by contract or under securities laws.
Members of our management and our board of directors hold or beneficially own a significant portion of our common stock and may sell their shares of our common stock to the extent not restricted by contract or under securities laws.
In the EU, we must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and the EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked.
Once our devices are certified under the EU Medical Devices Regulation, we must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and the EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked.
In connection with the Spin-Off, the Company and PDL entered into a Separation and Distribution Agreement, dated September 30, 2020 (the “Separation and Distribution Agreement”), which sets forth the agreements between PDL and the Company regarding the principal transactions necessary to separate the Company from PDL and other agreements that govern certain aspects of the relationship with PDL after the completion of the Spin-Off.
In connection with the Spin-Off, the Company and PDL entered into a Separation and Distribution Agreement, dated September 30, 2020, or the Separation and Distribution Agreement, which sets forth the agreements between PDL and the Company regarding the principal transactions necessary to separate the Company from PDL and other agreements that govern certain aspects of the relationship with PDL after the completion of the Spin-Off.
Our ability to place systems in 2022 was limited by supply chain constraints that delayed the delivery of certain ALLY System raw materials and the completion and testing of ALLY Systems for use as launch-stock inventory. If we continue to experience supply chain constraints, we may be unable to deliver ALLY Systems as planned.
Our ability to place systems in 2022 was limited by supply chain constraints that delayed the delivery of certain ALLY System raw materials and the completion and testing of ALLY Systems for use as launch-stock. If we experience further supply chain constraints, we may be unable to deliver ALLY Systems as planned.
Failure to comply with the EU GDPR could result in penalties. Penalties for certain breaches are up to the greater of EUR 20 million or 4% of our global annual turnover.
Failure to comply with the GDPR could result in penalties for certain breaches of up to the greater of EUR 20 million or 4% of our global annual turnover.
In Europe, reimbursement is entirely regulated at member state level and varies significantly between countries, and member states are facing increased pressure to limit public healthcare spending. We may not obtain additional international coverage and reimbursement approvals in a timely manner, if at all.
In the EU, reimbursement is entirely regulated at member state level and varies significantly between countries, and member states are facing increased pressure to limit public healthcare spending. We may not obtain additional international coverage and reimbursement approvals in a timely manner, if at all.
Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, and any resurgence of the virus or emergence of new variants may lead to further inspectional delays.
Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates, and any resurgence of the COVID-19 virus or emergence of new variants may lead to further inspectional delays.
The notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final 47 inspection of our devices.
The notified body would typically audit 46 and examine the technical file and the quality system for the manufacture, design and final inspection of our devices.
Additionally, we rely exclusively on a network of independent distributors to generate sales and leases of our LENSAR Laser System and ALLY System as well as purchases of our consumables and licensed applications outside of the United States. For the year ended December 31, 2022, one customer accounted for 10% of our revenue.
Additionally, we rely exclusively on a network of independent distributors to generate sales and leases of our LENSAR Laser System and ALLY System as well as purchases of our consumables and licensed applications outside of the United States. For the year ended December 31, 2023, one customer accounted for 13% of our revenue.
If we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships. In connection with the commercial launch of the ALLY System, we are modifying our manufacturing operations from producing the LENSAR Laser Systems to the ALLY System.
If we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships. In connection with the commercial launch of the ALLY System, we have modified our manufacturing operations from producing the LENSAR Laser Systems to the ALLY System.
For example, the war between Russia and Ukraine has not had a direct material impact on our revenue to date; however, that could change depending on the magnitude of the conflict and the imposition of additional sanctions by the U.S. and other countries or the spread of the conflict to surrounding areas.
In addition, the war between Russia and Ukraine has not had a direct material impact on our revenue to date; however, that could change depending on the magnitude of the conflict and the imposition of additional sanctions by the U.S. and other countries or the spread of the conflict to surrounding areas.
While we have no specific plan to issue preferred stock, our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more series of preferred stock having such designation, powers, privileges, preferences, including preferences over our common stock respecting dividends and distributions, terms of redemption and relative participation, optional, or other rights, if any, of the shares of each such series of preferred stock and any qualifications, limitations or restrictions thereof, as our board of directors may determine.
Our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more series of preferred stock having such designation, powers, privileges, preferences, including preferences over our common stock respecting dividends and distributions, terms of redemption and relative participation, optional, or other rights, if any, of the shares of each such series of preferred stock and any qualifications, limitations or restrictions thereof, as our board of directors may determine.
We expect to incur operating losses for the near-term future and we cannot assure you that we will be able to generate sufficient revenue to achieve or sustain profitability. For the years ended December 31, 2022 and 2021, we had net losses of $19.9 million and $19.6 million, respectively.
We expect to incur operating losses for the near-term future and we cannot assure you that we will be able to generate sufficient revenue to achieve or sustain profitability. For the years ended December 31, 2023 and 2022, we had net losses of $14.4 million and $19.9 million, respectively.
Our failure to achieve or maintain profitability could negatively affect the value of our securities and our ability to raise capital and continue operations. We have historically derived our revenue from the sale or lease of our LENSAR Laser System and the associated procedure licenses and sale of consumables used in each procedure involving our LENSAR Laser System.
Our failure to achieve or maintain profitability could negatively affect the value of our securities and our ability to raise capital and continue operations. We have historically derived our revenue from the sale or lease of our LENSAR Laser and ALLY Systems as well as the associated procedure licenses and sale of consumables used in each procedure involving our systems.
Stored data might be improperly accessed due to a variety of events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues.
Confidential Information might be improperly accessed due to a variety of events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues.
Intangible assets on our books may lead to significant impairment charges. We carry a significant amount of intangible assets on our balance sheet, partially due to the value of the LENSAR brand name, but also intangible assets associated with our technologies, acquired research and development, currently marketed products, and marketing know-how.
We carry a significant amount of intangible assets on our balance sheet, partially due to the value of the LENSAR brand name, but also intangible assets associated with our technologies, acquired research and development, currently marketed products, and marketing know-how.
Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, any further disruptions related to the COVID-19 pandemic or similar health crises may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials.
Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, any further disruptions related to public health crises, such as a resurgence of COVID-19, may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials.
The regulation foresees a three-year transitional period and will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
To finance our operations beyond that point, we may seek additional funds from public or private stock offerings, borrowings under credit facilities or other sources that we may not be able to maintain or obtain on acceptable or commercially reasonable terms, if at all.
We may seek additional funds from public or private stock offerings, borrowings under credit facilities or other sources that we may not be able to maintain or obtain on acceptable or commercially reasonable terms, if at all.
Like most companies, despite our current security measures, our information technology systems, and those of our third-party service providers, may be vulnerable to information security breaches, acts of vandalism, computer viruses and interruption or loss of valuable business data.
Like most companies, despite our current security measures, our information technology systems, and those of our third-party service providers, may be vulnerable to information security breaches, acts of vandalism, computer viruses and interruption, theft or loss of Confidential Information.
The GDPR imposes comprehensive compliance obligations regarding our processing of personal data, including a principle of accountability and the obligation to demonstrate that appropriate legal bases are in place to justify data processing activities.
The GDPR imposes comprehensive compliance obligations regarding our processing of personal data of individuals within the EEA or in the context of our activities within the EEA, including a principle of accountability and the obligation to demonstrate that appropriate legal bases are in place to justify data processing activities.
When conducting clinical studies, we face risks associated with collecting trial participants’ information, especially health information, in a manner consistent with applicable laws and regulations. We also face risks inherent in handling large volumes of information and in protecting the security of such information.
Our business processes health-related and other personal information. When conducting clinical studies, we face risks associated with collecting trial participants’ information, especially health information, in a manner consistent with applicable laws and regulations. We also face risks inherent in handling large volumes of information and in protecting the security of such information.
This litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources, and could have a material adverse effect on our business, financial condition and results of operations.
This type of litigation could result in very substantial costs, divert our management’s attention and resources, and could have a material adverse effect on our business, financial condition and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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We plan to expand our manufacturing and office space to accommodate our expected growth associated with the potential launch and manufacture of our ALLY System, subject to FDA clearance.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings. From time to time we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. We are not party to any material legal proceedings. Item 4. Mine Saf ety Disclosure. Not applicable. 72 Part II
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Item 3. Legal Proceedings. From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including intellectual property, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. On August 14, 2023, stockholders Ryan Schaper and Christopher P.
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Bolster filed a Verified Amended Class Action Complaint (“Amended Complaint”) against the Company and certain of its officers and members of the board of directors (“Defendants”) in the matter captioned Schaper v. LENSAR, Inc., et al., Case No. 1:23-cv-00692-GBW (D. Del.).
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Plaintiffs allege that Defendants violated Sections 14(a) and 20(a) of the Exchange Act, as well as Rule 14d-9 promulgated thereunder, and assert claims challenging the adequacy of disclosures in the definitive proxy statement filed with the SEC on June 20, 2023, or the Proxy, in connection with the Private Placement.
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On August 18, 2023, the parties filed a joint stipulation extending Defendants’ time to respond to the complaint. On December 12, 2023, the Court appointed Ryan Schaper and Christopher P. Bolster as Lead Plaintiffs.
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On December 22, 2023, the parties filed a joint stipulation providing that Lead Plaintiffs will file a second amended complaint or designate the Amended Complaint as operative on or before January 12, 2024. On January 12, 2024, Lead Plaintiffs filed a Verified Second Amended Class Action Complaint, or the Second Amended Complaint.
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The Second Amended Complaint alleges that the Proxy failed to disclose details about North Run, discussion with stockholders regarding possible financing alternatives, LENSAR’s internal budget, the basis for the Board’s recommendation on the vote, potential costs to LENSAR if shareholders voted against the proposal, and purported conflicts of interest. Defendants filed a motion to dismiss on February 26, 2024.
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The parties will complete briefings in May 2024. The Company vigorously denies that the Proxy was deficient in any respect. The Company believes the allegations and claims asserted in the Schaper Action are without merit and that supplemental disclosures were not required or necessary under applicable laws.
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At this time, the Company cannot predict the outcome, or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.
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This matter may be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability or require us to change our business practices, even if we believe the claims asserted against us are without merit.
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Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses.
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Because litigation is inherently unpredictable, we cannot assure you that the results of any such actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows. 73 Item 4. Mine Saf ety Disclosure. Not applicable. 74 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on The Nasdaq Stock Market under the symbol “LNSR.” Stockholders As of January 31, 2023, there were approximately 113 holders of record of our common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on The Nasdaq Stock Market under the symbol “LNSR.” Stockholders As of February 29, 2024, there were approximately 82 holders of record of our common stock.
Equity Compensation Plans The information required by Item 5 of Form 10‑K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. Item 6. [Re served] 73
Equity Compensation Plans The information required by Item 5 of Form 10‑K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. Item 6. [Re served] 75

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet cash provided by financing activities for the year ended December 31, 2021 was $0.4 million, primarily from the sale of common stock under the employee stock purchase plan. Stock-Based Incentive Plan The 2020 Incentive Award Plan provides for the grant of stock options, restricted stock, restricted stock unit awards and other stock-based awards to recipients.
Biggest changeStock-Based Incentive Plan The 2020 Incentive Award Plan provides for the grant of stock options, restricted stock, restricted stock unit awards and other stock-based awards to recipients. During the years ended December 31, 2023 and 2022, we granted stock 84 options and restricted stock units to employees, directors, and non-employees.
Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $2.0 million, primarily due to the payment of $2.4 million in contingent consideration due to regulatory approval of the ALLY System offset from proceeds from the sale of common stock under the employee stock purchase plan.
Net cash used in financing activities for the year ended December 31, 2022 was $2.0 million, primarily due to the payment of $2.4 million in contingent consideration due to regulatory approval of the ALLY System offset from proceeds from the sale of common stock under the employee stock purchase plan.
We will remain an emerging growth company until the earliest to occur of: (1) the last day of our first fiscal year in which we have total annual gross revenues of more than $1.07 billion; (2) the date we qualify as a “large accelerated filer,” meaning, as of December 31, the market value of our common stock held by non-affiliates as of the prior June 85 30 exceeded $700.0 million; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) December 31, 2025 (the fiscal year-end following the fifth anniversary of the completion of the Spin-Off).
We will remain an emerging growth company until the earliest to occur of: (1) the last day of our first fiscal year in which we have total annual gross revenues of more than $1.07 billion; (2) the date we qualify as a “large accelerated filer,” meaning, as of December 31, the market value of our common stock held by non-affiliates as of the prior June 30 exceeded $700.0 million; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) December 31, 2025 (the fiscal year-end following the fifth anniversary of the completion of the Spin-Off).
We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
We have elected to use this extended transition period for 87 complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
EBITDA is a non-GAAP financial measure. EBITDA is included in this filing because we believe that EBITDA provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Adjusted EBITDA is also a non-GAAP financial measure.
EBITDA is a non-GAAP financial measure. EBITDA is included in this filing because we believe that EBITDA provides meaningful supplemental information for investors regarding the performance of our 81 business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Adjusted EBITDA is also a non-GAAP financial measure.
If we issue equity securities to raise additional capital, our existing stockholders may experience dilution, and the new 80 equity securities may have rights, preferences and privileges senior to those of our existing stockholders. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt.
If we issue equity securities to raise additional capital, our existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of our existing stockholders. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt.
We use these non-GAAP financial measures in order to have comparable financial 79 results to analyze changes in our underlying business from quarter to quarter. However, there are a number of limitations related to the use of non-GAAP measures and their nearest GAAP equivalents.
We use these non-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. However, there are a number of limitations related to the use of non-GAAP measures and their nearest GAAP equivalents.
Determining whether products and services are considered distinct performance obligations that should be accounted for separately may require significant judgment. Judgment is required to determine the level of interdependency between the system and the sale of other related products and services.
Determining whether products and services are considered distinct performance obligations that should be accounted for separately may require significant judgment. Judgment is required to determine the level of interdependency 85 between the system and the sale of other related products and services.
Our growth, market presence and ability to sell the ALLY System will depend on whether the ALLY System receives regulatory 74 clearance in other regions outside the United States and the timing of these clearances or certifications, among other factors.
Our growth, market presence and ability to sell the ALLY System will depend on whether the ALLY System receives regulatory clearance in other regions outside the United States and the timing of these clearances or certifications, among other factors.
We may be able to control the timing and level of research and development and selling, general and administrative expenses, but many of these expenditures will occur irrespective of our actions due to contractually committed activities and payments.
We may be able to control the timing and level of research and development and selling, general and 77 administrative expenses, but many of these expenditures will occur irrespective of our actions due to contractually committed activities and payments.
Ongoing supply chain disruptions, unavailability of various parts needed to manufacture the ALLY System and price increases of component parts may have an adverse impact on the Company’s ability to meet customer demand for the ALLY System.
Supply chain disruptions, unavailability of various parts needed to manufacture the ALLY System and price increases of component parts may have an adverse impact on the Company’s ability to meet customer demand for the ALLY System.
Our revenues and operating expenses are also difficult to predict and depend on several factors, including the level of ongoing research and development requirements necessary to complete development and obtain further regulatory clearance or certification of our ALLY System, the number of laser systems we manufacture, sell, and lease on an annual basis, the availability of capital and direction from regulatory agencies or notified bodies, which are difficult to predict.
Our revenues and operating expenses are also difficult to predict and depend on several factors, including the level of ongoing research and development requirements necessary to further develop and/or obtain further regulatory clearance or certification of our ALLY System, the number of laser systems we manufacture, sell, and lease on an annual basis, the availability of capital and direction from regulatory agencies or notified bodies, which are difficult to predict.
Amortization of intangible assets was approximately $1.1 million for the year ended December 31, 2022, which was consistent with the year ended December 31, 2021. Non-GAAP Financial Measures We prepare and analyze operating and financial data and non-GAAP measures to assess the performance of our business, make strategic and offering decisions and build our financial projections.
Amortization of intangible assets was approximately $1.1 million for the year ended December 31, 2023, which was consistent with the year ended December 31, 2022. Non-GAAP Financial Measures We prepare and analyze operating and financial data and non-GAAP measures to assess the performance of our business, make strategic and offering decisions and build our financial projections.
We evaluate each product or service promised 83 in a contract to determine whether it represents a distinct performance obligation.
We evaluate each product or service promised in a contract to determine whether it represents a distinct performance obligation.
A discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020 has been reported previously in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 3, 2022, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview We are a commercial-stage medical device company focused on designing, developing and marketing an advanced femtosecond laser system for the treatment of cataracts and the management of pre-existing or surgically induced corneal astigmatism.
A discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021 has been reported previously in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 16, 2023, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview We are a commercial-stage medical device company focused on designing, developing and marketing an advanced femtosecond laser system for the treatment of cataracts and the management of pre-existing or surgically induced corneal astigmatism.
At contract inception we perform an evaluation to determine if a lease arrangement conveys the right to control the use of an identified asset. To the extent such rights 84 of control are conveyed, we further make an assessment as to the applicable lease classification.
At contract inception we perform an evaluation to determine if a lease arrangement conveys the right to control the use of an identified asset. To the extent such rights 86 of control are conveyed, we further make an assessment as to the applicable lease classification.
Recently Issued Accounting Standards See Note 2, Summary of Significant Accounting Policies , to our financial statements included elsewhere in this Annual Report for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 31, 2022.
Recently Issued Accounting Standards See Note 2, Summary of Significant Accounting Policies , to our financial statements included elsewhere in this Annual Report for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 31, 2023.
We also simultaneously entered into a sales agreement with SVB Leerink LLC, as sales agent, providing for the offering, issuance and sale by us of up to an aggregate $35.0 million of our common stock from time to time in “at-the-market” (“ATM”) offerings under the Registration Statement.
We also simultaneously entered into a sales agreement with SVB Leerink LLC, as sales agent, providing for the offering, issuance and sale by us of up to an aggregate $35.0 million of our common stock from time to time in “at-the-market”, or ATM, offerings under the Registration Statement.
We expect we will need to raise additional capital through equity or debt financings, borrowings under credit facilities or from other sources to continue our operations. We may issue securities, including common stock, preferred stock, warrants, and/or debt securities through private placement transactions or registered public offerings in the future.
In the future, we may need to raise additional capital through equity or debt financings, borrowings under credit facilities or from other sources to continue our operations. We may issue securities, including common stock, preferred stock, warrants, and/or debt securities through private placement transactions or registered public offerings in the 82 future.
As of December 31, 2022, we expect our current cash and cash equivalents, together with cash generated from the future sale and lease of our products, to be sufficient to operate our business.
As of December 31, 2023, we expect our current cash and cash equivalents, together with cash generated from the future sale and lease of our products, to be sufficient to operate our business.
Beginning in 2022, the Tax Cuts and Jobs Act eliminated the option of expensing all research and development expenditures in the current year, instead requiring amortization over five years for expenditures in the United States and over fifteen years for foreign-based expenditures, pursuant to Internal Revenue Code of 1986, Section 174, or Section 174.
Beginning in 2022, the Tax Cuts and Jobs Act eliminated the option of expensing all research and development expenditures in the current year, instead requiring amortization over five years for expenditures in the United States and over fifteen years for foreign-based expenditures, pursuant to Section 174 of the Code, or Section 174.
The key non-GAAP measures we use, EBITDA and Adjusted EBITDA, are reconciled to net loss below for the years ended December 31, 2022 and 2021.
The key non-GAAP measures we use, EBITDA and Adjusted EBITDA, are reconciled to net loss below for the years ended December 31, 2023 and 2022.
Cost of lease revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 increased by $0.6 million, or 41.2%, primarily due to an increase in the number of newly leased systems between the years, which have a higher depreciation cost than older and some fully depreciated leased systems. Operating Expenses Selling, General and Administrative.
Cost of lease revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $0.2 million, or 7.7%, primarily due to an increase in the number of newly leased systems between the years, which have a higher depreciation cost than older and some fully depreciated leased systems. Operating Expenses Selling, General and Administrative.
In the United States, we sell our products through a direct sales organization that, as of December 31, 2022, consisted of approximately 45 commercial professionals, including regional sales managers, clinical applications and outcomes specialists, field service, marketing, technical and customer support personnel. We manufacture our systems at a facility in Orlando, Florida.
In the United States, we sell our products through a direct sales organization that, as of December 31, 2023, consisted of approximately 60 commercial professionals, including regional sales managers, clinical applications and outcomes specialists, field service, marketing, technical and 76 customer support personnel. We manufacture our systems at a facility in Orlando, Florida.
Our total installed base of LENSAR Laser Systems and ALLY Systems was approximately 270 as of December 31, 2022. Factors to Consider We operate in a highly competitive environment that involves a number of risks, some of which are beyond our control.
Our total installed base of LENSAR Laser Systems and ALLY Systems was approximately 305 as of December 31, 2023. Factors to Consider We operate in a highly competitive environment that involves a number of risks, some of which are beyond our control.
The impact of accounting estimates and judgments on our financial condition and results of operations due to the COVID-19 pandemic and global macroeconomic conditions originating during the pandemic has introduced additional uncertainties. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates and such differences may be material.
The impact of accounting estimates and judgments on our financial condition and results of operations due to global macroeconomic conditions has introduced additional uncertainties. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates and such differences may be material.
We have built and are continuing to grow our commercial organization, which includes a direct sales force in the United States and distributors in Germany, China, South Korea and other targeted international markets. We believe there is significant opportunity for us to expand our presence in these countries and other markets and regions.
We have built and are continuing to grow our commercial organization, which includes a direct sales force in the United States and distributors in Germany, China, South Korea and other targeted international markets. We believe there is significant opportunity for us to expand our presence in these countries and other markets and regions, subject to applicable regulatory clearance or certification.
Our future liquidity needs, and ability to address those needs, will largely be determined by the success of our commercial efforts and those of our distributors; the ongoing impact of COVID-19 and supply chain issues on our business; and the timing, scope and magnitude of our commercial and development activities.
Our future liquidity needs, and ability to address those needs, will largely be determined by the success of our commercial efforts and those of our distributors; the ongoing impact of global macroeconomic conditions and supply chain issues on our business; and the timing, scope and magnitude of our commercial and development activities.
Net cash used in investing activities for year ended December 31, 2021 was $0.4 million, which consisted primarily of capital expenditures for property and equipment.
Net cash used in investing activities for year ended December 31, 2022 was $0.1 million, which consisted primarily of capital expenditures for property and equipment.
Our material contractual obligations and commercial commitments at December 31, 2022 primarily consist of $2.8 million in operating lease liabilities for our facility lease and $5.8 million in remaining minimum purchase obligations for inventory components for the manufacture and supply of certain components within the next 24 months.
Our material contractual obligations and commercial commitments at December 31, 2023 primarily consist of $2.3 million in operating lease liabilities for our facility lease and $6.5 million in remaining minimum purchase obligations for inventory components for the manufacture and supply of certain components within the next 12 months.
For the years ended December 31, 2022 and 2021, approximately 86% of our revenue was attributable to recurring sources. 76 Cost of Revenue Total cost of revenue comprises cost of product revenue , cost of lease revenue and cost of service revenue.
For the years ended December 31, 2023 and 2022, approximately 77% and 86% of our revenue was attributable to recurring sources, respectively. Cost of Revenue Total cost of revenue comprises cost of product revenue , cost of lease revenue and cost of service revenue.
Our current product portfolio includes the LENSAR Laser System with Streamline IV and IntelliAxis (both our first generation and ALLY ® Adaptive Cataract Treatment System, or ALLY System) and its associated consumable components. The consumable portion of the system consists of a disposable patient interface device kit, or PID kit, and the system also requires a procedure license.
Our current product portfolio includes the LENSAR Laser System and ALLY ® Adaptive Cataract Treatment System, or ALLY System, and its associated consumable components. The consumable portion of the system consists of a disposable patient interface device kit, or PID kit, and the system also requires a procedure license.
Geographically, the United States represented 64% of product and service revenues for the years ended December 31, 2022 and 2021. Lease revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 increased by $0.9 million, or 19.1%, primarily due to increased leased systems.
Geographically, the United States represented 71% and 64% of product and service revenues for the years ended December 31, 2023 and 2022, respectively. Lease revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $0.5 million, or 9.0%, primarily due to increased leased systems.
We are subject to risks common to medical device companies, including risks inherent in: • our laser system development and commercialization efforts; • clinical studies; • uncertainty of regulatory actions and marketing approvals or certifications; • reliance on a network of international distributors and a network of suppliers; • levels of coverage and reimbursement by government or other third-party payors for procedures using our products; • patients’ willingness and ability to pay for procedures with significant costs not covered by or reimbursable through government or other third-party payors; • enforcement of patent and proprietary rights; • the need for future capital; • the ongoing impact of the COVID-19 pandemic and all safety requirements and suggestions regarding patient treatment as required or suggested by health care authorities; • clearance or certification by regulatory agencies, including the FDA, or notified bodies for our ALLY System; • supply chain shortages, labor market shifts and price increases resulting from various macroeconomic factors, including related to the ongoing COVID-19 pandemic; and • competition associated with our products. 75 We cannot provide assurance that we will generate significant revenues or achieve and sustain profitability in the future.
We are subject to risks common to medical device companies, including risks inherent in: • our laser system development and commercialization efforts; • clinical studies; • uncertainty of regulatory actions and marketing approvals or certifications; • reliance on a network of international distributors and a network of suppliers; • levels of coverage and reimbursement by government or other third-party payors for procedures using our products; • patients’ willingness and ability to pay for procedures with significant costs not covered by or reimbursable through government or other third-party payors; • enforcement of patent and proprietary rights; • the need for future capital; • all safety requirements and suggestions regarding patient treatment as required or suggested by health care authorities; • clearance or certification by regulatory agencies, including the FDA, or notified bodies for our ALLY System; • supply chain shortages, labor market shifts and price increases resulting from various macroeconomic factors; • competition associated with our products; and • reimbursement practices in jurisdictions where procedures using our systems are performed, such as South Korea.
Our revenue increased from $34.5 million for the year ended December 31, 2021 to $35.4 million for the year ended December 31, 2022, representing an increase of 2.6%. Our net losses were $19.6 million and $19.9 million for the years ended December 31, 2021 and 2022, respectively.
Our revenue increased from $35.4 million for the year ended December 31, 2022 to $42.2 million for the year ended December 31, 2023, representing an increase of 19.2%. Our net losses were $19.9 million and $14.4 million for the years ended December 31, 2022 and 2023, respectively.
Research and Development Expense Our research and development expenses consist primarily of engineering, product development, clinical studies to develop and support our products, personnel costs, such as salaries and wages, including stock-based compensation and benefits, regulatory expenses, and other costs associated with products and technologies that are in development.
We expect our selling, general and administrative expenses to continue to increase in association with our planned growth. 78 Research and Development Expense Our research and development expenses consist primarily of engineering, product development, clinical studies to develop and support our products, personnel costs, such as salaries and wages, including stock-based compensation and benefits, regulatory expenses, and other costs associated with products and technologies that are in development.
Liquidity and Capital Resources Overview For the years ended December 31, 2022 and 2021, we had net losses of $19.9 million and $19.6 million, respectively, and, as of December 31, 2022, we had an accumulated deficit of $97.5 million.
Liquidity and Capital Resources Overview For the years ended December 31, 2023 and 2022, we had net losses of $14.4 million and $19.9 million, respectively, and, as of December 31, 2023, we had an accumulated deficit of $111.9 million.
At December 31, 2022, there was approximately $2.8 million, $0.3 million, and $2.7 million of total unrecognized compensation expense related to restricted stock awards, restricted stock units, and stock options, respectively, which 82 is expected to be recognized over a weighted-average period of 0.6 years, 2.2 years, and 2.6 years, respectively.
At December 31, 2023, there was approximately $0.9 million and $2.4 million of total unrecognized compensation expense related to restricted stock units and stock options, respectively, which is expected to be recognized over a weighted-average period of 1.2 years and 2.1 years, respectively.
We maintain cash balances with financial institutions in excess of insured limits. As discussed above, ongoing global supply chain disruptions, inflationary pressures and other macroeconomic conditions have negatively affected our capital requirements and more operating capital may be needed to fund our operations in the future.
As discussed above, ongoing global supply chain disruptions, inflationary pressures and other macroeconomic conditions have negatively affected our capital requirements and more operating capital may be needed to fund our operations in the future.
Any sales by us pursuant to the Registration Statement, including any sales pursuant to the ATM offering, will be subject to any limits imposed under applicable law, including General Instructions I.B.1 and I.B.6 of Form S-3.
Any sales by us pursuant to the Registration Statement, including any sales pursuant to the ATM offering, will be subject to any limits imposed under applicable law, including General Instructions I.B.1 and I.B.6 of Form S-3. No shares were sold under the ATM during the twelve months ended December 31, 2023.
We expect to continue to incur losses and operating cash outflows for the near-term future as we continue to build our commercial and clinical infrastructure and pursue further regulatory clearances of our ALLY System. Our primary sources of liquidity are our cash and cash equivalents, cash from the sale and lease of our systems and the sale of our consumables.
We expect to continue to incur losses and operating cash outflows for the near-term future as we continue to build our commercial and clinical infrastructure and pursue further regulatory clearances of our ALLY System.
Total unrecognized stock-based compensation expense is expected to be amortized as follows: (Dollars in thousands) Amount 2023 4,224 2024 987 2025 635 2026 24 2027 — Thereafter — Total unrecognized stock-based compensation expense $ 5,870 The amounts included in this table are based on restricted stock awards, restricted stock units, and stock options outstanding at December 31, 2022 and assumes the requisite service period is fulfilled for all awards outstanding.
Total unrecognized stock-based compensation expense is expected to be amortized as follows: (Dollars in thousands) Amount 2024 2,069 2025 1,006 2026 215 2027 7 2028 — Thereafter — Total unrecognized stock-based compensation expense $ 3,297 The amounts included in this table are based on restricted stock units and stock options outstanding at December 31, 2023 and assumes the requisite service period is fulfilled for all awards outstanding.
Further development of the ALLY System is designed to combine our existing femtosecond laser technology with an option to add a phacoemulsification system into an integrated cataract treatment system.
Among other initiatives, further development of the ALLY System is designed to combine our existing femtosecond laser technology with phacoemulsification systems to provide an integrated cataract treatment system.
Non-cash charges primarily consisted of depreciation, amortization, and stock-based compensation. Net operating assets decreased due to accounts receivable net, and inventories offset with accounts payable. Net cash used in operating activities for the year ended December 31, 2021 was $9.0 million, consisting primarily of a net loss of $19.6 million offset by non-cash charges of $10.7 million.
Net cash used in operating activities for the year ended December 31, 2022 was $14.9 million, consisting primarily of a net loss of $19.9 million and a decrease in net operating assets of $5.6 million, partially offset by non-cash charges of $10.6 million. Non-cash charges consisted of depreciation, amortization, and stock-based compensation.
In particular, a global semiconductor supply shortage has had, and is continuing to have, wide-ranging effects across multiple industries. We have seen significant disruptions in the supply of, timing of delivery of and fluctuations in pricing for various component parts needed for our products, including the integrated circuits used in our systems, and expect these trends to continue.
We have seen significant disruptions in the supply of, timing of delivery of and fluctuations in pricing for various component parts needed for our products, including the integrated circuits used in our systems, and expect these trends to continue.
The following table provides information about procedure volume: 2022 2021 2020 Q1 38,901 28,122 23,225 Q2 33,359 30,966 18,265 Q3 28,453 30,765 25,078 Q4 31,400 41,642 30,503 Total procedure volume 132,113 131,495 97,071 Service revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 increased by $0.2 million.
The following table provides information about procedure volume: 2023 2022 2021 Q1 31,600 38,901 28,122 Q2 35,349 33,359 30,966 Q3 32,649 28,453 30,765 Q4 37,414 31,400 41,642 Total procedure volume 137,012 132,113 131,495 Service revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $0.6 million.
Selling, general and administrative expenses for the year ended December 31, 2022 were $27.2 million, an increase of $3.3 million, or 13.7%, compared to $23.9 million for the year ended December 31, 2021.
Selling, general and administrative expenses for the year ended December 31, 2023 were $26.1 million, a decrease of $1.1 million, or 3.9%, compared to $27.2 million for the year ended December 31, 2022.
We currently have an effective shelf registration statement on Form S-3 (No. 333-255136) filed with the SEC on April 8, 2021 (the “Registration Statement”) under which we may offer from time to time in one or more offerings any combination of common and preferred stock, debt securities, depositary shares, warrants, purchase contracts and units of up to $100.0 million in the aggregate.
Furthermore, the Company acquired certain intellectual property, which would result in additional royalty payments at a rate of 3% of certain revenue upon the phacoemulsification features being cleared for commercialization and operational in the ALLY System. 83 We currently have an effective shelf registration statement on Form S-3 (No. 333-255136) filed with the SEC on April 8, 2021, the Registration Statement, under which we may offer from time to time in one or more offerings any combination of common and preferred stock, debt securities, depositary shares, warrants, purchase contracts and units of up to $100.0 million in the aggregate.
Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 (Dollars in thousands) 2022 2021 Change from Prior Year % Revenue: Product $ 25,959 $ 26,246 (1.1 )% Lease 5,915 4,966 19.1 % Service 3,484 3,247 7.3 % Total revenue $ 35,358 $ 34,459 2.6 % Cost of revenue (excluding intangible amortization): Product $ 8,910 $ 11,845 (24.8 )% Lease 1,941 1,375 41.2 % Service 4,552 3,406 33.6 % Total cost of revenue $ 15,403 $ 16,626 (7.4 )% Revenue Total revenue for the year ended December 31, 2022 was $35.4 million, an increase of 2.6% when compared to total revenue of $34.5 million for the year ended December 31, 2021.
Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 (Dollars in thousands) 2023 2022 Change from Prior Year % Revenue: Product $ 31,643 $ 25,959 21.9 % Lease 6,448 5,915 9.0 % Service 4,073 3,484 16.9 % Total revenue $ 42,164 $ 35,358 19.2 % Cost of revenue (excluding intangible amortization): Product $ 13,902 $ 8,910 56.0 % Lease 2,091 1,941 7.7 % Service 5,064 4,552 11.2 % Total cost of revenue $ 21,057 $ 15,403 36.7 % Revenue Total revenue for the year ended December 31, 2023 was $42.2 million, an increase of 19.2% when compared to total revenue of $35.4 million for the year ended December 31, 2022.
Proceeds from the sale were offset by offering costs and commissions associated with the transactions. 81 Cash Flows The following table summarizes, for the periods indicated, selected items in our statements of cash flows: Year Ended December 31, (Dollars in thousands) 2022 2021 Net cash used in operating activities $ (14,856 ) $ (8,969 ) Net cash used in investing activities (115 ) (354 ) Net cash provided by financing activities (1,992 ) 361 Net increase in cash, cash equivalents and restricted cash $ (16,963 ) $ (8,962 ) Operating Activities Net cash used in operating activities for the year ended December 31, 2022 was $14.9 million, consisting primarily of a net loss of $19.9 million and an increase in net operating assets of $5.6 million, partially offset by non-cash charges of $10.6 million.
Cash Flows The following table summarizes, for the periods indicated, selected items in our statements of cash flows: Year Ended December 31, (Dollars in thousands) 2023 2022 Net cash used in operating activities $ (9,659 ) $ (14,856 ) Net cash used in investing activities (4,156 ) (115 ) Net cash provided by (used in) financing activities 19,762 (1,992 ) Net increase (decrease) in cash and cash equivalents $ 5,947 $ (16,963 ) Operating Activities Net cash used in operating activities for the year ended December 31, 2023 was $9.7 million, consisting primarily of a net loss of $14.4 million and a decrease in net operating assets of $7.8 million, partially offset by non-cash charges of $12.5 million.
In addition, we can provide no assurance that we will have sufficient funding to meet our future capital requirements.
We cannot provide assurance that we will generate significant revenues or achieve and sustain profitability in the future. In addition, we can provide no assurance that we will have sufficient funding to meet our future capital requirements.
During the year ended December 31, 2021, we granted stock options to directors, employees, and non-employees. During the year ended December 31, 2022, we granted stock options and restricted stock units to employees and non-employees. We intend to grant stock options and restricted stock units as part of our overall compensation package to directors and employees.
We intend to grant stock options and restricted stock units as part of our overall compensation package to directors and employees.
Research and development expenses in the year ended December 31, 2022 decreased from 2021 associated with the 510(k) submission to the FDA and subsequent U.S. FDA clearance of the ALLY System in June 2022.
Research and development expenses in the year ended December 31, 2023 decreased from the year ended December 31, 2022 as a result of the 510(k) clearance of the ALLY System by the FDA in June 2022.
We believe this structure allows the surgeon to implement a budget while also providing us with a predictable revenue stream. We are focused on continuous innovation and have launched our proprietary next generation ALLY System. The ALLY System, which has received clearance from the U.S.
We believe this structure allows the surgeon to implement a budget while also providing us with a predictable revenue stream. We are focused on continuous innovation and have launched our proprietary next-generation ALLY System. The ALLY System enables cataract surgeons to complete the femtosecond-laser-assisted cataract surgery, or FLACS, procedure seamlessly in a single, sterile environment.
Our ability to place systems in 2022 was limited by supply chain constraints that delayed the delivery of certain ALLY System raw materials and the completion and testing of ALLY Systems for use as launch-stock inventory. The FDA clearance is the first stage of a planned, two step commercial release strategy.
Our ability to place systems in 2022 was limited by supply chain constraints that delayed the delivery of certain ALLY System raw materials and the completion and testing of ALLY Systems for use as launch-stock. In 2022, we transitioned from manufacturing and selling our LENSAR Laser System to focus on our ALLY System.
Non-cash charges consisted of depreciation, amortization, and stock-based compensation. Net operating assets remained unchanged due to changes in accounts receivable, net offset with inventory. Investing Activities Net cash used in investing activities for the year ended December 31, 2022 was $0.1 million, which consisted primarily of capital expenditures for property and equipment.
Net operating assets decreased due to accounts receivable, net, and inventories offset with accounts payable. Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $4.2 million, which consisted primarily of purchases of investments and capital expenditures for property and equipment.
Year Ended December 31, (Dollars in thousands) 2022 2021 Net loss $ (19,914 ) $ (19,601 ) Less: Interest income (263 ) (51 ) Add: Depreciation expense 2,258 1,524 Add: Amortization expense 1,148 1,240 EBITDA (16,771 ) (16,888 ) Add: Stock-based compensation expense 6,611 6,866 Adjusted EBITDA $ (10,160 ) $ (10,022 ) EBITDA is defined as net loss before interest expense, interest income, income tax expense, depreciation and amortization expenses.
Year Ended December 31, (Dollars in thousands) 2023 2022 Net loss $ (14,383 ) $ (19,914 ) Less: Interest income (698 ) (263 ) Add: Depreciation expense 2,418 2,258 Add: Amortization expense 1,097 1,148 EBITDA (11,566 ) (16,771 ) Add: Stock-based compensation expense 5,539 6,611 Add: Change in fair value of warrant liabilities 2,852 — Less: Employee retention credit (1,368 ) — Adjusted EBITDA $ (4,543 ) $ (10,160 ) EBITDA is defined as net loss before interest expense, interest income, income tax expense, depreciation and amortization expenses.
We believe Adjusted EBITDA, which excludes stock-based compensation expense, provides meaningful supplemental information for investors when evaluating our results and comparing us to peer companies as stock-based compensation expense is a significant non-cash charge due to the recapitalization of the Company.
We believe Adjusted EBITDA, which is defined as EBITDA and further excluding stock-based compensation expense, change in fair value of warrant liabilities, and income from the employee retention credit, or ERC, provides meaningful supplemental information for investors when evaluating our results and comparing us to peer companies as stock-based compensation expense and change in fair value of warrant liabilities are significant non-cash charges and the ERC is not recurring.
In addition, based on inventory of our LENSAR Laser System, our future revenue and cash flows will depend on, among other factors, our installed base of systems and the timing of and applicable clearances for our ALLY System.
In addition, our future revenue and cash flows will depend on, among other factors, our installed base of systems and the timing of and applicable clearances for our ALLY System. We expect selling, general and administrative expenses to increase from current levels to support the expansion efforts in the U.S. and internationally for the ALLY System.
Inventory costs for the manufacture of ALLY Systems of $3.4 million and $3.7 million were included in research and development expense for the years ended December 31, 2022 and 2021, respectively. Amortization of Intangible Assets .
Inventory costs for the manufacture of ALLY Systems of $3.4 million were included in research and development expenses for the year ended December 31, 2022. Following our receipt of 510(k) clearance for the ALLY System from the FDA in June 2022, all ALLY System inventory costs are being capitalized to inventory. Amortization of Intangible Assets .
In September 2022, we submitted the ALLY System for certification in the European Union, or EU, and we intend to submit additional marketing or certification applications outside the United States in an effort to commercialize the ALLY System in additional countries and operating regions.
In September 2022, we submitted the ALLY System for certification in the European Union, or EU, and, in 2023, submitted documentation to distributors in South Korea, Taiwan, and China for additional marketing or certification applications.
We expect selling, general and administrative expenses to continue to increase from current levels to support the commercialization of the ALLY System. Research and Development . Research and development expenses were $11.8 million for the year ended December 31, 2022, a decrease of $0.5 million, or 4.4%, compared to $12.4 million for the year ended December 31, 2021.
Research and development expenses were $6.1 million for the year ended December 31, 2023, a decrease of $5.7 million, or 48.0%, compared to $11.8 million for the year ended December 31, 2022.
Product revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 decreased by $0.3 million, or 1.1%. The decrease was primarily attributable to a lower average selling price per procedure offset by increased procedure volume, which amounted to a $0.2 million decrease, during the year ended December 31, 2022.
Product revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $5.7 million, or 21.9%. The increase was primarily attributable to higher system sales, which amounted to a $4.8 million increase, and increased procedure volume, which amounted to a $0.9 million increase, during the year ended December 31, 2023.
Cost of Revenue Total cost of revenue for the year ended December 31, 2022 was $15.4 million, a decrease of 7.4% when compared to total cost of revenue of $16.6 million for the year ended December 31, 2021. 78 Cost of product revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 decreased by $2.9 million or 24.8%.
Cost of Revenue Total cost of revenue for the year ended December 31, 2023 was $21.1 million, an increase of 36.7% when compared to total cost of revenue of $15.4 million for the year ended December 31, 2022. 80 Cost of product revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $5.0 million or 56.0%.
Food and Drug Administration, or FDA, enables cataract surgeons to complete the femtosecond-laser-assisted cataract surgery, or FLACS, procedure seamlessly in a single, sterile environment. Our ALLY System received clearance from the FDA in June 2022, and we executed a controlled and targeted initial launch of the ALLY System beginning in August 2022.
Our ALLY System received clearance from the FDA in June 2022, and we executed a controlled and targeted initial launch of the ALLY System beginning in August 2022. The ALLY System is available to all U.S. cataract surgeons and has also received regulatory clearance in India and the Philippines.
The lingering impacts of COVID-19 into early 2023, along with global economic uncertainty, have impeded global supply chains, resulted in longer lead times and delays in procuring component parts and raw materials, and resulted in inflationary cost increases in certain raw materials, labor and transportation.
Global economic uncertainty and other factors have impeded global supply chains, resulted in longer lead times and delays in procuring component parts and raw materials, and resulted in inflationary cost increases in certain raw materials, labor and transportation. In particular, a global semiconductor supply shortage has had, and is continuing to have, wide-ranging effects across multiple industries.
In September 2022, we submitted the ALLY System for certification in the EU and we intend to submit additional marketing or certification applications outside the United States in an effort to commercialize the ALLY System in additional countries and operating regions.
The ALLY System has received regulatory approval in the United States, India, and the Philippines. In September 2022, we submitted the ALLY System for certification in the EU and, in 2023, submitted documentation to distributors in South Korea, Taiwan, and China for additional marketing or certification applications.
This increase was primarily attributable to an increase in service volume due to an increase in installed LENSAR Laser Systems and ALLY Systems.
Cost of service revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $0.5 million or 11.2%. This increase was primarily attributable to an increase in service volume due to an increase in installed LENSAR Laser Systems and ALLY Systems.
Because these estimates and assumptions are necessarily subjective, the obligations we will actually pay in future periods may vary from those described. Furthermore, the Company acquired certain intellectual property, which would result in additional royalty payments at a rate of 3% of certain revenue upon the phacoemulsification features being cleared for commercialization and operational in the ALLY System.
Because these estimates and assumptions are necessarily subjective, the obligations we will actually pay in future periods may vary from those described.
These grants resulted in $0.6 million of total unrecognized compensation expense, of which $0.1 million will be recognized in 2023. Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S.
Actual stock-based compensation expense in future periods may vary from those reflected in the table. Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S.
We expect selling, general and administrative expenses to increase from current levels due to the continued commercial launch of the ALLY System, particularly if supply chain constraints begin to ease.
We expect selling, general and administrative expenses to continue to increase from current levels to support the expansion efforts in the U.S. and internationally for the ALLY System. Research and Development .
The impact of Section 174 on the Company’s cash from operations depends primarily on the amount of research and development expenditures incurred and whether the Internal Revenue Service issues guidance on the provision which differs from our current interpretation. 77 Seasonality We have historically experienced seasonal variations in the sales and leases of our products, with our fourth quarter typically being the strongest and the first or third quarter being the slowest.
The Company will continue to review the applicability of new notices to its operations and will review the proposed regulations and adjust the estimates as necessary. 79 Seasonality We have historically experienced seasonal variations in the sales and leases of our products, with our fourth quarter typically being the strongest and the first or third quarter being the slowest.
Removed
The ALLY System is expected to be made widely available to U.S. cataract surgeons in 2023, and we intend to submit additional marketing or certification applications outside the United States in an effort to commercialize the ALLY System in additional countries and operating regions.
Added
Change in Fair Value of Warrant Liabilities The change in fair value of warrant liabilities consists of the change in estimated fair value of the warrant liabilities using recently quoted market prices of the Company's common stock and the Black-Scholes option pricing model.
Removed
As the second stage of the strategy, we plan to seek an additional 510(k) clearance for the phacoemulsification features of the ALLY System in a subsequent 510(k) submission subject to a third party’s phacoemulsification device receiving clearance and serving as a predicate device.
Added
On September 8, 2023, the Internal Revenue Service, or the IRS, issued Notice 2023-63 providing interim guidance regarding the capitalization and amortization of research and experimental expenditures for U.S. tax purposes that became effective in 2022. On December 22, 2023, the Treasury Department, or Treasury, and the IRS issued Rev.
Removed
As this device will be considered the predicate device for purposes of evaluating the ALLY System’s phacoemulsification functionality, we are unable to submit a 510(k) submission seeking clearance of the phacoemulsification features within the ALLY System until the predicate device receives FDA clearance.
Added
Proc. 2024-9, which provides procedural guidance for taxpayers to make accounting method changes to apply the provisions of Notice 2023-63. IRS and Treasury concurrently released Notice 2024-12, which modifies certain provisions of Notice 2023-63.
Removed
Accordingly, we are delivering the ALLY System to surgeons in the initial launch with the phacoemulsification features disabled and/or removed. In 2022, we transitioned from manufacturing and selling our LENSAR Laser System to focus on our ALLY System.
Added
However, recently proposed tax legislation, if enacted, would restore the ability to deduct currently domestic research and development expenditures through 2025 and would retroactively restore this benefit for 2022 and 2023. The impact of Section 174 on the Company’s cash from operations depends primarily on the amount of research and development expenditures incurred.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitat ive Disclosures About Market Risk. We had cash and cash equivalents of $14.7 million as of December 31, 2022.
Biggest changeItem 7A. Quantitative and Qualitat ive Disclosures About Market Risk. We had cash, cash equivalents and short-term and long-term investments of $24.6 million as of December 31, 2023. We generally hold our cash and cash equivalents in interest-bearing bank accounts, money market funds, and U.S. treasury bills.
We do have the ability to disable the system’s ability to operate for lack of payment and, in the case of notes receivable, repossess the system if scheduled payments lapse. As of December 31, 2022, no customers accounted for 10% or more of our accounts receivable, net.
We do have the ability to disable the system’s ability to operate for lack of payment and, in the case of notes receivable, repossess the system if scheduled payments lapse. As of December 31, 2023, no customers accounted for more than 10% of our accounts receivable, net.
Management has reviewed the financial situation and government guarantees to depositors of this financial institution and believe there to be little or no credit risk to us. A hypothetical 10% change in interest rates would not have had a material impact on the value of our cash and cash equivalents as of December 31, 2022.
Management has reviewed the financial situation and government guarantees to depositors, if applicable, of the financial institutions and believes there to be little or no credit risk to us. A hypothetical 10% change in interest rates would not have had a material impact on the value of our cash and cash equivalents as of December 31, 2023.
Our cash and cash equivalents are held in deposit demand accounts at a large financial institution in amounts in excess of the Federal Deposit Insurance Corporation, or FDIC, insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category.
Our investments consist primarily of U.S. treasury bills and certificates of deposit and all our investments are classified as available-for-sale. Our cash and cash equivalents are held in deposit demand accounts at large financial institutions in amounts in excess of the Federal Deposit Insurance Corporation, or FDIC, insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category.

Other LNSR 10-K year-over-year comparisons