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What changed in Outset Medical, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Outset Medical, Inc.'s 2023 and 2024 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 2024 report.

+538 added−473 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-21)

Top changes in Outset Medical, Inc.'s 2024 10-K

538 paragraphs added · 473 removed · 380 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

92 edited+27 added−21 removed208 unchanged
Biggest changeThe FDA conducted their first quality system inspection of our San Jose, California facility which concluded in February 2023. At completion, the FDA issued a Form FDA-483 identifying four inspectional observations. We provided our response plan to the FDA in March 2023 and have since completed the associated remediation workstreams to fully address these observations.
Biggest changeWe provided our response plan to the FDA in March 2023, completed the associated remediation workstreams, and submitted our final update to the FDA regarding actions taken to address these observations. The FDA conducted a follow-up inspection of our San Jose, California facility, which concluded in September 2024. At completion, the FDA did not issue a Form-483.
As further described below in the section entitled “Tablo Data Ecosystem”, with Tablo, we are bringing data to dialysis. Tablo is built to live in a connected setting with cloud-based system monitoring, patient analytics and clinical recordkeeping. Tablo Data Ecosystem 4 Tablo's two-way wireless data transmission and connectedness help reduce maintenance costs and enable ongoing system improvements.
As further described below in the section entitled “Tablo Data Ecosystem”, with Tablo, we are bringing data to dialysis. Tablo is built to live in a connected setting with cloud-based system monitoring, patient analytics and clinical recordkeeping. 4 Tablo Data Ecosystem Tablo's two-way wireless data transmission and connectedness help reduce maintenance costs and enable ongoing system improvements.
We cannot be sure that our pending patent applications or future patent applications will result in issued patents or that any patents that have issued 6 or might issue in the future will protect our current or future products, provide us with any competitive advantage or will not be challenged, invalidated, or circumvented.
We cannot be sure that our pending patent applications or future patent applications will result in issued patents or that any patents that have issued or might 6 issue in the future will protect our current or future products, provide us with any competitive advantage or will not be challenged, invalidated, or circumvented.
The My Health My Data Act considers violations of this law to be an unfair or deceptive act in trade or commerce and an unfair method of competition and subject to the Washington Consumer Protection Act.
The My Health My Data Act considers violations of this law to be an unfair or deceptive act in trade or commerce and an unfair method of competition subject to the Washington Consumer Protection Act.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling regulations and FDA prohibitions against the promotion of investigational products, or the promotion of ‘‘off-label’’ uses of cleared or approved products; • requirements related to promotional activities; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of certain modifications to PMA-approved devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and 10 • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling regulations and FDA prohibitions against the promotion of investigational products, or the promotion of ‘‘off-label’’ uses of cleared or approved products; • requirements related to promotional activities; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of certain modifications to PMA-approved devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Government officials continue to focus their enforcement efforts on the sales and marketing activities of medical device manufacturers and other 12 healthcare companies, and routinely bring cases under the federal Anti-Kickback Statute and False Claims Act against individuals or entities who allegedly offer unlawful inducements to potential or existing customers in an attempt to procure their business.
Government officials continue to focus their enforcement efforts on the sales and marketing activities of medical device manufacturers and other healthcare companies, and routinely bring cases under the federal Anti-Kickback Statute and False Claims Act against individuals or entities who allegedly offer unlawful inducements to potential or existing customers in an attempt to procure their business.
Nash held various positions of increasing responsibility at Alere Inc., a medical technology company, where he was responsible for the transfer, consolidation and enhancement of class II and class III point of care and rapid diagnostic products globally. Mr. Nash holds a B.S. from Union College and an M.B.A. from the University of Haifa, Israel.
Nash held various positions of increasing responsibility at Alere Inc., a medical technology company, where he was responsible for the transfer, consolidation and enhancement of class II and class III point of care and rapid diagnostic products globally. Mr. Nash holds a B.S. from Union College and an M.B.A. from the University of Haifa, Israel. 20
A PMA may include post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported the PMA or requirements to conduct additional clinical studies post-approval.
A PMA may include post-approval conditions intended to ensure the safety and effectiveness of the device, including, 8 among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported the PMA or requirements to conduct additional clinical studies post-approval.
For example, in October 2022,we submitted a 510(k) notification to the 11 FDA seeking clearance of a new software version intended to offer new commercial features and enhancements designed to improve the reliability and serviceability of Tablo, as well as other previously implemented modifications. In June 2023, the FDA cleared this 510(k) application.
For example, in October 2022, we submitted a 510(k) notification to the FDA seeking clearance of a new software version intended to offer new commercial features and enhancements designed to improve the reliability and serviceability of Tablo, as well as other previously implemented modifications. In June 2023, the FDA cleared this 510(k) application.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, 13 imprisonment, and/or exclusion from government-funded healthcare programs, such as Medicare and Medicaid.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, imprisonment, and/or exclusion from government-funded healthcare programs, such as Medicare and Medicaid.
Specifically, the Supreme Court held that because the Plan’s terms apply uniformly to all covered individuals, the Plan does not “differentiate in the 17 benefits it provides” to individuals with ESRD or “take into account” whether an individual is entitled to or eligible for Medicare, and thus does not violate the MSPA.
Specifically, the Supreme Court held that because the Plan’s terms apply uniformly to all covered individuals, the Plan does not “differentiate in the benefits it provides” to individuals with ESRD or “take into account” whether an individual is entitled to or eligible for Medicare, and thus does not violate the MSPA.
Diversity, Equity and Inclusion Strategy We are committed to creating and nurturing an inclusive workplace, where everyone feels respected, valued, and included – not only because it’s the right thing to do, but also because we strongly believe that it’s vital to our success and crucial to fully support the diverse communities we serve.
Diversity, Equity and Inclusion We are committed to creating and nurturing an inclusive workplace, where everyone feels respected, valued, and included – not only because it’s the right thing to do, but also because we strongly believe that it’s vital to our success and crucial to fully support the diverse communities we serve.
A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.
A significant risk device is one that presents a potential for serious 9 risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.
Quality Systems Regulation Requirements Our manufacturing processes are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use.
Quality Systems Regulation Requirements 10 Our manufacturing processes are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use.
Under the program, a manufacturer is eligible to receive priority review and interactive communications from the FDA regarding device development and clinical trial protocols, all the way through to commercialization decisions. Clinical Trials 9 Clinical trials are almost always required to support a PMA and are sometimes required to support a 510(k) submission.
Under the program, a manufacturer is eligible to receive priority review and interactive communications from the FDA regarding device development and clinical trial protocols, all the way through to commercialization decisions. Clinical Trials Clinical trials are almost always required to support a PMA and are sometimes required to support a 510(k) submission.
Ahmed held various positions of increasing responsibility 19 at Ernst & Young LLP from 1997 to 2004 and at eBay, Inc. from 2004 to 2008. Mr. Ahmed holds a Bachelor of Commerce degree from Laurentian University and an M.B.A. from The Wharton School, University of Pennsylvania. John L. Brottem John L.
Ahmed held various positions of increasing responsibility at Ernst & Young LLP from 1997 to 2004 and at eBay, Inc. from 2004 to 2008. Mr. Ahmed holds a Bachelor of Commerce degree from Laurentian University and an M.B.A. from The Wharton School, University of Pennsylvania. John L. Brottem John L.
Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and effectiveness.
Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and 7 effectiveness.
Changes to federal and state legislatures and executive offices have resulted in and will likely continue to result in further healthcare policy changes. For example, on July 9, 2021, President Biden issued an executive order to promote competition in the American economy, including in the healthcare sector.
Changes to federal and state legislatures and executive offices have resulted in and will likely continue to result in further healthcare policy changes. For example, on July 9, 2021, former President Biden issued an executive order to promote competition in the American economy, including in the healthcare sector.
In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party 8 manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR. PMA devices are also subject to the payment of user fees.
In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR. PMA devices are also subject to the payment of user fees.
Additionally, current CMS rules limit the number of hemodialysis treatments paid for by Medicare Part B to three times a week, unless there is medical justification provided by the dialysis facility based on information from the patient’s physician for additional treatments.
Current CMS rules limit the number of hemodialysis treatments paid for by Medicare Part B to three times a week, unless there is medical justification provided by the dialysis facility based on information from the patient’s physician for additional treatments.
Given that the Anti-Kickback Statute is an intent-based law, the failure of a transaction or arrangement to fit precisely within an exception or safe harbor does not necessarily mean that it is illegal or that prosecution will be pursued.
Given that the federal Anti-Kickback Statute is an intent-based law, the failure of a transaction or arrangement to fit precisely within an exception or safe harbor does not necessarily mean that it is illegal or that prosecution will be pursued.
However, to the extent that providers continue to prescribe more than three home dialysis treatments per week and Medicare 15 contractors determine they will not pay for such additional treatments, use of Tablo could be adversely impacted.
However, to the extent that providers continue to prescribe more than three home dialysis treatments per week and Medicare contractors determine they will not pay for such additional treatments, use of Tablo could be adversely impacted.
Of these competitors, Fresenius is the largest, and is vertically integrated, both manufacturing dialysis 5 products and operating dialysis clinics along with providing inpatient dialysis services to hospitals and health systems. Additionally, companies with dialysis machine development programs include Medtronic plc (Medtronic).
Of these competitors, Fresenius is the largest, and is vertically integrated, both manufacturing dialysis products and operating dialysis clinics along with providing inpatient dialysis services to hospitals and health systems. Additionally, companies with dialysis machine development programs include Medtronic plc (Medtronic).
As we expand our international operations, we may be required to expend significant time and resources to put in place additional mechanisms to ensure compliance with multiple robust and evolving data privacy laws as they become applicable to our business.
If we expand our international operations, we may be required to expend significant time and resources to put in place additional mechanisms to ensure compliance with multiple robust and evolving data privacy laws as they become applicable to our business.
FDA Premarket Clearance and Approval Requirements 7 Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, approval of a de novo application, or approval of a premarket approval (PMA).
FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, approval of a de novo application, or approval of a premarket approval (PMA).
ESRD patients covered by Medicare, the Medicare reimbursement rate is an important factor in a healthcare provider’s decision to use Tablo and limits the fees for which we can sell or rent Tablo.
ESRD patients covered by Medicare, the Medicare reimbursement rate is an important factor in a 15 healthcare provider’s decision to use Tablo and limits the fees for which we can sell or rent Tablo.
Ms. Trigg joined the Company from Warburg Pincus, a private equity firm, where she was an Executive in Residence from March 2012 to March 2014. Prior to that, Ms.
Trigg joined the Company from Warburg Pincus, a private equity firm, where she was an Executive 19 in Residence from March 2012 to March 2014. Prior to that, Ms.
We compete primarily on the basis that Tablo is designed to drive operational efficiency through ease of use and cost reduction by reducing infrastructure and supplies cost. Further, hospital customers in this market have generally outsourced their dialysis services to third party providers, for example, Fresenius, rather than offering on-site inpatient dialysis services on their own.
We compete primarily on the basis that Tablo is designed to drive operational efficiency through ease of use and cost reduction by reducing infrastructure and supplies cost. Further, hospital and post-acute customers in this market have generally outsourced their dialysis services to third party providers, for example, Fresenius, rather than offering on-site inpatient dialysis services on their own.
CMS subsequently published a final rule on September 29, 2020, among other things, to implement the End-Stage Renal Disease Treatment Choices (ETC) Model. The ETC Model is a mandatory payment model that adjusts certain Medicare payments to selected ESRD facilities, nephrologists, and other clinicians managing beneficiaries with ESRD starting January 1, 2021 and continuing through June 30, 2027.
CMS subsequently published a final rule on September 29, 2020, among other things, to implement the End-Stage Renal Disease Treatment Choices (ETC) Model. The ETC Model is a mandatory payment model that adjusts certain Medicare payments to select ESRD facilities, nephrologists, and other clinicians managing beneficiaries with ESRD starting January 1, 2021 and continuing through June 30, 2027.
Acute Care While historically customers in this market have focused on machine functionality and price, we believe they are increasingly focused on the total cost of patient care, which favors technology that can provide clinical versatility and improve operational efficiency. In the acute care setting, the dialysis machine manufacturers that we compete with include Fresenius, Baxter and B. Braun.
Acute Care While historically customers in this market have focused on machine functionality and price, we believe they are increasingly focused on the total cost of patient care, which favors technology that can provide clinical versatility and improve operational efficiency. In the acute care setting, the dialysis machine manufacturers that we compete with include Fresenius, Vantive and B. Braun.
For example, the Budget Control Act of 2011, among other things, resulted in reductions in payments to Medicare providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect into 2032 unless additional Congressional action is taken, with the exception of a temporary suspension of the 2% cut in Medicare payments from May 1, 2020 through July 1, 2022 due to the COVID-19 pandemic.
For example, the Budget Control Act of 2011, among other things, resulted in reductions in payments to Medicare providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect into 2032 unless additional Congressional action is taken, with the exception of a temporary suspension of the 2% cut in Medicare payments from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic.
The law provided for 1% Medicare sequestration in the second quarter of 2022, with the full 2% sequestration going into effect thereafter through the first six months of the FY 2032 sequestration order, unless additional Congressional action is taken.
The law provided for 1% Medicare sequestration in the second quarter of 2022, with the full 2% sequestration going into effect thereafter through the first eight months of the FY 2032 sequestration order, unless additional Congressional action is taken.
Trigg holds a B.S. degree from Northwestern University and an M.B.A. from The Haas School of Business, UC Berkeley. Nabeel Ahmed Nabeel Ahmed has served as our Chief Financial Officer since August 2021. Mr.
Trigg holds a B.S. degree from Northwestern University and an M.B.A. from The Haas School of Business, University of California, Berkeley. Nabeel Ahmed Nabeel Ahmed has served as our Chief Financial Officer since August 2021. Mr.
Recently, the Inflation Reduction Act of 2022 extended this increased tax credit assistance and removal of the 400% federal poverty limit through 2025. It is unclear if efforts to challenge, or modify, or alter the implementation or interpretation of the Affordable Care Act will affect our business, financial condition and results of operations.
Recently, the Inflation Reduction Act of 2022 extended this increased tax credit assistance and removal of the 400% federal poverty limit through 2025. It is unclear if efforts to challenge, or modify, or alter the implementation or interpretation of the ACA will affect our business, financial condition and results of operations.
Treatments must be administered under a physician’s prescription and observed by a trained individual who is considered competent in the use of the device. The FDA’s authorizations for the Tablo System and Tablo Cartridge have thus far been granted as 510(k) clearances.
Treatments must be administered under a physician’s prescription and observed by a trained individual who is considered competent in the use of the device. The FDA’s authorizations for the Tablo System, Tablo Cartridge and TabloCart with Prefiltration have thus far been granted as 510(k) clearances.
Reimbursement in the Critical Care Setting For Medicare patients, both acute kidney failure (AKI) and fluid overload therapies provided in an in-patient hospital setting are reimbursed under Medicare Part A through the Hospital Inpatient Prospective Payment System using the Medicare Severity Diagnosis Related Group System (MS-DRG).
Reimbursement in the Critical Care Setting For Medicare patients, both AKI and fluid overload therapies provided in an in-patient hospital setting are reimbursed under Medicare Part A through the Hospital Inpatient Prospective Payment System using the Medicare Severity Diagnosis Related Group System (MS-DRG).
Our proprietary data ecosystem provides what we believe is a unique way of connecting providers and patients for real-time treatment monitoring, automated treatment documentation, and simplified compliance and record-keeping. Our patents expire between October 2025 and December 2039. The term of individual patents depends upon the legal term for patents in the countries in which they are granted.
Our proprietary data ecosystem provides what we believe is a unique way of connecting providers and patients for real-time treatment monitoring, automated treatment documentation, and simplified compliance and record-keeping. Our patents expire between October 2025 and April 2040. The term of individual patents depends upon the legal term for patents in the countries in which they are granted.
In July 2023, we received a warning letter (the “Warning Letter”) from the FDA that raised two observations. The first observation asserts that certain content reviewed by the FDA and found on our website promotes Continuous Renal Replacement Therapy (CRRT), a modality outside of the current indications for Tablo.
In July 2023, we received a warning letter (the Warning Letter) from the FDA that raised two observations. The first observation asserted that certain content reviewed by the FDA and found on our website promotes Continuous Renal Replacement Therapy (CRRT), a modality outside of the current indications for Tablo.
At the state level, for example, the Washington State My Health My Data Act, which largely goes into effect in 2024, contains requirements such as the provision of specific health-data consumer disclosures and consumer rights (including the right to consent to the processing of their 14 health data) in addition to other compliance and security requirements.
At the state level, for example, the Washington State My Health My Data Act, which went into effect in 2024, contains requirements such as the provision of specific health-data consumer disclosures and consumer rights (including the right to consent to the processing of their health data) in addition to other compliance and security requirements.
The 2020 amendments also created a California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The CCPA regulations also impose proscriptive requirements on businesses regarding how to properly demonstrate compliance with the law’s requirements.
The 2020 amendments also created a California data protection agency authorized to issue substantive regulations and has resulted in increased privacy and information security enforcement. The CCPA regulations also impose proscriptive requirements on businesses regarding how to properly demonstrate compliance with the law’s requirements.
Information About Our Executive Officers The following table sets forth information concerning our executive officers and directors as of the date of this Annual Report: Name Age Position(s) Executive Officers Leslie Trigg 53 President, Chief Executive Officer and Chair of the Board Nabeel Ahmed 48 Chief Financial Officer John L.
Information About Our Executive Officers The following table sets forth information concerning our executive officers and directors as of the date of this Annual Report: Name Age Position(s) Executive Officers Leslie Trigg 54 President, Chief Executive Officer and Chair of the Board Nabeel Ahmed 49 Chief Financial Officer John L.
The number of suppliers required for Tablo console production is in excess of 200 worldwide. We consider a discrete number of these suppliers, located in the United States, Mexico, Europe and Asia, as critical providers of components such as pumps, motors, valves and PCBA boards.
The number of suppliers required for Tablo console production is approximately 100 worldwide. We consider a discrete number of these suppliers, located in the United States, Mexico, Europe and Asia, as critical providers of components such as pumps, motors, valves and PCBA boards.
The Affordable Care Act, among other things, 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, 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 American Rescue Plan of 2021, Pub. L. No. 117-2, enacted on March 11, 2021, temporarily increased premium tax credit assistance for those eligible for subsidies for 2021 and 2022 and removed the 400% federal poverty level limit that otherwise applies for purposes of eligibility to receive premium tax credits.
No. 117-2, enacted on March 11, 2021, temporarily increased premium tax credit assistance for those eligible for subsidies for 2021 and 2022 and removed the 400% federal poverty level limit that otherwise applies for purposes of eligibility to receive premium tax credits.
Although we believe we are in material compliance with the QSR and have addressed the observations identified in the Form-483, there is no guarantee that subsequent inspections of our facility by the FDA or other regulatory authorities will not result in similar observations with respect to our quality system, which could adversely affect our business.
Although we believe we are in material compliance with the QSR, there is no guarantee that subsequent inspections of our facility by the FDA or other regulatory authorities will not result in similar observations with respect to our quality system, which could adversely affect our business.
Unlike traditional hemodialysis machines, which have limited clinical versatility across care settings, Tablo can be used seamlessly across multiple care settings and a wide range of clinical applications. We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs by up to 80% in the intensive care unit (ICU).
Unlike traditional hemodialysis machines, which have limited clinical versatility across care settings, Tablo can be used seamlessly across multiple care settings and a wide range of clinical applications. We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs.
Our intellectual property includes specific algorithms for Tablo console, including those related to pressure sensors, blood leakage and pump control loops. Patents As of December 31, 2023, we had 22 issued U.S. patents, as well as 7 pending U.S. patent applications.
Our intellectual property includes specific algorithms for Tablo console, including those related to pressure sensors, blood leakage and pump control loops. Patents As of December 31, 2024, we had 23 issued U.S. patents, as well as 10 pending U.S. patent applications.
However, these exceptions and safe harbors are narrowly drawn, and there is no exception or safe harbor for many common business activities like the provision of meals, educational grants or reimbursement support programs, among others.
However, these exceptions and safe harbors are narrowly drawn, and there are no exceptions or safe harbors for many other common business 12 activities, like the provision of meals, educational grants or reimbursement support programs, among others.
Privacy and Security In the course of performing our business we obtain personally identifiable information (PII), including health-related information. Numerous federal and state laws and regulations, including HIPAA, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or personal information.
Privacy and Security In the course of performing our business we obtain personally identifiable information (PII), including health-related information. Numerous federal and state laws and regulations, including the Healthcare Insurance Portability and Accountability Act 13 (HIPAA), govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or personal information.
We had an aggregate of 39 issued patents in Australia, Canada, China, France, Germany, Hong Kong, Japan, Spain, Sweden and the United Kingdom, as well as 35 pending patent applications in Australia, Brazil, Canada, China, the European Patent Office, Hong Kong, Japan, Saudi Arabia, United Arab Emirates and under the Patent Cooperation Treaty.
We had an aggregate of 40 issued patents in Australia, Canada, China, France, Germany, Hong Kong, Japan, Spain, Sweden and the United Kingdom, as well as 36 pending patent applications in Australia, Brazil, Canada, China, the European Patent Office, Hong Kong, Japan, Saudi Arabia and United Arab Emirates.
Given the breadth of the federal Anti-Kickback Statute, and to allow innocuous or beneficial arrangements that may otherwise implicate the law, there are statutory exceptions and regulatory safe harbors that protect certain arrangements from liability under the law when all elements of an applicable exception or safe harbor are met.
Given the breadth of the federal Anti-Kickback Statute, in order to protect certain common business arrangements and activities that may otherwise implicate the law, there are statutory exceptions and regulatory safe harbors that protect certain arrangements from liability under the law when all elements of an applicable exception or safe harbor are met.
Additionally, the Affordable Care Act encouraged expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
Additionally, the ACA encouraged states to expand eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties for each false claim submitted or statement made, which currently set at $13,946 up to $27,894 per false claim or statement for penalties assessed after January 15, 2024.
FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties for each false claim submitted or statement made, which currently set at $13,946 up to $27,894 per false claim or statement for penalties assessed after January 15, 2024 and which we expect will increase incrementally in early 2025 due to inflationary adjustments.
The Further Consolidated Appropriations Act of 2020, Pub. L. No. 116-94, signed into law December 20, 2019, fully repealed the Affordable Care Act’s “Cadillac Tax” on certain high-cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share (repeal effective in 2021), and the medical device excise tax on non-exempt medical devices.
No. 116-94, signed into law December 20, 2019, fully repealed the ACA’s “Cadillac Tax” on certain high-cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share (repeal effective in 2021), and the medical device excise tax on non-exempt medical devices. The American Rescue Plan of 2021, Pub. L.
We plan to continue leveraging our commercial infrastructure, including our sales, field service and marketing teams, to broaden our installed base in the acute care market, as well as driving utilization and fleet expansion with our existing customers. Tablo is also utilized for home-based dialysis. In March 2020, Tablo was cleared by the FDA for patient use in the home.
We plan to continue leveraging our commercial infrastructure, including our sales, field service and marketing teams, to broaden our installed base in the acute and post-acute care markets, as well as driving utilization and fleet expansion with our existing customers. Tablo is also utilized for home-based dialysis.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted.
Home Care We believe competition in the home setting is based on a system’s clinical performance, its cost efficiency, its ease of use and patient preference. In the home hemodialysis setting, competitors include Fresenius (through its acquisition of NxStage).
Home Care We believe competition in the home setting is based on a system’s clinical performance, its cost efficiency, its ease of use and patient preference. In the home hemodialysis setting, competitors include Fresenius (through its acquisition of NxStage) and Quanta which received FDA 510(k) clearance for home use in 2024.
There have been judicial and Congressional challenges to various elements of the Affordable Care Act, as well as efforts to modify certain aspects of the Affordable Care Act. For example, Congress eliminated, starting January 1, 2019, the tax penalty for not complying with the Affordable Care Act’s individual mandate to carry health insurance.
There have been judicial and Congressional challenges to various elements of the ACA, as well as efforts to modify certain aspects of the ACA. For example, Congress eliminated, starting January 1, 2019, the tax penalty for not complying with the ACA’s individual mandate to carry health insurance. The Further Consolidated Appropriations Act of 2020, Pub. L.
Notable competitors in the United States include Fresenius Medical Care AG & Co. KGaA (Fresenius), Baxter International, Inc. (Baxter) and B. Braun. Medical Inc. (B. Braun). In addition, Quanta Dialysis Technologies Ltd’s (Quanta) dialysis system received FDA 510(k) clearance for use in acute and/or chronic settings.
Notable competitors in the United States include Fresenius Medical Care AG & Co. KGaA (Fresenius), Vantive, formerly the Baxter kidney care segment, and B. Braun. Medical Inc. (B. Braun). In addition, Quanta Dialysis Technologies Ltd.’s (Quanta) dialysis system has received FDA 510(k) 5 clearance for use in acute and/or chronic and home settings.
The TACNA Agreement has an initial three-year term and will continue thereafter until terminated by us or TACNA in accordance with the terms of the TACNA Agreement. We also manufacture a portion of Tablo cartridges through two contract manufacturing partners, Providien Medical (Providien), part of Carlisle Companies Incorporated, a contract manufacturer with a facility in Mexico, and Infus Medical Co.
The TACNA Agreement has an initial three-year term and will continue thereafter until terminated by us or TACNA in accordance with the terms of the TACNA Agreement. We also manufacture a portion of Tablo cartridges through Infus Medical Co. Ltd. (Infus), a contract manufacturer with two facilities in Thailand.
Trigg has served on the board of directors of Adaptive Biotechnologies Corporation, a biotechnology company, since March 2021, and on the board of directors of ARYA Sciences Acquisition Corp IV, a special purpose acquisition company, since March 2021. Ms. Trigg also serves as the Chair of the board of directors of the Medical Device Manufacturers Association. Ms.
Trigg also serves as the Chair of the board of directors of the Medical Device Manufacturers Association (MDMA). Previously, Ms. Trigg served on the boards of directors of Adaptive Biotechnologies Corporation, a biotechnology company, from March 2021 to June 2023, and of ARYA Sciences Acquisition Corp IV, a special purpose acquisition company, from March 2021 to July 2024. Ms.
Additionally, the Federal Trade Commission (FTC) and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the online collection, use, dissemination and security of health-related and other personal information. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access.
Additionally, the Federal Trade Commission (FTC) and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the online collection, use, dissemination and security of health-related and other personal information.
On November 6, 2023, CMS published the final rule for Calendar Year (CY) 2024, which increased the base reimbursement rate per dialysis treatment to $271.02, an increase of $5.45 over the CY 2023 base rate of $265.57.
On November 12, 2024, CMS published the final rule for Calendar Year (CY) 2025, which increased the base reimbursement rate per dialysis treatment to $273.82, an increase of $2.80 over the CY 2024 base rate of $271.02.
We strongly believe in growing from within and provide opportunities for in-role stretch assignments, cross-group short assignments, internal mobility, and promotions. We conduct an enterprise-wide employee survey at least annually to monitor employee engagement and identify areas of focus for our human capital management program. Information on the results of these surveys is included in our ESG Report.
We conduct an enterprise-wide employee survey at least annually to monitor employee engagement and identify areas of focus for our human capital management program. Information on the results of these surveys is included in our ESG Report.
In 2022, we introduced TabloCart with storage drawer, an accessory for Tablo that has 360° wheels for maneuverability and additional storage. • Tablo Cartridge . A proprietary, disposable single use pre-strung cartridge that easily clicks into place, minimizing steps, touch points and connections, allowing for set up of treatment supplies in less than 12 minutes.
We also offer TabloCart with Prefiltration drawer or storage drawer, an accessory for Tablo, that is configured based on the customer’s needs. • Tablo Cartridge. A proprietary, disposable single use pre-strung cartridge that easily clicks into place, minimizing steps, touch points and connections, allowing for set up of treatment supplies in less than 12 minutes.
Specifically, the ETC Model adjusts certain ESRD facilities’ treatment base rates under the ESRD Prospective Payment System and managing clinicians’ monthly Medicare capitation payments to incentivize greater use of home dialysis and kidney transplants. CMS continues to propose modifications to the ETC Model as it evaluates the model against the agency’s stated goals for the program.
Specifically, the ETC Model adjusts certain ESRD facilities’ treatment base rates under the ESRD Prospective Payment System and manages clinicians’ monthly Medicare capitation payments to incentivize greater use of home dialysis and kidney transplants.
HIPAA enforcement actions may lead to monetary penalties and costly and burdensome corrective action plans. We are also required to report known breaches of PHI consistent with applicable breach reporting requirements set forth in applicable laws and regulations.
We are also required to report known breaches of PHI consistent with applicable breach reporting requirements set forth in applicable laws and regulations.
Our workforce hails from across industries, including technology, medical devices, life sciences and retail management. As of December 31, 2023, our manufacturing facility in Tijuana, Mexico had 300 full-time team members on-site across quality, engineering, manufacturing, supply chain, and other support functions. TACNA facilitates the hiring of new team members and is responsible for human resource functions and payroll processing.
As of December 31, 2024, our manufacturing facility in Tijuana, Mexico had 187 full-time team members on-site across quality, engineering, manufacturing, supply chain, and other support functions. TACNA facilitates the hiring of new team members and is responsible for human resource functions and payroll processing. Starting in 2023 through the beginning of 2025, we implemented four workforce reductions.
Brottem 50 General Counsel and Secretary Marc Nash 35 Senior Vice President, Operations and R&D Jean-Olivier Racine 42 Chief Technology Officer Steve Williamson 51 Chief Commercial Officer Leslie Trigg Leslie Trigg has served as our President and Chief Executive Officer and a member of our board of directors since November 2014 and as Chair of our Board since February 2022.
Brottem 51 General Counsel and Secretary Marc Nash 36 Senior Vice President, Operations and R&D Leslie Trigg Leslie Trigg has served as our President and CEO and a member of our Board since November 2014 and as Chair of our Board since February 2022. Ms.
In May 2022, the FDA published a Letter to Healthcare Providers entitled "Potential Risk of Exposure to Toxic Compounds When Using Certain Hemodialysis Machines Manufactured by Fresenius Medical Care – Letter to Health Care Providers." In that communication, the agency stated that it is evaluating the potential risk of exposure to non-dioxin-like (NDL) polychlorinated biphenyl acids (PCBAs) and NDL polychlorinated biphenyls (PCBs) with certain hemodialysis machines marketed in the United States.
In May 2022, the FDA published a Letter to Healthcare Providers stating that it is evaluating the potential risk of exposure to non-dioxin-like (NDL) polychlorinated biphenyl acids (PCBAs) and NDL polychlorinated biphenyls (PCBs) with certain 11 hemodialysis machines marketed in the United States from the silicone tubing used in those machines.
The Department of Health and Human Services Office for Civil Rights (OCR) has recently increased its enforcement efforts on compliance with HIPAA, including the security regulations (Security Rule), bringing actions against entities which have failed to implement security measures sufficient to reduce risks to electronic protected health information or to conduct an accurate and thorough risk analysis, among other violations.
OCR has recently increased its enforcement of compliance with HIPAA, including the Security Rule, bringing actions against entities which have failed to implement security measures sufficient to reduce risks to electronic PHI or to conduct an accurate and thorough risk analysis, among other violations. HIPAA enforcement actions may lead to monetary penalties and costly and burdensome corrective action plans.
To demonstrate the cost advantages of Tablo in the home setting, we are continuing to collect additional patient clinical experience and outcomes data. Tablo Hemodialysis System Tablo is an FDA-cleared single enterprise solution for hemodialysis, comprised of a compact console with integrated water purification, on-demand dialysate production and advanced software and connectivity capabilities.
Tablo Hemodialysis System Tablo is an FDA-cleared single enterprise solution for hemodialysis, comprised of a compact console with integrated water purification, on-demand dialysate production and advanced software and connectivity capabilities.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Rulemaking by the California Privacy Protection Agency (CPPA) has begun – the CPPA has administrative enforcement authority over CCPA and oversees CCPA rulemaking.
We believe the concern raised by the second observation regarding TabloCart with Prefiltration has been effectively addressed with two actions. First, although we evaluated TabloCart with Prefiltration prior to marketing and distributing the product and concluded that no marketing authorization was necessary, we paused distribution of TabloCart with Prefiltration pending the FDA’s review and clearance of a 510(k) application.
Although we evaluated TabloCart with Prefiltration prior to marketing and distributing the product and concluded that no marketing authorization was necessary, we paused distribution of TabloCart with Prefiltration pending the FDA’s review and clearance of a 510(k) application for TabloCart with Prefiltration, which we submitted in September 2023.
The second observation asserts that TabloCart with Prefiltration requires prior 510(k) clearance for marketing authorization. TabloCart with Prefiltration is an accessory to Tablo launched in the third quarter of 2022. We believe the concern raised by the first observation regarding CRRT promotion has been effectively addressed through a thorough review of existing promotional materials and practices.
The second observation asserted that TabloCart with Prefiltration required prior 510(k) clearance for marketing authorization. TabloCart with Prefiltration is an accessory to Tablo launched in the third quarter of 2022. We took action to address the first observation regarding CRRT promotion through revision of processes and procedures and updates to existing labeling and promotional materials.
Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information.
Courts may also adopt the standards for fair information practices promulgated by the FTC, which 14 concern consumer notice, choice, security and access. Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information.
The various components for Tablo cartridge are manufactured by approximately 30 different single-source suppliers located in various countries including the United States, Mexico, Europe and Asia. Government Regulation United States Food and Drug Administration In the United States, our products are subject to regulation by the FDA as medical devices pursuant to the Federal Food Drug and Cosmetic Act (FDCA).
Government Regulation United States Food and Drug Administration In the United States, our products are subject to regulation by the FDA as medical devices pursuant to the Federal Food Drug and Cosmetic Act (FDCA).
United States Health Reform Changes in healthcare policy could increase our costs and subject us to additional legislative and regulatory requirements that may interrupt commercialization of our current and future products, decrease our revenue and adversely impact sales of, and pricing of and reimbursement for, our current and future products.
Given that dialysis is a “fixed cost” for providers within the MS-DRG, we believe that there is significant motivation for providers to attempt to reduce costs associated with dialysis in order to improve overall service line profitability. 16 United States Health Reform Changes in healthcare policy could increase our costs and subject us to additional legislative and regulatory requirements that may interrupt commercialization of our current and future products, decrease our revenue and adversely impact sales of, and pricing of and reimbursement for, our current and future products.
We offer numerous avenues for employees to gain experience, exposure and build new skills. For example, we have invested in various training and development opportunities for our employees, including programs taught by internal leaders or external speakers, a management development program, and access to on-demand learning resources.
We offer numerous avenues for employees to gain experience, exposure and build new skills. For example, we have invested in various training and development opportunities for our employees, including access to on-demand learning resources. We strongly believe in growing from within and provide opportunities for in-role stretch assignments, cross-group short assignments, internal mobility, and promotions.
Private Insurance Finally, some patients may have coverage through private insurance, for example through a marketplace plan set up under the Affordable Care Act or through an employer or union group health plan. Private insurance reimbursement is generally higher than government reimbursement, but private insurance coverage and reimbursement varies by sponsor and plan.
Some ESRD patients, however, may have Medicaid as their primary coverage. Because Medicaid is a state-administered program, Medicaid reimbursement for dialysis services varies by state. Private Insurance Finally, some patients may have coverage through private insurance, for example through a marketplace plan set up under the ACA or through an employer or union group health plan.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe following factors could result in harm to our business, reputation, revenue, financial results, and prospects, among other impacts: Risks Related to Our Business and Industry • Our history of net losses and expectation that we will continue to incur losses • Our ability to achieve sustainable gross margins, including by reduce manufacturing and service costs • Our ability to attain market acceptance for Tablo among providers and patients • Concentration of our revenues in a single product and concentration of a large percentage of our revenues from a limited number of customers • Financial pressures faced by our customers including capital budget constraints, staffing shortages and increased costs • Our ability to expand into the home hemodialysis market and the expansion of the home hemodialysis market itself • Risks associated with our international manufacturing operations • Our reliance on third-party suppliers, including single source suppliers and contract manufacturers, and our ability to overcome any manufacturing or supply chain disruptions • Our ability to continue innovating and improving Tablo, ensure strong product performance and reliability, offer high quality support, ensure proper training and use of Tablo, and increase our sales and marketing capabilities • Our ability to compete effectively with existing manufacturers and new entrants • Our ability to effectively manage privacy, information and data security risks, including our ability to adequately defend against, respond to and manage increasingly sophisticated cyberattacks in an increasingly complex cyber ecosystem • Our estimates of the sizes of the markets for Tablo • Our ability to accurately forecast customer demand and manage our inventory • The impact of the recent pandemic, natural or man-made disasters and similar events on our business • Potential disruptions of service provided by third parties that host our cloud-based ecosystem and information technology systems • Potential litigation, including product liability claims, and the expense and potential unavailability of insurance coverage for any liabilities resulting from Tablo • Risks related to our credit agreements, including interest rate risk and our ability to access additional capital and/or meet certain covenants Risks Related to Government Regulation • Our ability to recover from disruptions to our business and operations as a result of the prior shipment hold on Tablo for home use • Our compliance with FDA and other medical device regulations applicable to our products and operations, including our ability to: resolve the warning letter we recently received from the FDA, comply with the post-market surveillance order recently issued by the FDA for Tablo and resume our distribution of TabloCart with Prefiltration pending the FDA’s review and clearance of the submitted 510(k) application; obtain and maintain necessary FDA regulatory clearance or approvals for Tablo, related products, or any future product modifications or new products; comply with ongoing FDA requirements, including related to the manufacturing, marketing and promotion of our products, and the ability of our suppliers to so comply; and manage the risks and expenses associated any clinical trials necessary to support future product submissions to the FDA • Impact of potential changes to scope of coverage and reimbursement rates for dialysis treatments or healthcare reform measures 21 • Impact of potential adverse medical events associated with Tablo, product failures or malfunctions, or our failure to report such events to the FDA • Our ability to comply with various laws and regulations regarding healthcare, data privacy and security, and environmental and occupational safety Risks Related to Our Intellectual Property • Our ability to obtain, maintain, protect and enforce our intellectual property rights, including our patents, copyrights, trademarks and trade secrets Risks Related to Ownership of Our Common Stock • Fluctuations in the market price of our common stock in response to numerous factors regardless of our operating performance • Influence of principal stockholders and management over matters subject to stockholder approval • Our organizational documents include certain provisions that may make a change of control more difficult, as well as exclusive forum requirements General Risks • General economic and financial market conditions • Substantial resources associated with complying with the laws and regulations affecting public companies • Our ability to attract and retain key personnel and maintain our corporate culture • Risks associated with potential future acquisitions or investments • Our ability to comply with anti-corruption, anti-bribery, anti-money laundering and similar laws • Our estimates or judgments relating to our accounting policies • Expectations relating to ESG factors The summary risk factors described above should be read together with the text of the full risk factors below and the other information set forth in this Annual Report, including our financial statements and the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as in other documents that we file with the SEC.
Biggest changeThe following factors could result in harm to our business, reputation, revenue, financial results, and prospects, among other impacts: Risks Related to Our Business and Industry • Our history of net losses and expectation that we will continue to incur losses • Our ability to achieve sustainable gross margins, including by reducing manufacturing and service costs • Our ability to attain market acceptance for Tablo among providers and patients • Concentration of our revenues in a single product and concentration of a large percentage of our revenues from a limited number of customers • Financial pressures faced by our customers including capital budget constraints, staffing shortages and increased costs • Our ability to expand into the home hemodialysis market and the expansion of the home hemodialysis market itself • Risks associated with our international manufacturing operations, including the potential for tariffs and other trade disputes • Our reliance on third-party suppliers, including single source suppliers and a contract manufacturer, and our ability to overcome any manufacturing or supply chain disruptions • Our ability to retain our commercial team, optimize our sales processes and expand the adoption of Tablo as we focus more heavily on enterprise selling • Our ability to continue innovating and improving Tablo, ensure strong product performance and reliability, offer high quality support, ensure proper training and use of Tablo, and increase our sales and marketing capabilities • Our ability to compete effectively with existing manufacturers and new entrants • Our ability to effectively manage privacy, information and data security risks, including our ability to adequately defend against, respond to and manage increasingly sophisticated cyberattacks in an increasingly complex cyber ecosystem • Our estimates of the sizes of the markets for Tablo • Our ability to accurately forecast customer demand and manage our inventory • The impact of pandemics, natural or man-made disasters and similar events on our business • Potential disruptions of service provided by third parties that host our cloud-based ecosystem and information technology systems • Our ability to obtain additional financing, as well as risks related to our credit agreement, including interest rate risk and our ability to access additional capital and/or meet certain covenants Risks Related to Government Regulation • Our compliance with FDA and other medical device regulations applicable to our products and operations, including our ability to: recover from disruptions to our business and operations as a result of the warning letter we received from the FDA in 2023 and our prior distribution pause on TabloCart with Prefiltration; obtain and maintain necessary FDA regulatory clearance or approvals for Tablo, related products, or any future product modifications or new products; comply with ongoing FDA requirements, including related to the manufacturing, marketing and promotion of our products, and the ability of our suppliers to so comply; and manage the risks and expenses associated any clinical trials necessary to support future product submissions to the FDA • Impact of potential changes to scope of coverage and reimbursement rates for dialysis treatments or healthcare reform measures 21 • Impact of potential adverse medical events associated with Tablo, product failures or malfunctions, or our failure to report such events to the FDA • Our ability to comply with various laws and regulations regarding healthcare, data privacy and security, and environmental and occupational safety Risks Related to Our Intellectual Property • Our ability to obtain, maintain, protect and enforce our intellectual property rights, including our patents, copyrights, trademarks and trade secrets Risks Related to Ownership of Our Common Stock • Fluctuations in the market price of our common stock in response to numerous factors regardless of our operating performance • If our stockholders do not approve the conversion of all outstanding shares of our Series A Preferred Stock into shares of our common stock, the Series A Preferred Stock will contain rights, preferences and privileges that may limit our business flexibility or reduce the value of our common stock • Our ability to maintain the listing of our common stock on Nasdaq • Influence of principal stockholders and management over matters subject to stockholder approval • Our organizational documents include certain provisions that may make a change of control more difficult, as well as exclusive forum requirements General Risks • General economic and financial market conditions • Substantial resources associated with complying with the laws and regulations affecting public companies • Our ability to attract and retain key personnel and maintain our corporate culture • Risks associated with potential future acquisitions or investments • Our ability to comply with anti-corruption, anti-bribery, anti-money laundering and similar laws • Our estimates or judgments relating to our accounting policies • Expectations relating to ESG factors The summary risk factors described above should be read together with the text of the full risk factors below and the other information set forth in this Annual Report, including our financial statements and the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as in other documents that we file with the SEC.
While we are undertaking a second source qualification process for the majority of these critical components, we may not ultimately be successful in securing second sourcing for all of them. In addition, we purchase supplies through purchase orders and do not have long-term supply agreements with, or guaranteed commitments from, our suppliers, including single source suppliers.
While we are undertaking a second source qualification process for the majority of these critical components, we may not ultimately be successful in securing second sourcing for all of them. In addition, we purchase supplies through purchase orders and do not have long-term supply agreements with, or guaranteed commitments from all, our suppliers, including single source suppliers.
This development generated uncertainty in the marketplace with respect to the potential impact of these or other similar classes of drugs or new classes of drugs or treatments on the rate of growth of the ESRD patient population.
This development generated uncertainty in the marketplace with respect to the potential impact of these or other similar classes of drugs or new classes of drugs or treatments on the rate of growth of the ESRD patient population.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends on our common stock in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes.
The market price of our common stock has been and may continue to be highly volatile and may continue to fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated changes in our operating results, and variations between our actual operating results and the expectations of securities analysts, investors and the financial community; • any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • additional shares of our common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales; • hedging activities by market participants; • regulatory actions with respect to our products or our competitors’ products, or announcements by us in relation to such regulatory actions (for example, the Warning Letter we received in July 2023 and our subsequent pause on the distribution of TabloCart with Prefiltration); • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of companies in our industry, including our competitors; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and • other events or factors, including those resulting from political conditions, election cycles, war or incidents of terrorism, or responses to these events.
The market price of our common stock has been and may continue to be highly volatile and may continue to fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: 55 • actual or anticipated changes in our operating results, and variations between our actual operating results and the expectations of securities analysts, investors and the financial community; • any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • additional shares of our common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales; • hedging activities by market participants; • regulatory actions with respect to our products or our competitors’ products, or announcements by us in relation to such regulatory actions (for example, the Warning Letter we received in July 2023 and our subsequent pause on the distribution of TabloCart with Prefiltration); • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of companies in our industry, including our competitors; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and • other events or factors, including those resulting from political conditions, election cycles, war or incidents of terrorism, or responses to these events.
For example: • others may be able to make products that are similar to Tablo or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in Tablo that is in the public domain; • we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; • we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our current or future pending patent applications will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
For example: • others may be able to make products that are similar to Tablo or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in Tablo that is in the public domain; • we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; 54 • we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our current or future pending patent applications will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
These provisions include the following: • establish a classified board of directors so that not all members of our board of directors are elected at one time; • permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • provide that directors may only be removed for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of our capital stock; 56 • require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibit stockholders from calling special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • restrict the forum for certain litigation against us to Delaware; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
These provisions include the following: • establish a classified board of directors so that not all members of our board of directors are elected at one time; • permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • provide that directors may only be removed for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of our capital stock; • require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibit stockholders from calling special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • restrict the forum for certain litigation against us to Delaware; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
The failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the following enforcement actions: • FDA untitled letters, FDA Form 483s, FDA warning letters, it has come to our attention letters, fines, injunctions, consent decrees and civil penalties; • unanticipated expenditures to address or defend such actions • customer notifications for repair, replacement, refunds; • recall, detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying our requests for 510(k) clearance or PMA approval of new products or modified products; • withdrawal of 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export approval for our products; or • criminal prosecution.
The failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the following enforcement actions: • FDA untitled letters, FDA Form 483s, FDA warning letters, it has come to our attention letters, fines, injunctions, consent decrees and civil penalties; • unanticipated expenditures to address or defend such actions; 43 • customer notifications for repair, replacement, refunds; • recall, detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying our requests for 510(k) clearance or PMA approval of new products or modified products; • withdrawal of 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export approval for our products; or • criminal prosecution.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf under Delaware law, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law (DGCL), our amended and restated certificate of incorporation or bylaws, (4) any other action asserting a claim that is governed by the internal affairs doctrine, or (5) any other action asserting an “internal corporate claim,” as defined in Section 115 of the DGCL, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) in all cases subject to the court having jurisdiction over indispensable parties named as defendants.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf under Delaware law, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law (DGCL), our amended and restated certificate of incorporation or bylaws, (4) any other action asserting a claim that is governed by the internal affairs doctrine, or (5) any other action asserting an “internal corporate claim,” as defined in Section 115 of the DGCL, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal 59 district court for the District of Delaware) in all cases subject to the court having jurisdiction over indispensable parties named as defendants.
The FDA or other regulators could delay, limit, or deny clearance or approval of a device for many reasons, including: 41 • our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that Tablo, or any other future device, and any accessories are substantially equivalent to a legally marketed predicate device or safe or effective for their proposed intended use; • the disagreement of the FDA with the design or implementation of any clinical trials or the interpretation of data from preclinical studies or clinical trials; • serious and unexpected adverse device effects experienced by participants in our clinical trials; • the insufficiency of the data from preclinical studies or clinical trials to support clearance or approval, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • the failure of our manufacturing process or facilities to meet applicable requirements; and • the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval.
The FDA or other regulators could delay, limit, or deny clearance or approval of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that Tablo, or any other future device, and any accessories are substantially equivalent to a legally marketed predicate device or safe or effective for their proposed intended use; • the disagreement of the FDA with the design or implementation of any clinical trials or the interpretation of data from preclinical studies or clinical trials; • serious and unexpected adverse device effects experienced by participants in our clinical trials; • the insufficiency of the data from preclinical studies or clinical trials to support clearance or approval, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • the failure of our manufacturing process or facilities to meet applicable requirements; and • the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval.
Our failure to comply with applicable regulatory requirements could result in enforcement action by any such agency, which may include any of the following sanctions: • adverse publicity, warning letters (such as the Warning Letter we received in July 2023), untitled letters, it has come to our attention letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recall or seizure of Tablo; • operating restrictions, partial suspension or total shutdown of production; • denial of our requests for regulatory clearance or PMA approval of new products or services, new intended uses or modifications to existing products or services; • withdrawal of regulatory clearance or PMA approvals that have already been granted; or • criminal prosecution.
Our failure to comply with applicable regulatory requirements could result in enforcement action by any such agency, which may include any of the following sanctions: • adverse publicity, warning letters (such as the Warning Letter we received in July 2023), untitled letters, it has come to our attention letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recall or seizure of Tablo; • operating restrictions, partial suspension or total shutdown of production; • denial of our requests for regulatory clearance or PMA approval of new products or services, new intended uses or modifications to existing products or services; 42 • withdrawal of regulatory clearance or PMA approvals that have already been granted; or • criminal prosecution.
Regardless of the merits or eventual outcome, liability claims may result in: • decreased demand for Tablo; • harm to our reputation; • initiation of investigations by regulators, which could result in enforcement action against us or our contract manufacturers; • costs to defend the related litigation; • a diversion of management’s time and our resources; • substantial monetary awards to trial participants or patients; • product recalls, withdrawals or labeling, marketing or promotional restrictions; • loss of revenue; and 33 • exhaustion of any available insurance and our capital resources.
Regardless of the merits or eventual outcome, liability claims may result in: • decreased demand for Tablo; • harm to our reputation; • initiation of investigations by regulators, which could result in enforcement action against us or our contract manufacturers; • costs to defend the related litigation; • a diversion of management’s time and our resources; • substantial monetary awards to trial participants or patients; • product recalls, withdrawals or labeling, marketing or promotional restrictions; • loss of revenue; and • exhaustion of any available insurance and our capital resources.
As there is not a uniform national standard for what constitutes medical justification, a clinic’s decision as to how much it is willing to spend on home dialysis equipment and services will be at least partly dependent on the number of weekly treatments prescribed for home dialysis, and if greater than three, the level of confidence 39 the center has in the predictability of receiving reimbursement from Medicare for additional treatments per week based on submitted claims for medical justification.
As there is not a uniform national standard for what constitutes medical justification, a clinic’s decision as to how much it is willing to spend on home dialysis equipment and services will be at least partly dependent on the number of weekly treatments prescribed for home dialysis, and if greater than three, the level of confidence the center has in the predictability of receiving reimbursement from Medicare for additional treatments per week based on submitted claims for medical justification.
Any of our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, wildfires, floods, nuclear disasters, riots, acts of terrorism or other criminal activities, infectious disease outbreaks or pandemic events, such as the recent COVID-19 pandemic, power outages and other infrastructure failures, which may render it difficult or impossible for us to operate our business for some period of time.
Any of our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, wildfires, floods, nuclear disasters, riots, acts of terrorism or other criminal activities, infectious disease outbreaks or pandemic events, such as the COVID-19 pandemic, power outages and other infrastructure failures, which may render it difficult or impossible for us to operate our business for some period of time.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) a corporation that undergoes an ownership change, generally defined as a greater than 50% change by value in its equity ownership over a three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses and its research and development credit carryforwards to offset future taxable income.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) a corporation that undergoes an ownership change, generally defined as a greater than 50% change by value in its equity ownership over a three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses and its research and development 38 credit carryforwards to offset future taxable income.
For example, these stockholders could attempt to delay or prevent a change in control of us, even if such change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of us or our assets and might affect the prevailing market price of our common stock due to investors’ perceptions that conflicts of interest may exist or arise.
For example, these stockholders could attempt to delay or prevent a change in control of us, even if such change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of us or our assets and might affect the prevailing market price of our common stock due to investors’ 58 perceptions that conflicts of interest may exist or arise.
We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA 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, 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 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, could cause or 44 contribute to a death or serious injury.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, compliance oversight and reporting requirements and the curtailment or restructuring of our operations.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from 41 government funded healthcare programs, such as Medicare and Medicaid, compliance oversight and reporting requirements and the curtailment or restructuring of our operations.
HIPAA enforcement actions may lead to monetary penalties and costly and burdensome corrective action plans. We are also required to report known breaches of PHI consistent with applicable breach reporting requirements set forth in applicable laws and regulations. In addition, HIPAA mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA covered entities and business associates.
HIPAA enforcement actions may lead to monetary penalties and costly and burdensome corrective action plans. We are also required to report known breaches of PHI consistent with applicable breach reporting requirements set forth in applicable laws and regulations. 49 In addition, HIPAA mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA covered entities and business associates.
Our customers depend upon reimbursement by government and other third-party insurance payors for dialysis services using our products. With a vast majority of U.S. patients with ESRD covered by Medicare, the Medicare reimbursement rate is an important factor in a customer’s decision to use Tablo and limits the prices we may charge for our products.
Our customers depend upon reimbursement by government and other third-party insurance payors for dialysis services using our products. With a vast majority of U.S. patients with ESRD and AKI covered by Medicare, the Medicare reimbursement rate is an important factor in a customer’s decision to use Tablo and limits the prices we may charge for our products.
To the extent that our employees, consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise 51 as to the rights in related or resulting know-how and inventions, which could have a material adverse effect on our business, financial condition and results of operations.
To the extent that our employees, consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions, which could have a material adverse effect on our business, financial condition and results of operations.
If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, including increases in revenue, and any acquisitions we complete could be viewed negatively by our customers, investors and industry analysts. Future acquisitions may reduce our cash available for operations and other uses and could result in amortization expense related to identifiable assets acquired.
If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, including increases in revenue, and any acquisitions we complete could be viewed negatively by our customers, investors and industry analysts. 61 Future acquisitions may reduce our cash available for operations and other uses and could result in amortization expense related to identifiable assets acquired.
While we believe replacement suppliers exist for all materials, components and services necessary to continue manufacturing Tablo, establishing additional or replacement suppliers for any of these materials, components or services could be time-consuming and expensive, may result in interruptions in our operations and product delivery, may affect the performance specifications of Tablo or could require that we modify Tablo’s design.
While we believe replacement suppliers exist for all most all materials, components and services necessary to continue manufacturing Tablo, establishing additional or replacement suppliers for any of these materials, components or services could be time-consuming and expensive, may result in interruptions in our operations and product delivery, may affect the performance specifications of Tablo or could require that we modify Tablo’s design.
Because the techniques used to obtain unauthorized access, disable or 28 degrade service or sabotage systems change frequently or may be designed to remain dormant until a predetermined or other future event and often are not recognized until launched against a target, we and our partners may be unable to anticipate these techniques or to implement adequate preventative measures.
Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently or may be designed to remain dormant until a predetermined or other future event and often are not recognized until launched against a target, we and our partners may be unable to anticipate these techniques or to implement adequate preventative measures.
In addition, a pandemic, epidemic or other outbreak could disrupt our business operations and adversely impact the health and availability of our workforce. For example, in response to the recent COVID-19 pandemic, we made modifications to our normal operations, employing precautionary measures designed to help protect our employees while providing ongoing support for our customers and their patients.
In addition, a pandemic, epidemic or other outbreak could disrupt our business operations and adversely impact the health and availability of our workforce. For example, in response to the COVID-19 pandemic, we made modifications to our normal operations, employing precautionary measures designed to help protect our employees while providing ongoing support for our customers and their patients.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be promulgated that could prevent, limit or delay regulatory clearance or approval of our product candidates or enhancements. We cannot predict the 45 likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be promulgated that could prevent, limit or delay regulatory clearance or approval of our product candidates or enhancements. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
We may form or seek strategic alliances, make minority investments, create joint ventures or collaborations or enter into licensing or partnership arrangements with third parties that we believe will compliment or augment our sales and marketing and/or 36 product development efforts with respect to Tablo. We may not be successful in our efforts to establish such collaborations for Tablo.
We may form or seek strategic alliances, make minority investments, create joint ventures or collaborations or enter into licensing or partnership arrangements with third parties that we believe will compliment or augment our sales and marketing and/or product development efforts with respect to Tablo. We may not be successful in our efforts to establish such collaborations for Tablo.
Repeated or prolonged system failures may reduce the attractiveness of Tablo to providers and patients and result in a decreased demand for Tablo, thereby 32 adversely affecting our business, financial condition and results of operations. Moreover, negative publicity arising from these types of disruptions could damage our reputation and may adversely impact use of Tablo.
Repeated or prolonged system failures may reduce the attractiveness of Tablo to providers and patients and result in a decreased demand for Tablo, thereby adversely affecting our business, financial condition and results of operations. Moreover, negative publicity arising from these types of disruptions could damage our reputation and may adversely impact use of Tablo.
Complying with these various laws and regulations could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business. 49 Our employees, collaborators, independent contractors and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
Complying with these various laws and regulations could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business. Our employees, collaborators, independent contractors and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
In addition, our ability to deduct net interest expense may be limited if we have insufficient taxable income for the year during which the interest is incurred, and any future carryovers of such disallowed interest would be subject to the 37 limitation rules similar to those applicable to NOLs and other attributes.
In addition, our ability to deduct net interest expense may be limited if we have insufficient taxable income for the year during which the interest is incurred, and any future carryovers of such disallowed interest would be subject to the limitation rules similar to those applicable to NOLs and other attributes.
Obtaining clearances or approvals can be a time-consuming and costly process , which may in some cases require us to conduct clinical trials, and delays in obtaining required future clearances or approval could adversely affect our ability to make updates and enhancements to Tablo in a timely manner, which in turn would harm our future growth.
Obtaining clearances or 39 approvals can be a time-consuming and costly process , which may in some cases require us to conduct clinical trials, and delays in obtaining required future clearances or approval could adversely affect our ability to make updates and enhancements to Tablo in a timely manner, which in turn would harm our future growth.
Misconduct by these persons could include intentional, reckless and/or negligent conduct or unauthorized activity that violates: • FDA requirements, including those laws requiring the reporting of true, complete and accurate information to the FDA authorities; • manufacturing standards; • federal and state healthcare fraud and abuse laws and regulations; or • laws that require the true, complete and accurate reporting of financial information or data.
Misconduct by these persons could include intentional, reckless and/or negligent conduct or unauthorized activity that violates: • FDA requirements, including those laws requiring the reporting of true, complete and accurate information to the FDA authorities; 50 • manufacturing standards; • federal and state healthcare fraud and abuse laws and regulations; or • laws that require the true, complete and accurate reporting of financial information or data.
The ultimate impact of these conflicts on fuel prices, inflation, volatility of global financial markets, the global 57 supply chain and other macroeconomic conditions is unknown and could materially adversely affect the availability and cost of materials, access to capital, global economic growth, consumer confidence and demand for our products and services.
The ultimate impact of these conflicts on fuel prices, inflation, volatility of global financial markets, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect the availability and cost of materials, access to capital, global economic growth, consumer confidence and demand for our products and services.
This may change, however, with the development of new medications designed to reduce the incidence of kidney transplant rejection, progress in using kidneys harvested from genetically engineered animals as a source of transplants as demonstrated by the first pig-to-human kidney transplant in 2021, and other advances in kidney transplantation.
This may change, however, with the development of 29 new medications designed to reduce the incidence of kidney transplant rejection, progress in using kidneys harvested from genetically engineered animals as a source of transplants as demonstrated by the first pig-to-human kidney transplant in 2021, and other advances in kidney transplantation.
Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the future product’s profile.
Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our product candidates and generate 48 revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the future product’s profile.
Moreover, the recent COVID-19 pandemic resulted in, and future pandemics, epidemics or other outbreaks may result in, significant disruption of global financial markets, which could result in a reduction in our ability to access capital and delays in payments of outstanding receivables that could adversely affect our liquidity.
Moreover, the COVID-19 pandemic resulted in, and future pandemics, epidemics or other outbreaks may result in, significant disruption of global financial markets, which could result in a reduction in our ability to access capital and delays in payments of outstanding receivables that could adversely affect our liquidity.
Should a carrier encounter delivery performance issues such as loss, damage or destruction of any systems, it would be costly to replace such systems in a timely manner and such occurrences may damage our reputation and lead to decreased demand for Tablo and increased cost and expense to our business.
Should a carrier encounter delivery performance issues such as loss, damage or 36 destruction of any systems, it would be costly to replace such systems in a timely manner and such occurrences may damage our reputation and lead to decreased demand for Tablo and increased cost and expense to our business.
Even when a provider is the sole contracted supplier of a GPO or IDN for a certain product category, members of the GPO or IDN are generally free to purchase from other suppliers. Furthermore, GPO and IDN contracts typically are 35 terminable without cause by the GPO or IDN upon 60 to 90 days’ notice.
Even when a provider is the sole contracted supplier of a GPO or IDN for a certain product category, members of the GPO or IDN are generally free to purchase from other suppliers. Furthermore, GPO and IDN contracts typically are terminable without cause by the GPO or IDN upon 60 to 90 days’ notice.
Any failure to hire, develop and retain talented sales personnel, to achieve desired productivity levels in a reasonable period of time or timely reduce fixed costs, or to evolve and scale our commercial infrastructure and sales processes, could negatively affect our business, financial condition and results of operations.
Any failure to hire, optimize, develop and retain talented sales personnel, to achieve desired productivity levels in a reasonable period of time or timely reduce fixed costs, or to evolve and scale our commercial infrastructure and sales processes, could negatively affect our business, financial condition and results of operations.
We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our revenue is derived, and we expect it to continue to be derived, primarily from sales of Tablo, its associated consumables and related services.
We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. 22 Our revenue is derived, and we expect it to continue to be derived, primarily from sales of Tablo, its associated consumables and related services.
We derive substantially all of our revenues from sales of Tablo and its associated consumables, with the remainder of our revenues largely coming from services provided for the support and maintenance of Tablo. Accordingly, our business is exposed to risks that our revenues are concentrated in a single product.
We derive substantially all of our revenues from sales of Tablo and its associated accessories and consumables, with the remainder of our revenues largely coming from services provided for the support and maintenance of Tablo. Accordingly, our business is exposed to risks that our revenues are concentrated in a single product.
Technological interruptions or malfunction would disrupt our operations, including our ability to timely ship and track Tablo orders, project inventory requirements, ensure the integrity of our data analytics services, manage our supply chain and otherwise adequately service our customers or disrupt our customers’ ability to use Tablo.
Technological interruptions or malfunction would disrupt our 34 operations, including our ability to timely ship and track Tablo orders, project inventory requirements, ensure the integrity of our data analytics services, manage our supply chain and otherwise adequately service our customers or disrupt our customers’ ability to use Tablo.
In that event, our reputation could be damaged, and adoption of the products could be impaired. Although our policy is to refrain from statements that could be considered off-label promotion of Tablo, the FDA or another regulatory agency could disagree and conclude that we have engaged in off-label promotion.
In that event, our reputation could 45 be damaged, and adoption of the products could be impaired. Although our policy is to refrain from statements that could be considered off-label promotion of Tablo, the FDA or another regulatory agency could disagree and conclude that we have engaged in off-label promotion.
In addition, with our relatively recent transition to manufacturing Tablo consoles and a majority of Tablo cartridges at our facility in Mexico operated in collaboration with TACNA, we are more exposed to risks relating to 26 product quality and reliability as we continue to refine our manufacturing processes.
In addition, with our relatively recent transition to manufacturing Tablo consoles and a majority of Tablo cartridges at our facility in Mexico operated in collaboration with TACNA, we are more exposed to risks relating to product quality and reliability as we continue to refine our manufacturing processes.
The value to employees of equity awards that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies.
The value to employees of equity awards that vest over time may be significantly affected by movements in our stock price that are beyond 60 our control and may at any time be insufficient to counteract more lucrative offers from other companies.
Our business strategy, including our pricing of Tablo, while informed by our limited history of selling Tablo in the home care setting, continues to be based in part on certain assumptions about the adoption of Tablo by home dialysis patients, as well as patient retention.
Our business strategy, including our pricing of Tablo, while informed by our relatively limited history of selling Tablo in the home care setting, continues to be based in part on certain assumptions about the adoption of Tablo by home dialysis patients, as well as patient retention.
Furthermore, because our business model consists of an upfront capital purchase by our customers, and relatively lower recurring revenue from future sales of consumables and services, revenues from these larger customers may not represent a substantial portion of our revenues in future periods.
Furthermore, because our business model consists of an upfront capital purchase by our customers, and relatively lower annual recurring revenue from future sales of consumables and services, revenues from these larger customers may not represent a substantial portion of our revenues in future periods.
It is difficult to predict how quickly, if at all, providers and patients will accept Tablo or, if accepted, how frequently it will be used. These constituents must believe that Tablo offers benefits over traditional machines.
It is difficult to predict how 23 quickly, if at all, providers and patients will accept Tablo or, if accepted, how frequently it will be used. These constituents must believe that Tablo offers benefits over traditional machines.
Our ability to accurately forecast demand for Tablo could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for Tablo or for products of our competitors, our failure to accurately forecast customer acceptance of new products, potential disruption in our supply chain from regional or global public health crises such as the recent COVID-19 pandemic, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions.
Our ability to accurately forecast demand for Tablo could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for Tablo or for products of our competitors, our failure to accurately forecast customer acceptance of new products, potential disruption in our supply chain from regional or global public health crises such as the COVID-19 pandemic, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer 31 confidence in future economic conditions.
Further, the examination process may require us to narrow the claims for our pending patent applications, which may limit the scope of patent protection that may be obtained if these applications issue. The 50 scope of a patent may also be reinterpreted after issuance.
Further, the examination process may require us to narrow the claims for our pending patent applications, which may limit the scope of patent protection that may be obtained if these applications issue. The scope of a patent may also be reinterpreted after issuance.
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 IDE application to the FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and the FDA may reject our IDE application and notify us that we may not begin clinical trials; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators and/or an IRB, 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 (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 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 the withdrawal of approval of an IDE by the FDA based on, for example, a finding that the subjects are being exposed to unacceptable health risks; 46 • 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 and/or regulatory authorities for re-examination; • regulators, IRBs, 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 policies or regulations of the FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval; • our current or future products may have undesirable side effects or other unexpected characteristics; and • impacts of regional or global public health crises such as the recent COVID-19 pandemic could adversely affect any clinical trials we are conducting or plan to conduct, including delays or difficulties in enrolling or onboarding patients, initiating clinical sites, or obtaining the requisite regulatory approvals, interruption of key clinical trial activities, or supply chain disruptions that delay or make it more difficult or costly to obtain the supplies and materials we need for clinical trials.
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 IDE application to the FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and the FDA may reject our IDE application and notify us that we may not begin clinical trials; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators and/or an IRB, 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 (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 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 the withdrawal of approval of an IDE by the FDA based on, for example, 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 and/or regulatory authorities for re-examination; • regulators, IRBs, 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 policies or regulations of the FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval; • our current or future products may have undesirable side effects or other unexpected characteristics; and • impacts of regional or global public health crises such as the recent COVID-19 pandemic could adversely affect any clinical trials we are conducting or plan to conduct, including delays or difficulties in enrolling or onboarding patients, initiating clinical sites, or obtaining the requisite regulatory approvals, interruption of key clinical trial activities, or supply chain disruptions that delay or make it more difficult or costly to obtain the supplies and materials we need for clinical trials. 47 Any of these occurrences may significantly harm our business, financial condition and prospects.
In addition, preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their products performed satisfactorily in preclinical studies and earlier clinical trials have nonetheless failed to replicate results in later clinical trials.
In 46 addition, preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their products performed satisfactorily in preclinical studies and earlier clinical trials have nonetheless failed to replicate results in later clinical trials.
These risks could be difficult to eliminate or manage, and, if not addressed, could harm our business, financial condition and results of operations. 53 Intellectual property rights do not necessarily address all potential threats.
These risks could be difficult to eliminate or manage, and, if not addressed, could harm our business, financial condition and results of operations. Intellectual property rights do not necessarily address all potential threats.
Our limited experience in the distribution, logistics and service support that relate to the use of Tablo in the home care setting may also negatively impact our ability to generate revenue from home-based dialysis.
Our relatively limited experience in the distribution, logistics and service support that relate to the use of Tablo in the home care setting may also negatively impact our ability to generate revenue from home-based dialysis.
As a consequence, they are able to spend more on product development, marketing, sales and other product initiatives than we can. Additionally, companies with dialysis machine development programs include Medtronic.
As 28 a consequence, they are able to spend more on product development, marketing, sales and other product initiatives than we can. Additionally, companies with dialysis machine development programs include Medtronic.
A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide such as the recent COVID-19 pandemic could adversely affect our business. If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected.
A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide such as the COVID-19 pandemic could adversely affect our business. If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected.
For example, in January 2022 we proactively initiated a recall to replace a component in Tablo consoles at customer sites due to the possibility of heat-related damage to the device as a result of the component.
For example, in 2022 we proactively initiated a recall to replace a component in Tablo consoles at customer sites due to the possibility of heat-related damage to the device as a result of the component.
We may not be able to protect our rights to these trademarks and trade names, which we need to build name 52 recognition among potential partners and customers in our markets of interest.
We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners and customers in our markets of interest.
We train nurses and dialysis technicians on the appropriate use of Tablo, as well as how to train other users, including patients and care partners who use Tablo in the home setting, on the appropriate use of Tablo.
We train nurses and dialysis technicians on the appropriate use of Tablo, as well as how to train other users, including patients and care partners who use Tablo in the home setting, on the appropriate use of 32 Tablo.
The members of our direct sales force are highly trained and possess substantial technical expertise, which we believe is critical in increasing adoption of Tablo. The members of our U.S. sales force are at-will employees. The loss of these personnel to competitors, or otherwise, will negatively affect our business, financial condition and results of operations.
The members of our direct sales force are highly trained and possess substantial technical expertise, which we believe is critical in increasing utilization of Tablo. The members of our U.S. sales force are at-will employees. The loss of these personnel to competitors, or otherwise, will negatively affect our business, financial condition and results of operations.
Commercial payment rates are negotiated between our customers and insurers or other third-party administrators, and commercial payors may also exert downward pressure on payment rates for dialysis services. Recent litigation regarding payor coverage of ESRD services may also affect our business. Specifically, on June 21, 2022, in the case of Marietta v.
Commercial payment rates are negotiated between our customers and insurers or other third-party administrators, and commercial payors may also exert downward pressure on payment rates for dialysis services. Recent litigation regarding payor coverage of ESRD services may also affect our business. For example, on June 21, 2022, in the case of Marietta v.
In addition, our services revenue is dependent in part on our FSEs, and any failure to maintain, or adequately train, our team of FSEs could negatively impact our services revenue. In order to generate future growth, we plan to leverage and optimize our sales and marketing infrastructure to increase the number of customers that adopt Tablo.
In addition, our services revenue is dependent in part on our FSEs, and any failure to maintain, or adequately train, our team of FSEs could negatively impact our services revenue. In order to generate future growth, we plan to leverage and optimize our sales and marketing infrastructure to increase the number of customers that utilize Tablo.
It will negatively affect our business, financial condition and results of operations if our efforts to expand and train our sales force do not generate a corresponding increase in revenue, and our higher fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for Tablo.
It will negatively affect our business, financial condition and results of operations if our efforts to optimize and train our sales force do not generate a corresponding increase in revenue, and our higher fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for Tablo.
Moreover, our ability to expand gross margins will also depend in part on our ability to control the average selling prices of our products and services, including by selling higher-margin accessories, consumables and services. Our ability to maintain our product pricing is dependent on our customers’ recognition that the benefits outweigh the higher upfront purchase price.
Our ability to expand gross margins will depend in part on our ability to control the average selling prices of our products and services, including by selling higher-margin accessories, consumables and services. Our ability to maintain our product pricing is dependent on our customers’ recognition that the benefits outweigh the higher upfront purchase price.
These suppliers and contract manufacturers may encounter problems during manufacturing for a variety of reasons, including as a result of public health crises such as the recent COVID-19 pandemic, labor disputes, work stoppages, damage or interruption from fires, severe weather or other natural disasters, vandalism, terrorism or other political hostilities, any of which could delay or impede their ability to meet our demand.
These suppliers and contract manufacturer may encounter problems during manufacturing for a variety of reasons, including as a result of public health crises such as the COVID-19 pandemic, labor disputes, work stoppages, damage or interruption from fires, severe weather or other natural disasters, vandalism, terrorism or other political hostilities, any of which could delay or impede their ability to meet our demand.
During 2022, our existing and prospective customers faced shortages of skilled nurses and other clinical personnel as well as increased labor costs, combined with economic pressures resulting from general economic and financial market conditions, primarily escalating inflation, tightening hospital operating budgets and increased scrutiny of capital purchase decisions, all of which generally have the effect of lengthening the average sales cycle and elongating the timing of installations.
Beginning in 2022, our existing and prospective customers faced shortages of skilled nurses and other clinical personnel as well as increased labor costs, combined with economic pressures resulting from general economic and financial market conditions, primarily escalating inflation, tightening hospital operating budgets and increased scrutiny of capital purchase decisions, all of which generally have the effect of lengthening the average sales cycle and elongating the timing of installations.
If we inaccurately forecast demand for finished goods, we may be unable to meet customer demand which could harm our competitive position and reputation. Further, if we fail to effectively manage our relationships with our suppliers and contract manufacturers, we may be required to change suppliers or contract manufacturers.
However, if we inaccurately forecast demand for finished goods, we may be unable to meet customer demand which could harm our competitive position and reputation. Further, if we fail to effectively manage our relationships with our suppliers and contract manufacturer, we may be required to change suppliers or contract manufacturers.
The terms of our credit agreement require us to meet certain operating and financial covenants, place restrictions on our operating and financial flexibility and subject us to interest rate risk, and our ability to access additional borrowings is subject to us achieving certain net revenue milestones and obtaining lenders’ credit approval.
The terms of our credit agreement require us to meet certain operating and financial covenants, place restrictions on our operating and financial flexibility and subject us to interest rate risk, and our ability to access additional borrowings is subject to us achieving certain net revenue milestone and obtaining lenders’ credit approval.
Many of our suppliers and contract manufacturers are not obligated to perform services or supply products for any specific period, in any specific quantity or at any specific price, except as may be provided in a particular purchase order.
Many of our suppliers and our contract manufacturer are not obligated to perform services or supply products for any specific period, in any specific quantity or at any specific price, except as may be provided in a particular purchase order.
Lastly, our ability to expand gross margins is also dependent on the success of our initiatives to better leverage our field service team and drive down service costs per console, including through our cloud-based data system, remote monitoring, remote diagnostics and repairs, and other enhancements designed to improve the performance and reliability of Tablo.
In addition, our ability to expand gross margins is also dependent on the success of our initiatives to better leverage our field service team and drive down service costs per console, including through our cloud-based data system, remote monitoring, remote diagnostics and repairs, and other enhancements designed to improve the performance and reliability of Tablo.
If our customers continue to face prolonged periods of rising interest rates, capital budget constraints, volatility, uncertainty, staffing shortages, rising costs and other financial pressures, whether due to general macroeconomic conditions or otherwise, it could ultimately adversely impact our ability to expand existing customer relationships or attract new customers of Tablo, timely collect amounts due, effectively manage our inventory levels, and have a material adverse effect on our bookings, revenues, results of operations, financial condition, and, ultimately, our future growth and profitability.
If our customers continue to face prolonged periods of rising interest rates, capital budget constraints, volatility, uncertainty, staffing shortages, cash flow challenges, rising costs and other financial pressures, whether due to general macroeconomic conditions, cybersecurity events or otherwise, it could ultimately adversely impact our ability to expand existing customer relationships or attract new customers of Tablo, timely collect amounts due, effectively manage our inventory levels, and have a material adverse effect on our bookings, revenues, results of operations, financial condition, and, ultimately, our future growth and profitability.
If either of our contract manufacturing partners’ facilities were disrupted, by labor disputes, work stoppages, public health crises such as the recent COVID-19 pandemic, riots, terrorism, vandalism, cyber security attacks, natural disaster, regulatory action or otherwise, it could cause substantial delays in our operations and result in our having insufficient Tablo cartridge in inventory to fulfill orders.
If this contract manufacturing partners’ facilities were disrupted, by labor disputes, work stoppages, public health crises such as the COVID-19 pandemic, riots, terrorism, vandalism, cyber security attacks, natural disaster, regulatory action or otherwise, it could cause substantial delays in our operations and result in our having insufficient Tablo cartridge in inventory to fulfill orders.
We depend on our suppliers and contract manufacturers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements.
We depend on our suppliers and contract manufacturer to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements.
For example, precautionary measures designed and in recent years implemented to contain the spread and mitigate the impact of COVID-19, such as travel restrictions, “shelter-in-place” orders, quarantines and business shutdowns impacted many of the regions in which we, our customers and our suppliers operate.
For example, precautionary measures designed to contain the spread and mitigate the impact of COVID-19, such as travel restrictions, “shelter-in-place” orders, quarantines and business shutdowns impacted many of the regions in which we, our customers and our suppliers operate.
If not utilized, our U.S. federal NOLs generated in taxable years beginning before 2018 will begin to expire in 2024 and our state NOLs began to expire in 2024.
If not utilized, our U.S. federal NOLs generated in taxable years beginning before 2018 will begin to expire in 2025 and our state NOLs began to expire in 2025.
There may also be unforeseen occurrences that increase our costs, such as increased prices of raw materials, changes to labor costs, less favorable terms with third party suppliers, freight providers, or contract manufacturing partners, or disruptions to the operations of our contract manufacturers or third-party suppliers including as a result of the recent COVID-19 pandemic.
There may also be unforeseen occurrences that increase our costs, such as increased prices of raw materials, changes to labor costs, less favorable terms with third party suppliers, freight providers, or contract manufacturing partners, or disruptions to the operations of our contract manufacturers or third-party suppliers including as a result of public health crises such as the COVID-19 pandemic.
Expectations relating to ESG factors may impose additional costs and expose us to new risks. There is increasing focus from certain investors, customers and other stakeholders on ESG factors, including greenhouse gas emissions and climate-related risks; diversity, equity, and inclusion; responsible sourcing and supply chain; human rights and social responsibility; and corporate governance and oversight.
Expectations relating to ESG factors may impose additional costs and expose us to new risks. Certain investors, customers and other stakeholders may focus on ESG factors, including greenhouse gas emissions and climate-related risks; diversity, equity, and inclusion; responsible sourcing and supply chain; human rights and social responsibility; and corporate governance and oversight.
If the debt under either SLR Credit Facility Agreement was accelerated, we may not have sufficient cash or be able to sell sufficient assets to repay this debt, which would harm our business and financial condition.
If the debt under the Credit Agreement was accelerated, we may not have sufficient cash or be able to sell sufficient assets to repay this debt, which would harm our business and financial condition.
As discussed in the section titled “Business – Government Regulation – United States Health Reform” above, there have been, and continue to be, judicial and Congressional challenges to several elements of the Affordable Care Act, as well as efforts by both the executive and legislative branches of the federal government to modify certain aspects of the Affordable Care Act.
As discussed in the section titled “Business – Government Regulation – United States Health Reform” above, there have been, and continue to be, judicial and Congressional challenges to several elements of the ACA, as well as efforts by both the executive and legislative branches of the federal government to modify certain aspects of the ACA.
Further, with home dialysis as a growing trend in the industry and the implementation of the ETC Model, a failure to implement our expansion into home dialysis could have a material adverse impact on our business.
Further, with home dialysis as a growing trend in the industry and the implementation of the ETC and IOTA Models, a failure to implement our expansion into home dialysis could have a material adverse impact on our business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe assess and prioritize the remediation of vulnerabilities and other cybersecurity risks identified through these activities, using a risk-based approach. • INSURANCE : We maintain information security risk insurance coverage to mitigate potential losses in the event of a business disruption. • TRAINING : All Outset employees are assigned HIPAA and information security training as part of the new employee onboarding process and refresher training is assigned annually.
Biggest changeWe assess and prioritize the remediation of vulnerabilities and other cybersecurity risks identified through these activities, using a risk-based approach. • THREAT LANDSCAPE AWARENESS: We regularly receive and review threat landscape bulletins from Health Information Sharing and Analysis Center (H-ISAC), Cybersecurity and Infrastructure Security Agency (CISA) and others, and incorporate enhancements into our ongoing cybersecurity program based on this review. • INSURANCE : We maintain information security risk insurance coverage to mitigate potential losses in the event of a business disruption. 64 • TRAINING : All Outset employees are assigned HIPAA and information security training as part of the new employee onboarding process and refresher training is assigned annually.
Risk Oversight Oversight of our information security program, including oversight of risks related to cybersecurity threats and the assessment and management of such risks, is accomplished through a governance structure which includes our Board, Audit Committee, and executive management. BOARD AND COMMITTEE OVERSIGHT BOARD: One of the key functions of our Board is informed oversight of our risk management process.
Risk Oversight Oversight of our information security program, including oversight of risks related to cybersecurity threats and the assessment and management of such risks, is accomplished through a governance structure which includes our Board, Audit Committee, and executive management. BOARD AND AUDIT COMMITTEE OVERSIGHT One of the key functions of our Board is informed oversight of our risk management process.
Our IT team also conducts continuous automated phishing campaigns, which can trigger additional training for employees on how to recognize social engineering attempts (e.g., phishing, smishing, etc.). We track employee performance on phishing exercises to help us monitor the awareness of our employees and inform future training priorities.
Our IT team also conducts continuous automated phishing simulation campaigns, which can trigger additional training for employees on how to recognize social engineering attempts (e.g., phishing, smishing, etc.). We track employee performance on phishing exercises to help us monitor the awareness of our employees and inform future training priorities.
We may be required to expend significant resources in the response, containment, mitigation of cybersecurity incidents as well as in defense against claims that our information security was unreasonable or otherwise violated applicable laws or contractual obligations.
We may be required to expend significant resources in the response, containment, and mitigation of cybersecurity incidents as well as in defense against claims that our information security was unreasonable or otherwise violated applicable laws or contractual obligations.
The Board receives written updates, generally on a quarterly basis, regarding the status of our information security program. In addition, the Audit Committee receives in-person updates on our information 60 security programs on at least an annual basis.
The Board receives written updates, generally on a quarterly basis, regarding the status of our information security program. In addition, the Audit Committee receives in-person updates on our information security programs on at least an annual basis.
In addition, we recently conducted a tabletop exercise to simulate a response to a cybersecurity incident. • SECURITY STANDARDS : Our IT and Tablo cloud security architecture are designed to comply with the HIPAA Security Rule. In addition, our Tablo cloud security architecture leverages recognized frameworks designed to protect customer data.
In addition, we have conducted a tabletop exercise to simulate a response to a cybersecurity incident. • SECURITY STANDARDS : Our IT and Tablo cloud security architecture are designed to comply with the HIPAA Security Rule. In addition, our Tablo cloud security architecture leverages recognized frameworks designed to protect customer data.
If we, or any of our third-party service providers, fail to comply with laws requiring the protection of sensitive personal information, or fail to safeguard and defend personal information or other critical data assets or IT systems, or if our incident response, 62 containment or mitigation measures are inadequate in the face of a particular data security incident, we may face significant business interruptions, incur reputational damage, and be subject to regulatory enforcement and fines as well as private civil actions.
If we, or any of our third-party service providers, fail to comply with laws requiring the protection of sensitive personal information, or fail to safeguard and defend personal information or other critical data assets or IT systems, or if our incident response, containment or mitigation measures are inadequate in the face of a particular data breach or cybersecurity incident, we may face significant business interruptions, incur reputational damage, and be subject to regulatory enforcement and fines as well as private civil actions.
We may face increased risks from cybersecurity threats due to our reliance on internet technology and the increased frequency of employees working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. We regularly monitor, defend against, and respond to cyber and other security threats to our networks and other information security incidents.
We may face increased risks from cybersecurity threats due to our reliance on internet technology and the increased frequency of employees working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. We regularly monitor for, defend against, and respond to cybersecurity threats to our networks and information systems, as well as other types of security threats and incidents.
For example, we have received SOC 2 certification for Tablo cloud, we are in the process of pursuing NIST FIPS 140-3 certification, and we are working to align our processes, protocols and software with the FDA’s recent cybersecurity guidance finalized in September 2023.
For example, we have received SOC 2 certification for Tablo cloud and we are working to align our processes, protocols and product software with the FDA’s recent cybersecurity guidance finalized in September 2023.
This committee, which is sponsored by the Chief Technology Officer, is comprised of Company associates from information security, information technology (IT), engineering, and other functions, who have experience in managing cybersecurity risks, who review the cybersecurity threat landscape, and who evaluate key emerging data security risks.
This committee, which is sponsored by our VP of Information Technology, is comprised of Company leaders from information security, information technology (IT), legal, privacy, finance, operations, and other functions, who have experience in managing cybersecurity risks, who review the cybersecurity threat landscape, and who evaluate key emerging data security risks.
Our Board focuses on the overall risks affecting us and delegates responsibility for oversight of certain specific risks to its standing committees. For significant risks related to cybersecurity, the Board has delegated oversight responsibility to the Audit Committee. Our full Board and Audit Committee are kept informed about significant risks related to cybersecurity, including enterprise-level risks from cybersecurity threats.
Our Board focuses on the overall risks affecting us and delegates responsibility for oversight of certain specific risks to its standing committees. For significant risks related to cybersecurity, the Board has delegated oversight responsibility to the Audit Committee.
These updates generally cover topics such as our cybersecurity strategy, the threat landscape, key cybersecurity risk areas facing the organization, any key findings of audits and testing, the status of key initiatives, as well as a review of any major incidents.
These updates generally cover topics such as our cybersecurity strategy, the threat landscape, key cybersecurity risk areas facing the organization, any key findings of audits and testing, the status of key initiatives, as well as a review of any major incidents. MANAGEMENT Executive management plays a significant role in assessing and managing material risks from cybersecurity threats.
We also used a third-party firm to assist us with the National Institute of Standards and Technology (NIST) Federal Information Processing Standards (FIPS) 140-3 certification we are pursuing. • VENDOR ASSESSMENT: We leverage a third-party risk assessment tool to help us identify cybersecurity related risks associated with our use of certain third-party service providers. • INCIDENT PREPAREDNESS AND RESPONSE: We maintain a Cybersecurity Incident Response Plan (IRP) which establishes a framework designed to enable us to respond to cybersecurity incidents in a consistent, timely and effective manner.
In addition, In addition, we used a third-party audit firm accredited by the American Institute of Certified Public Accountants (AICPA) to support us in the SOC 2 certification process for Tablo cloud. • VENDOR ASSESSMENT: We leverage a third-party risk assessment tool to help us identify cybersecurity, privacy, and operational related risks associated with our use of certain third-party service providers. • INCIDENT PREPAREDNESS AND RESPONSE: We maintain a Cybersecurity Incident Response Plan (IRP) which establishes a framework designed to enable us to respond to cybersecurity incidents in a consistent, timely and effective manner.
Cross-functional management engagement We have established a committee comprised of leaders from key functions across the Company including, but not limited to, information security, IT, engineering, legal, regulatory, medical affairs, finance, research and development, operations, supply chain, marketing and people operations.
As described above, significant risks related to cybersecurity are escalated to the Audit Committee and/or the full Board as appropriate. Cross-functional management engagement We have established a committee comprised of leaders from key functions across the Company including, but not limited to, information security, IT, engineering, legal, privacy, finance, and people operations.
Executive leadership Our Chief Technology Officer and the information security team periodically present information about the Company’s information security program, including program goals and actions, progress against key initiatives and key risks, to our executive leadership team. As described above, significant risks related to cybersecurity are escalated to the Audit Committee and/or the full Board as appropriate.
Our VP of Information Technology manages our information security program. Executive leadership Our VP of Information Technology and the information security team periodically present information about the Company’s information security program, including program goals and actions, progress against key initiatives and key risks, to our executive leadership team.
AUDIT COMMITTEE: Our Audit Committee is responsible for overseeing our major financial, legal, and regulatory risk exposures, which span a variety of areas, including cybersecurity. MANAGEMENT Executive management plays a significant role in assessing and managing material risks from cybersecurity threats. Our Chief Technology Officer manages our information security program.
Our Audit Committee is responsible for overseeing our major financial, legal, and regulatory risk exposures, which span a variety of areas, including cybersecurity. Our full Board and Audit Committee are kept informed about significant risks related to cybersecurity, including enterprise-level risks from cybersecurity threats.
For example, we currently consult with third party firms to assist with our annual penetration testing for the Tablo device, Tablo cloud and IT infrastructure. In addition, In addition, we used a third-party audit firm accredited by the American Institute of Certified Public Accountants (AICPA) to support us in the 61 SOC 2 certification process for Tablo cloud.
For example, we currently consult with third party firms to assist with our annual penetration testing for the Tablo device, Tablo cloud and IT infrastructure.
Governance of information security risks We have also established a risk governance committee, which generally meets on a monthly basis.
Members of this committee generally meet regularly to review the Company’s cybersecurity program, the evolving threat landscape and key related action items. 63 Governance of information security risks We have also established a risk governance committee, which generally meets on a quarterly basis.
Removed
This committee generally meets quarterly and is responsible for promoting a culture of awareness and accountability related to, among other things, information security. The committee also provides cross-functional input to facilitate the development, articulation, implementation and operation of information security risk management programs.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn Tijuana, Mexico, we also lease 87,187 square feet of space for our manufacturing facility under a lease agreement that will expire in 2026 and 7,739 square feet of office space for certain research and development and general and administrative activities under a lease agreement that will expire in 2028.
Biggest changeIn Tijuana, Mexico, we also lease 87,187 square feet of space for our manufacturing facility under a lease agreement that will expire in 65 2026 and 7,739 square feet of office space for certain research and development and general and administrative activities under a lease agreement that will expire in 2028.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. Item 4. Mine Saf ety Disclosures. Not applicable. 63 PART II
Biggest changeWe are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. Item 4. Mine Saf ety Disclosures. Not applicable. 66 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Common Stock As of February 15, 2024, there were 102 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Biggest changeHolders of Common Stock As of February 24, 2025, there were 98 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
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Stock Performance Graph The following shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent we specifically incorporate it by reference into such filing.
Added
Recent Sales of Unregistered Securities On January 3, 2025, we entered into the Securities Purchase Agreements with various investors pursuant to which we sold 843,908 shares of Series A Preferred Stock at a price of $200.00 per share in the Private Placement.
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The following graph compares the cumulative total return on our common stock relative to the cumulative total returns of the NASDAQ Composite Index and the S&P Healthcare Equipment Select Industry Index (SPSIHE) for the period from September 15, 2020 (the first day of trading of our common stock) through December 31, 2023.
Added
Subject to the stockholder approval and beneficial ownership limitations, each share of Series A Preferred Stock will automatically convert into 250 shares of common stock for an aggregate of 210,977,000 shares of common stock.
Removed
The graph assumes an investment of $100 on September 15, 2020 and its relative performance is tracked through December 31, 2023. Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends, however no dividends have been declared on our common stock to date.
Added
Pursuant to the Securities Purchase Agreements, we also agreed to sell 19,432 shares of Series A Preferred Stock to certain members of our Board of Directors and management, subject to obtaining stockholder approval.
Removed
The offering price of our common stock in our initial public offering (IPO), which had a closing stock price of $60.68 on September 15, 2020, was $27.00 per share. Note that historic stock price performance is not necessarily indicative of future stock price performance. 64 Recent Sales of Unregistered Securities None. Issuer Purchases or Equity Securities None.
Added
The shares of Series A Preferred Stock were offered and sold pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (Securities Act) afforded by Section 4(a)(2) of the Securities Act, have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
Added
Concurrently with the execution of the Securities Purchase Agreements, we and the investors entered into a registration rights agreement pursuant to which we agreed to file a registration statement with the SEC registering the sale of the shares of common stock underlying the shares of Series A Preferred Stock sold in the Private Placement.
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The Company expects to use the net proceeds from the Private Placement for general corporate purposes. Issuer Purchases or Equity Securities None. Item 6. [ R eserved]. 67

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 of $72.9 million for the year ended December 31, 2022 was due primarily to the net proceeds of $96.1 million from borrowings under the SLR Term Loan Facility and the proceeds of $8.0 million from employee exercises of stock options and employee stock purchase plan purchases, partially offset by the cash outflow of $31.2 million in repayment of the SVB Term Loan which included early prepayment and exit fees. 73 Debt Obligations SLR Debt Financing On November 3, 2022 (the Closing Date), we entered into two senior secured credit facilities, which collectively provide for borrowings of up to $300.0 million as follows: (i) up to a $250.0 million term loan facility pursuant to a loan and security agreement (the SLR Loan Agreement) among SLR Investment Corp., as collateral agent (Agent), the lenders from time to time party thereto (the Term Loan Lenders) and us (the SLR Term Loan Facility) and (ii) up to a $50.0 million asset-based revolving credit facility pursuant to a credit agreement (the SLR Revolving Credit Agreement, together with the SLR Loan Agreement, the SLR Credit Facility Agreements) among Gemino Healthcare Finance, LLC d/b/a SLR Healthcare ABL, as lender (ABL Lender), and us (the SLR Revolver, together with the SLR Term Loan Facility, the SLR Credit Facilities).
Biggest changeSLR Debt Financing On November 3, 2022, we entered into two senior secured credit facilities, which collectively provide for borrowings of up to $300.0 million as follows: (i) up to a $250.0 million term loan facility pursuant to a loan and security agreement (the SLR Loan Agreement) among SLR Investment Corp., as collateral agent (SLR Agent), the lenders from time to time party thereto (the Term Loan Lenders) and us (the SLR Term Loan Facility) and (ii) up to a $50.0 million asset-based revolving credit facility pursuant to a credit agreement (the SLR Revolving Credit Agreement, together with the SLR Loan Agreement, the SLR Credit Facility Agreements) among Gemino Healthcare Finance, LLC d/b/a SLR Healthcare ABL, as lender (ABL Lender), and us (the SLR Revolver, together with the SLR Term Loan Facility, the SLR Credit Facilities).
Overview Our technology is designed to elevate the dialysis experience for patients and help providers overcome traditional care delivery challenges. Requiring only an electrical outlet and tap water to operate, Tablo® Hemodialysis System (Tablo) frees patients and providers from the burdensome infrastructure required to operate traditional dialysis machines.
Overview Our technology is designed to elevate the dialysis experience for patients and help providers overcome traditional care delivery challenges. Requiring only an electrical outlet and tap water to operate, our Tablo® Hemodialysis System (Tablo) frees patients and providers from the burdensome infrastructure required to operate traditional dialysis machines.
Investing Activities Net cash provided by investing activities of $83.0 million for the year ended December 31, 2023 was due to the maturities of investment securities of $258.8 million, partially offset by purchases of investment securities of $172.3 million and purchases of property and equipment of $3.4 million.
Net cash provided by investing activities of $83.0 million for the year ended December 31, 2023 was due to the maturities of investment securities of $258.8 million, partially offset by purchases of investment securities of $172.3 million and purchases of property and equipment of $3.4 million.
Financing Activities Net cash provided by financing activities of $43.7 million for the year ended December 31, 2023 was due primarily to the net proceeds of $33.2 million from borrowings under the SLR Term Loan Facility and the proceeds of $10.4 million from employee exercises of stock options and employee stock purchase plan purchases.
Net cash provided by financing activities of $43.7 million for the year ended December 31, 2023 was due primarily to the net proceeds of $33.2 million from borrowings under the SLR Term Loan Facility and the proceeds of $10.4 million from employee exercises of stock options and employee stock purchase plan purchases.
While the significant accounting policies are more fully described in Note 2 to our audited financial statements included elsewhere in this Annual Report, we believe that the following critical accounting policy is most important to understanding and evaluating our reported financial results. 74 Revenue Recognition Our contracts with customers often include multiple performance obligations, such as products and services.
While the significant accounting policies are more fully described in Note 2 to our audited financial statements included elsewhere in this Annual Report, we believe that the following critical accounting policy is most important to understanding and evaluating our reported financial results. Revenue Recognition Our contracts with customers often include multiple performance obligations, such as products and services.
While we expect gross margin to increase over the long term, we also anticipate it will likely fluctuate from quarter to quarter. 69 Operating Expenses Research and Development Research and development expenses primarily consist of personnel and related costs, regulatory fees, consulting services, laboratory supplies and materials expenses, and infrastructure costs including facilities, depreciation and information technology.
While we expect gross margin to increase over the long term, we also anticipate it will likely fluctuate from quarter to quarter. Operating Expenses Research and Development Research and development expenses primarily consist of personnel and related costs, regulatory fees, consulting services, laboratory supplies and materials expenses, and infrastructure costs including facilities, depreciation and information technology.
If we raise additional capital through debt financing (including through our existing debt), we will be subject to an increase in our interest expense which may negatively affect our cash flow. We are subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
We are subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital through debt financing (including through our existing debt), we may be subject to an increase in our interest expense which may negatively affect our cash flow.
Our sales organization is comprised of our capital sales team, responsible for generating new customer demand for Tablo, and our clinical sales team, responsible for driving utilization and fleet expansion of Tablo at existing customer sites. In addition, our field service team provides maintenance services and product support to our customers.
Our sales organization is comprised of our capital sales team, responsible for generating new customer demand for 68 Tablo, and our clinical sales team, responsible for driving utilization and fleet expansion of Tablo at existing customer sites. In addition, our field service team provides maintenance services and product support to our customers.
The estimates are based on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
The estimates are based on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent 76 from other sources.
The net cash outflow from operating assets and liabilities was primarily due to an increase in accounts receivable due to timing of collections and billings, a decrease in accrued expenses and other current liabilities, a decrease in accrued compensation and related benefits, and a decrease in operating lease liabilities.
The net cash outflow from operating assets and liabilities was primarily due to an increase in accounts receivable due to 75 timing of collections and billings, a decrease in accrued expenses and other current liabilities, a decrease in accrued compensation and related benefits, and a decrease in operating lease liabilities.
Impacts of Macroeconomic Factors Global macroeconomic conditions, including inflationary pressures, rising interest rates, increased labor costs, labor shortages and global supply chain disruptions, may impact our business and results of operations, and those of our customers, manufacturing partners and suppliers.
Impacts of Macroeconomic Factors Global macroeconomic conditions, including inflationary pressures, rising interest rates, increased labor costs, staffing shortages and global supply chain disruptions, may impact our business and results of operations, and those of our customers, manufacturing partners and suppliers.
We continue to use our design, engineering, and manufacturing capabilities to further advance and improve the efficiency of our manufacturing processes, which, if successful, we believe will lower production costs and enable us to increase our gross margin.
We continue to use our design, engineering, and manufacturing capabilities to further advance and improve the efficiency of our manufacturing processes, which, if successful, we believe will lower production 71 costs and enable us to increase our gross margin.
Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, located in our annual report on Form 10-K for the year ended December 31, 2022 for reference to discussion of the year ended December 31, 2022, the earliest of the three fiscal years presented.
Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, located in our annual report on Form 10-K for the year ended December 31, 2023 for reference to discussion of the year ended December 31, 2023, the earliest of the three fiscal years presented.
During 2022, our existing and prospective customers faced shortages of skilled nurses and other clinical personnel as well as increased labor costs, combined with economic pressures resulting from general economic and financial market conditions, primarily escalating inflation, tightening hospital operating budgets and increased scrutiny of capital purchase decisions, all of which generally have the effect of lengthening the average sales cycle and elongating the timing of installations.
Beginning in 2022, our existing and prospective customers faced shortages of skilled nurses and other clinical personnel as well as increased labor costs, combined with economic pressures resulting from general economic and financial market conditions, primarily escalating inflation, tightening hospital operating budgets and increased scrutiny of capital purchase decisions, all of which generally have the effect of lengthening the average sales cycle and elongating the timing of installations.
Other sales and marketing expenses include marketing and promotional activities, government affairs, costs of outside consultants, customer services costs, and infrastructure costs including facilities, depreciation, and information technology. Shipping and handling costs, as well as the associated personnel expenses, are included in sales and marketing expenses.
Other sales and marketing expenses include marketing and promotional activities, costs of outside consultants, customer services costs, and infrastructure costs including facilities, depreciation, and information technology. Shipping and handling costs, as well as the associated personnel expenses, are included in sales and marketing expenses.
However, if our customers continue to face prolonged periods of rising interest rates, capital budget constraints, volatility, uncertainty, staffing shortages, rising costs and other financial pressures, whether due to general macroeconomic conditions or otherwise, it could ultimately adversely impact our ability to expand existing customer relationships or attract new customers of Tablo, timely collect amounts due, effectively manage our inventory levels, and have a material adverse effect on our bookings, revenues, results of operations, financial condition, and, ultimately, our future growth and profitability.
However, if our customers continue to face prolonged periods of rising interest rates, capital budget constraints, volatility, uncertainty, staffing shortages, cash flow challenges, rising costs and other financial pressures, whether due to general macroeconomic conditions, cybersecurity events or otherwise, it could ultimately adversely impact our ability to expand existing customer relationships or attract new customers of Tablo, timely collect amounts due, effectively manage our inventory levels, and have a material adverse effect on our bookings, revenues, results of operations, financial condition, and, ultimately, our future growth and profitability.
General and Administrative General and administrative expenses primarily consist of personnel and related costs, accounting and legal expenses, general corporate expenses, employee recruiting and training costs, and infrastructure costs including facilities, depreciation, and information technology. As a percentage of revenue, we expect general and administrative expenses to decrease over the long-term primarily as, and to the extent, our revenue grows.
General and Administrative General and administrative expenses primarily consist of personnel and related costs, accounting and legal expenses, general corporate expenses, and infrastructure costs including facilities, depreciation, and information technology. As a percentage of revenue, we expect general and administrative expenses to decrease over the long-term primarily as, and to the extent, our revenue grows.
For the years ended December 31, 2023, 2022, and 2021, sales of our consoles, which includes Tablo consoles and accessories, accounted for 47%, 56% and 63% of our revenue, respectively. We also earn recurring revenue from sales of consumables, including Tablo cartridge, and services, which generates significant total revenue over the life of Tablo console.
For the years ended December 31, 2024, 2023, and 2022, sales of our consoles, which includes Tablo consoles and accessories, accounted for 26%, 47% and 56% of our revenue, respectively. We also earn recurring revenue from sales of consumables, including Tablo cartridge, and services, which generates significant total revenue over the life of Tablo console.
First, although we evaluated TabloCart with Prefiltration prior to marketing and distributing the product and concluded that no marketing authorization was necessary, we paused distribution of TabloCart with Prefiltration pending the FDA’s review and clearance of a 510(k) application. Second, we submitted to the FDA a 510(k) application for TabloCart with Prefiltration in September 2023.
Although we evaluated TabloCart with Prefiltration prior to marketing and distributing the product and concluded that no marketing authorization was necessary, we paused distribution of TabloCart with Prefiltration pending the FDA’s review and clearance of a 510(k) application for the same that we submitted in September 2023.
Our field sales and service teams represent 48% of our total full-time employees as of December 31, 2023. The same sales organization and field service team drive Tablo penetration in both the acute and home markets.
Our field sales and service teams represent 52% of our total full-time employees as of December 31, 2024. The same sales organization and field service team drive Tablo penetration in both the acute and home markets.
For the years ended December 31, 2023, 2022, and 2021, sales of our consumables accounted for 32%, 25% and 19% of our revenue, respectively, and sales of service and other accounted for 21%, 19% and 18% of our revenue, respectively. 66 We primarily sell our solutions through our direct sales organization, which covers most major metropolitan markets in the United States.
For the years ended December 31, 2024, 2023, and 2022, sales of our consumables accounted for 45%, 32% and 25% of our revenue, respectively, and sales of service and other accounted for 29%, 21% and 19% of our revenue, respectively. We primarily sell our solutions through our direct sales organization, which covers most major metropolitan markets in the United States.
Moreover, we believe that localizing production of a majority of Tablo cartridges in Mexico (to our Mexico-based contract manufacturer and, more recently, in-house at our manufacturing facility) has helped achieve cost reductions through lower freight costs, further our long-term gross margin expansion and supply continuity strategies and improve the flexibility of our operations.
We believe that localizing production of a majority of Tablo cartridges in Mexico (in-house at our manufacturing facility) has helped achieve cost reductions through lower freight costs, further our long-term gross margin expansion and supply continuity strategies and improve the flexibility of our operations.
Over the past three years, we have moved the production of Tablo consoles and a majority of Tablo cartridges in-house at our manufacturing facility in Tijuana, Mexico which we operate in collaboration with TACNA as part of our cost reduction activities.
In addition, over the past several years, we have moved the production of Tablo consoles and a majority of Tablo 69 cartridges in-house to our manufacturing facility in Tijuana, Mexico which we operate in collaboration with TACNA as part of our cost reduction activities.
The net cash outflow from operating assets and liabilities was partially offset by an increase in deferred revenue due to the growth in service agreements and an increase in accrued expenses and other current liabilities.
The net cash outflow from operating assets and liabilities was partially offset by an increase in deferred revenue due to the growth in service agreements and a decrease in prepaid expenses and other assets.
These factors negatively impacted our customer base on pipeline development and installation schedules, which, in turn, negatively impacted our bookings, delayed our shipments and adversely impacted our revenues for 2022. We have generally seen some stabilization in these challenging labor market dynamics for healthcare providers in 2023 as compared to the prior year.
These factors negatively impacted our customer base on pipeline development and installation schedules, which, in turn, negatively impacted our bookings, delayed our shipments and adversely impacted our revenues for 2022 and, to a lesser extent, 2023. We have generally seen some stabilization in these challenging labor market dynamics for healthcare providers during 2023 and thereafter as compared to 2022.
Further, we will continue to utilize our cloud-based data system, as well as enhanced product performance, to better support our field service team and drive down service costs per console.
Further, we will continue to utilize our cloud-based data system, as well as enhanced product and support performance, to improve service margin and drive down service costs per console.
In addition, in limited instances, we may enter into console operating lease arrangements that contain lease and non-lease components. Our product and services revenues are generated primarily through direct sales to customers in the United States.
Components of Operating Results Revenue We generate our revenue primarily from the sale of products and services. In addition, in limited instances, we may enter into console operating lease arrangements that contain lease and non-lease components. Our product and services revenues are generated primarily through direct sales to customers in the United States.
In addition, our ability to expand gross margins will depend in part on our ability to control the average selling prices of our products and services, including by selling higher-margin accessories, consumables and services. Our ability to expand gross margins depends on our ability to successfully execute these strategies.
Our ability to expand gross margins will also depend in part on our ability to control the average selling prices of our products and services, including by selling higher-margin accessories, consumables and services.
However, we may face increased supply 68 chain constraints in the future, which could negatively impact our ability to meet customer demand on a timely basis, result in customer dissatisfaction and adversely impact our operating margins and results of operations. Components of Operating Results Revenue We generate our revenue primarily from the sale of products and services.
However, we may face increased 70 supply chain constraints in the future, which could negatively impact our ability to meet customer demand on a timely basis, result in customer dissatisfaction and adversely impact our operating margins and results of operations.
We expect our stock-based compensation expense allocated to cost of revenue, research and development expenses, sales and marketing expenses, and general and administrative expenses to increase in absolute dollars as we issue additional stock-based awards under our equity incentive plan and employee stock purchase plan to attract and retain employees.
We expect our stock-based compensation expense allocated to cost of revenue, research and development expenses, sales and marketing expenses, and general and administrative expenses to fluctuate based on our stock price at particular points in time as we issue additional stock-based awards under our equity incentive plan and employee stock purchase plan to attract and retain employees.
Our ability to successfully address the factors below is subject to various risks and uncertainties, including those described in the section titled “Risk Factors.” Market Acceptance of Tablo in Acute Setting We plan to further broaden our installed base by continuing to target national and regional IDNs and health systems, sub-acute long-term acute care hospitals (LTACHs) and skilled nursing facilities (SNFs).
Our ability to successfully address the factors below is subject to various risks and uncertainties, including those described in the section titled “Risk Factors.” Market Acceptance of Tablo in Acute Setting We plan to further broaden our installed base by continuing to target national and regional IDNs and health systems, as well as SNFs, LTACHs and other post-acute providers.
As a percentage of revenue, however, we expect sales and marketing expenses to continue to decrease over the long-term primarily as, and to the extent, our revenue grows.
We plan to continue to invest in infrastructure to support our growth and expect sales and marketing expenses as a percentage of revenue to continue to decrease over the long-term primarily as, and to the extent, our revenue grows.
We have a full valuation allowance for deferred tax assets, including net operating loss carryforwards and tax credits related primarily to research and development.
Provision for Income Taxes Provision for income taxes primarily consists of foreign taxes in Mexico. We have a full valuation allowance for deferred tax assets, including net operating loss carryforwards and tax credits related primarily to research and development.
Cash Flows Summary The following table summarizes the cash flows for each of the periods indicated (in thousands): Years Ended December 31, 2023 2022 2021 Net cash (used in) provided by: Operating activities $ (131,373 ) $ (145,729 ) $ (130,264 ) Investing activities 83,026 (66,295 ) (142,507 ) Financing activities 43,652 72,898 160,147 Net decrease in cash, cash equivalents and restricted cash $ (4,695 ) $ (139,126 ) $ (112,624 ) Operating Activities Net cash used in operating activities of $131.4 million for the year ended December 31, 2023 was due to a net loss of $172.8 million and a net cash outflow from the change in our operating assets and liabilities of $0.8 million, partially adjusted by the primary non-cash adjustments for stock-based compensation expense of $38.6 million, amortization of premium on investments of $6.4 million, depreciation and amortization of $5.8 million, non-cash interest expense of $1.8 million, and non-cash lease expense of $1.3 million.
Cash Flows Summary The following table summarizes the cash flows for each of the periods indicated (in thousands): Years Ended December 31, 2024 2023 2022 Net cash (used in) provided by: Operating activities $ (116,303 ) $ (131,373 ) $ (145,729 ) Investing activities 103,938 83,026 (66,295 ) Financing activities 67,870 43,652 72,898 Net increase (decrease) in cash, cash equivalents and restricted cash $ 55,505 $ (4,695 ) $ (139,126 ) Operating Activities Net cash used in operating activities of $116.3 million for the year ended December 31, 2024 was due to a net loss of $128.0 million, a net cash outflow from the change in our operating assets and liabilities of $25.7 million, and amortization of premium on investments of $4.7 million, partially adjusted by the primary non-cash adjustments for stock-based compensation expense of $29.4 million, depreciation and amortization of $5.7 million, non-cash interest expense of $2.6 million, allowance for credit losses of $2.4 million, and non-cash lease expense of $1.4 million.
We believe that our existing cash, cash equivalents and short-term investments, cash generated from sales, and proceeds received from the debt financing described below under “Debt 72 Obligations ‒ SLR Debt Financing”, will be sufficient to meet our anticipated needs for at least the next 12 months from the issuance date of this Annual Report.
We believe that our existing cash, cash equivalents and short-term investments, cash generated from sales, and proceeds recently received from the debt financing described below under “Debt Obligations ‒ Perceptive Credit Agreement” as well as proceeds received from the Private Placement described in Note 13 to the financial statements will be sufficient to meet our anticipated needs for at least the next 12 months from the issuance date of this Annual Report.
The increase in interest expense for the year ended December 31, 2023 as compared to the prior year was due to the increase in interest rate and a full year of outstanding balance under the SLR Term Loan Facility in 2023 as compared to only two months of outstanding balance of such facility in 2022.
The increase in interest expense for the year ended December 31, 2024 as compared to the prior year was due to the increase in interest rate and higher outstanding balance under the SLR Term Loan Facility in 2024 as compared to 2023.
In studies and surveys we have conducted, patients have reported quality of life benefits on Tablo compared to other dialysis machines. We believe Tablo empowers patients, who have traditionally been passive recipients of care, to regain agency and ownership of their treatment. Driving adoption of Tablo in the acute care setting has been our primary focus to date.
We believe Tablo empowers patients, who have traditionally been passive recipients of care, to regain agency and ownership of their treatment. Driving adoption of Tablo in the acute care setting has been our primary focus to date.
Recent Accounting Pronouncements Refer to Note 2, “Summary of Significant Accounting Policies” in our audited financial statements included in Part II, Item 8 of this Annual Report for a discussion of recent accounting pronouncements that may impact us.
Recent Accounting Pronouncements Refer to Note 2, “Summary of Significant Accounting Policies” in our audited financial statements included in Part II, Item 8 of this Annual Report for a discussion of recent accounting pronouncements that may impact us. Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. Not applicable. 77
We plan to continue to invest in our research and development efforts to grow our economic and clinical evidence, enhance existing products and develop new products and service offerings and expect research and development expenses to vary over time, depending on the level and timing of the enhancement of the existing products and new product or service development initiatives.
We plan to continue to invest in our research and development efforts to grow our economic and clinical evidence, and enhance existing products to improve reliability and reduce costs. We expect research and development expenses to vary over time, depending on the level and timing of the enhancement of the existing products as well as cost reduction initiatives.
The net cash outflow from operating assets and liabilities was primarily due to an increase in inventories due to the timing of inventory purchases including advance purchases of inventory to mitigate supply chain disruptions, a decrease in accrued compensation and related benefits, an increase in accounts receivable due to timing of collections, a decrease in accounts payable due to timing of vendor payments, an increase in prepaid expenses and other assets, and a decrease in operating lease liabilities.
The net cash outflow from operating assets and liabilities was primarily due to an increase in inventories, a decrease in accrued expenses and other current liabilities, an increase in accounts receivable due to timing of collections and billings, decreases in accounts payable, accrued compensation and related benefits, accrued warranty liabilities, and operating lease liabilities.
The first observation asserts that certain content reviewed by the FDA and found on our website promotes CRRT, a modality outside of the current indications for Tablo. The second observation asserts that TabloCart with Prefiltration requires prior 510(k) clearance for marketing authorization. TabloCart with Prefiltration is an accessory to Tablo launched in the third quarter of 2022.
The first observation asserted that certain content reviewed by the FDA and found on our website promotes Continuous Renal Replacement Therapy (CRRT), a modality outside of the current indications for Tablo. The second observation asserted that TabloCart with Prefiltration required prior 510(k) clearance for marketing authorization.
Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022. 70 The following table sets forth, for the years indicated, our results of operations (in thousands): Years Ended December 31, 2023 2022 2021 Revenue: Product revenue $ 103,537 $ 93,388 $ 84,312 Service and other revenue 26,839 21,987 18,290 Total revenue 130,376 115,375 102,602 Cost of revenue: Cost of product revenue 74,454 82,510 84,639 Cost of service and other revenue 26,922 15,032 10,355 Total cost of revenue 101,376 97,542 94,994 Gross profit 29,000 17,833 7,608 Operating expenses: Research and development 57,307 48,855 36,741 Sales and marketing 96,232 89,482 65,070 General and administrative 45,231 40,515 36,316 Total operating expenses 198,770 178,852 138,127 Loss from operations (169,770 ) (161,019 ) (130,519 ) Interest income and other income, net 10,171 3,291 498 Interest expense (12,675 ) (3,566 ) (1,715 ) Loss on extinguishment of term loan — (1,367 ) — Loss before provision for income taxes (172,274 ) (162,661 ) (131,736 ) Provision for income taxes 523 295 199 Net loss $ (172,797 ) $ (162,956 ) $ (131,935 ) Revenue Years Ended December 31, Change (dollars in thousands) 2023 2022 $ % Revenue: Product revenue $ 103,537 $ 93,388 $ 10,149 11 % Service and other revenue 26,839 21,987 4,852 22 % Total revenue $ 130,376 $ 115,375 15,001 13 % Product revenue increased by $10.1 million, or 11%, for the year ended December 31, 2023 as compared to the prior year.
Results of Operations In this section, we discuss the results of our operations for the year ended December 31, 2024 compared to the year ended December 31, 2023. 72 The following table sets forth, for the years indicated, our results of operations (in thousands): Years Ended December 31, 2024 2023 2022 Revenue: Product revenue $ 80,977 $ 103,537 $ 93,388 Service and other revenue 32,712 26,839 21,987 Total revenue 113,689 130,376 115,375 Cost of revenue: Cost of product revenue 46,449 74,454 82,510 Cost of service and other revenue 28,676 26,922 15,032 Total cost of revenue 75,125 101,376 97,542 Gross profit 38,564 29,000 17,833 Operating expenses: Research and development 38,397 57,307 48,855 Sales and marketing 70,044 96,232 89,482 General and administrative 43,498 45,231 40,515 Total operating expenses 151,939 198,770 178,852 Loss from operations (113,375 ) (169,770 ) (161,019 ) Interest income and other income, net 9,761 10,171 3,291 Interest expense (23,871 ) (12,675 ) (3,566 ) Loss on extinguishment of term loan — — (1,367 ) Loss before provision for income taxes (127,485 ) (172,274 ) (162,661 ) Provision for income taxes 491 523 295 Net loss $ (127,976 ) $ (172,797 ) $ (162,956 ) Revenue Years Ended December 31, Change (dollars in thousands) 2024 2023 $ % Revenue: Product revenue $ 80,977 $ 103,537 $ (22,560 ) (22 )% Service and other revenue 32,712 26,839 5,873 22 % Total revenue $ 113,689 $ 130,376 (16,687 ) (13 )% Product revenue decreased by $22.6 million, or 22%, for the year ended December 31, 2024 as compared to the prior year.
Gross Profit and Gross Margin Years Ended December 31, Change (dollars in thousands) 2023 2022 $ % Gross profit and gross margin: Gross profit $ 29,000 $ 17,833 $ 11,167 63 % Gross margin 22.2 % 15.5 % Gross profit increased by $11.2 million, or 63%, for the year ended December 31, 2023 as compared to the prior year.
Gross Profit and Gross Margin Years Ended December 31, Change (dollars in thousands) 2024 2023 $ % Gross profit and gross margin: Gross profit $ 38,564 $ 29,000 $ 9,564 33 % Gross margin 33.9 % 22.2 % Gross profit increased by $9.6 million, or 33%, for the year ended December 31, 2024 as compared to the prior year.
Net cash used in operating activities of $145.7 million for the year ended December 31, 2022 was due to a net loss of $163.0 million and a net cash outflow from the change in our operating assets and liabilities of $21.1 million, partially offset by the primary non-cash adjustments for stock-based compensation expense of $27.2 million, depreciation and amortization of $5.2 million, provision for inventories of $2.6 million, loss on extinguishment of term loan of $1.4 million, non-cash lease expense of $1.1 million, accretion of discount on investments of $0.4 million, and non-cash interest expense of $0.4 million.
Net cash used in operating activities of $131.4 million for the year ended December 31, 2023 was due to a net loss of $172.8 million and a net cash outflow from the change in our operating assets and liabilities of $0.8 million, partially adjusted by the primary non-cash adjustments for stock-based compensation expense of $38.6 million, amortization of premium on investments of $6.4 million, depreciation and amortization of $5.8 million, non-cash interest expense of $1.8 million, and non-cash lease expense of $1.3 million.
These deferrals served to elongate our sales cycle and the timing of delivery and installations, which, in turn, contributed to an adverse impact on our bookings and revenues for the second half of 2023, and we expect these negative impacts to continue into 2024.
These deferrals served to elongate our sales cycle and the timing of delivery and installations, which, in turn, contributed to an adverse impact on our bookings and revenues starting in the second half of 2023 and through 2024. We may see disruption from this in future periods.
We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs by up to 80% in the intensive care unit. In addition, Tablo has been shown to deliver robust clinical care.
We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs. In addition, Tablo has been shown to deliver robust clinical care. In studies and surveys we have conducted, patients have reported quality of life benefits on Tablo compared to other dialysis machines.
We believe the ability to leverage one team to serve both markets will result in significant productivity and cost optimization as we continue to scale our business.
We believe the ability to leverage one team to serve both markets will result in significant productivity and cost optimization as we continue to scale our business. Recent Developments In July 2023, we received a warning letter (the Warning Letter) from the FDA that raised two observations.
These factors include our ability to further evolve our commercial infrastructure and sales processes as we scale our business in the home market. 67 Gross Margin Our ability to expand our gross margins depends on: first, our ability to reduce the cost of Tablo consoles; second, our ability to continue to sell Tablo cartridges, services, and accessories for Tablo consoles; and third, our ability to reduce the cost of service.
Gross Margin Our ability to expand our gross margins depends on: first, our ability to continue to sell Tablo cartridges, services, and accessories for Tablo consoles; second, our ability to reduce the cost of service and third, our ability to reduce the cost of Tablo consoles.
To date, we have financed our operations and capital expenditures primarily through sales of redeemable convertible preferred stock and common stock, revenue from sales, debt financings, and proceeds from employee exercises of stock options and employee stock purchase plan purchases.
Liquidity and Capital Resources Sources of Liquidity Since our inception, we have incurred net losses and negative cash flows from operations. To date, we have financed our operations and capital expenditures primarily through sales of equity securities, revenue from sales, debt financings, and proceeds from employee exercises of stock options and employee stock purchase plan purchases.
These factors include our ability to expeditiously resolve the Warning Letter, overcome the adverse impact in the field from the Warning Letter and our distribution pause on TabloCart with Prefiltration, as well as the success of our efforts to further evolve our commercial infrastructure and sales processes to support the growth of our business in the acute care market.
These factors include our ability to recover from the adverse impact in the field from the Warning Letter as we resume distribution of TabloCart with Prefiltration, as well as the success of our efforts to further evolve our initiatives to optimize our commercial organization, infrastructure and sales processes to support the growth of our business in the acute and post-acute care markets as we focus more heavily on enterprise selling and transition beyond earlier stage adoption of Tablo.
Net cash used in investing activities of $66.3 million for the year ended December 31, 2022 was due primarily to purchases of investment securities of $261.2 million and purchases of property and equipment of $8.3 million, partially offset by the maturities of investment securities of $203.2 million.
Investing Activities Net cash provided by investing activities of $103.9 million for the year ended December 31, 2024 was due to the sales and maturities of investment securities of $261.4 million, partially offset by purchases of investment securities of $156.6 million and purchases of property and equipment of $0.9 million.
The gross margin percentage improved by 6.7 percentage points for the year ended December 31, 2023 as compared to the prior year. This improvement in gross margin was primarily driven by the impact of cost reduction activities and a higher average selling price for both consoles and consumables.
The gross margin percentage improved by 11.7 percentage points for the year ended December 31, 2024 as compared to the prior year. This improvement in gross margin was primarily driven by a higher mix of consumable and service and other revenue in 2024 as compared to the prior year.
We believe our ability to reduce training time, patient dropout, and the supplies and infrastructure required to deliver dialysis in the home can drive efficiency and economic improvements to the home care model. In our home IDE trial, patients reported specific quality of life improvements compared to their experience on the incumbent home dialysis machine.
Tablo is also utilized for home-based dialysis. We believe our ability to reduce training time, patient dropout, and the supplies and infrastructure required to deliver dialysis in the home can drive efficiency and economic improvements to the home care model.
Service and other revenue increased by $4.9 million, or 22%, for the year ended December 31, 2023 as compared to the prior year.
Service and other revenue increased by $5.9 million, or 22%, for the year ended December 31, 2024 as compared to the prior year. The increase was primarily due to services associated with the growth in our console installed base.
If this financing is not available to us at adequate levels or on acceptable terms, we may need to reevaluate our operating plans.
We may raise additional capital through the issuance of additional equity financing, debt financings, which may require refinancing or amending the terms of our existing debt, or other sources. If this financing is not available to us at adequate levels or on acceptable terms, we may need to further evaluate our operating plans.
We plan to continue leveraging our commercial infrastructure to broaden our installed base in the acute care market, as well as driving utilization and fleet expansion with our existing customers. Tablo is also utilized for home-based dialysis.
In addition, we are also working with SNFs, LTACHs and other post-acute providers to raise awareness of Tablo’s economic and clinical benefits to them and to patients. We plan to continue leveraging our commercial infrastructure to broaden our installed base in the acute and post-acute care markets, as well as driving utilization and fleet expansion with our existing customers.
Sales and marketing expenses increased by $6.8 million, or 8% for the year ended December 31, 2023 as compared to the prior year. The increase was primarily driven by compensation-related and stock-based compensation expense and infrastructure costs to support our growth. In addition, there were higher freight and marketing expenses due to an increase in sales and marketing activities.
The decrease was primarily due to an overall decrease in compensation-related and stock-based compensation expense, consulting and materials expense and infrastructure costs resulting from our cost reduction efforts implemented in 2024 and the fourth quarter of 2023. Sales and marketing expenses decreased by $26.2 million, or 27% for the year ended December 31, 2024 as compared to the prior year.
Other Income (Expenses), Net Years Ended December 31, Change (dollars in thousands) 2023 2022 $ % Other income (expenses), net: Interest income and other income, net $ 10,171 $ 3,291 $ 6,880 209 % Interest expense (12,675 ) (3,566 ) (9,109 ) 255 % Loss on extinguishment of term loan — (1,367 ) 1,367 * Total other expenses, net $ (2,504 ) $ (1,642 ) (862 ) 52 % The increase in interest income and other income, net, for the year ended December 31, 2023 as compared to the prior year was driven by higher interest rates.
Other Income (Expenses), Net Years Ended December 31, Change (dollars in thousands) 2024 2023 $ % Other income (expenses), net: Interest income and other income, net $ 9,761 $ 10,171 $ (410 ) (4 )% Interest expense (23,871 ) (12,675 ) (11,196 ) 88 % Total other expenses, net $ (14,110 ) $ (2,504 ) (11,606 ) 463 % The decrease in interest income and other income, net, for the year ended December 31, 2024 as compared to the prior year was driven by the changes in interest rates.
These increases were partially offset by lower travel and consulting expenses. General and administrative expenses increased by $4.7 million, or 12%, for the year ended December 31, 2023 as compared to the prior year. The increase was primarily driven by compensation-related and stock-based compensation expense and consulting expenses.
General and administrative expenses decreased by $1.7 million, or 4%, for the year ended December 31, 2024 as compared to the prior year. The decrease was primarily driven by an overall decrease in consulting, compensation-related expense resulting from our cost reduction efforts implemented in 2024 and the fourth quarter of 2023.
To demonstrate the cost advantages of Tablo in the home setting, we are continuing to collect additional patient clinical experience and outcomes data. We generate revenue from the placement of Tablo consoles along with accessories, and shipping and handling charged to customers, which revenue is recognized up-front.
We are also working with providers, patients, and payors to increase awareness and adoption of TCUs as a bridge to home-based therapy. We generate revenue from the placement of Tablo consoles along with accessories, and shipping and handling charged to customers, which revenue is recognized up-front.
This increase was partially offset by a $3.3 million decrease in console revenue which was primarily comprised of a $1.7 million decrease in console leasing revenue due to the expiration of certain lease agreements and lower number of consoles sold in the current year as compared to the prior year.
The decrease was mainly due to a $31.5 million decrease in console revenue as a result of a lower number of consoles sold in 2024 as compared to the prior year. This decrease was partially offset by an $8.9 million increase in consumables revenue attributable to the growth in our console installed base.
No amounts were outstanding under the SLR Revolver as of December 31, 2023. SVB Term Loan We entered into the SVB Loan and Security Agreement with SVB in July 2020, which provides for a $30.0 million term loan (the SVB Term Loan).
As of December 31, 2024, $200.0 million was outstanding under the SLR Term Loan Facility and no amounts were outstanding under the SLR Revolver.
To penetrate this market successfully, we continue to focus on refining our home distribution, logistics and support systems to help ensure they are ready for scale. We are also working with providers, patients, and payors to increase awareness and adoption of TCUs as a bridge to home-based therapy.
In our home IDE trial, patients reported specific quality of life improvements compared to their experience on the incumbent home dialysis machine. To penetrate this market successfully, we have made investments in and continue to focus on refining our home distribution, logistics and support systems to help ensure they are ready for scale.
As we continue to drive the expansion of Tablo, we expect shipping and handling costs to also increase. Additionally, we will continue to invest in infrastructure to support our growth. As a result, we expect sales and marketing expenses to increase in absolute dollars in future periods.
As we continue to drive the expansion of Tablo, we expect shipping and handling costs to also increase. However, the full year impact of mid-year cost saving initiatives in 2024 will result in lower year over year spend.
Under the SLR Loan Agreement, as subsequently amended on December 11, 2023, the Term Loan Lenders agreed to extend term loans to us in an aggregate principal amount of up to $250.0 million, comprised of (i) a term loan of $100.0 million (the Term A Loan), (ii) term loans in an aggregate principal amount of up to $100.0 million that was provided for in two increments, one of $33.5 million (the Term B-1 Loan) and one of $66.5 million (the Term B-2 Loan) and (iii) one or more term loans in an aggregate principal amount of up to $50.0 million (the Term C Loans).
Pursuant to the terms and conditions of the Perceptive Credit Agreement, the lenders agreed to extend term loans to us in an aggregate principal amount of up to $125.0 million, comprised of (i) a term loan of $100.0 million (the Initial Term Loan), which was funded at the closing of the Perceptive Credit Agreement on January 8, 2025, and (ii) a delayed draw term loan of up to $25.0 million (the Delayed Draw Loan).
Operating Expenses Years Ended December 31, Change 71 (dollars in thousands) 2023 2022 $ % Operating expenses: Research and development $ 57,307 $ 48,855 $ 8,452 17 % Sales and marketing 96,232 89,482 6,750 8 % General and administrative 45,231 40,515 4,716 12 % Total operating expenses $ 198,770 $ 178,852 19,918 11 % Research and development expenses increased by $8.5 million, or 17%, for the year ended December 31, 2023 as compared to the prior year.
The higher consumable gross margin mainly resulted from a lower cost per unit as well as a higher average selling price for consumables. 73 Operating Expenses Years Ended December 31, Change (dollars in thousands) 2024 2023 $ % Operating expenses: Research and development $ 38,397 $ 57,307 $ (18,910 ) (33 )% Sales and marketing 70,044 96,232 (26,188 ) (27 )% General and administrative 43,498 45,231 (1,733 ) (4 )% Total operating expenses $ 151,939 $ 198,770 (46,831 ) (24 )% Research and development expenses decreased by $18.9 million, or 33%, for the year ended December 31, 2024 as compared to the prior year.
We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term while we make investments to support our anticipated growth. We may raise additional capital through the issuance of additional equity financing, debt financings, including through refinancing our existing debt, or other sources.
While we have taken actions to reduce operating expenses and working capital to align with anticipated revenue growth including implementing restructuring plans to streamline our overall organizational structure and renegotiating commitments with suppliers to reduce inventory, we expect to continue to incur operating losses in the near term while we make investments to support our anticipated growth.
Removed
Recent Developments In May 2022, we implemented a shipment hold on the distribution and marketing of Tablo for use in the home environment pending the FDA’s review and clearance of a 510(k) application we submitted for changes made since the device’s original March 2020 clearance.
Added
TabloCart with Prefiltration is an accessory to Tablo launched in the third quarter of 2022. We took action to address the first observation regarding CRRT promotion through revision of processes and procedures and updates to existing labeling and promotional materials. We also took action to address the second observation regarding TabloCart with Prefiltration.
Removed
In late July 2022, the FDA cleared our 510(k) application of Tablo for patient use in the home and we resumed marketing and shipping Tablo for home use. In July 2023, we received a warning letter (the “Warning Letter”) from the FDA that raised two observations.
Added
In early May 2024, we received 510(k) clearance from the FDA for TabloCart with Prefiltration, and we have resumed distribution of TabloCart with Prefiltration. In February 2025, we were notified by the FDA that the issues cited in the Warning Letter have been addressed.
Removed
We believe the concern raised by the first observation regarding CRRT promotion has been effectively addressed through a thorough review of existing promotional materials and practices. We believe the concern raised by the second observation regarding TabloCart with Prefiltration has been effectively addressed with two actions.
Added
These factors the success of our initiatives to optimize and further evolve our commercial organization, infrastructure and sales processes as we scale our business in the home market.
Removed
In addition, we have provided monthly updates to the FDA as to the status of these Warning Letter-related workstreams since July 2023, and believe we have taken appropriate measures to resolve the matters raised in the Warning Letter. We have not identified any safety issues with TabloCart with Prefiltration.
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Our ability to expand gross margins depends on our ability to successfully execute these strategies, as well as the impact of macroeconomic factors described below, including the tariffs imposed by the new administration.
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While we remain committed to fully cooperating with the FDA to expeditiously and completely resolve the Warning Letter, we cannot guarantee that the FDA will be satisfied with our response or the remedial measures we have taken, nor can we give any assurances as to the timing of the resolution of such matters, including the clearance of the 510(k) application and our resumption of distribution of TabloCart with Prefiltration.
Added
Profitability Initiatives Our ability to achieve and sustain profitability depends on several key factors: first, our ability to grow our revenue while expanding gross margins, as discussed above; second, our ability to optimize operating expenses; and third, our ability to optimize working capital.
Removed
We faced increased supply chain constraints during late 2021, resulting in increased transportation and related costs associated with delivering adequate supply of Tablo treatments to our customers from our contract manufacturing partner in Southeast Asia. During 2023, we saw moderation in these costs.
Added
We have undertaken various initiatives designed to improve operational efficiencies, reduce operating expenses to align with anticipated levels of revenue growth and streamline our overall cost structure, including several organizational restructurings implemented beginning in the fourth quarter of 2023 through early 2025. We are also taking steps to improve our ability to efficiently manage working capital, including inventory.
Removed
Loss on Extinguishment of Term Loan Loss on extinguishment of term loan is related to the repayment of the SVB Term Loan in November 2022, which included early prepayment and exit fees. Provision for Income Taxes Provision for income taxes primarily consists of foreign taxes in Mexico.

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Other OM 10-K year-over-year comparisons