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

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

+378 added−380 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-07)

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

378 paragraphs added · 380 removed · 324 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

93 edited+12 added−14 removed118 unchanged
Biggest changeBeginning in 2022, applicable manufacturers are required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives; and ● foreign and state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers; state laws that require device manufacturers to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; and other federal and state laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts and data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation (the “GDPR”), which became effective in May 2018).
Biggest changeHITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and 14 Table of Contents gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; ● the federal physician payment transparency requirements, sometimes referred to as the “Physician Payments Sunshine Act,” created under the Patient Protection and Affordable Care Act (“PPACA”), which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report annually to the United States Department of Health and Human Services, Centers for Medicare and Medicare Services,(“CMS”), information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other professionals (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and ● foreign and state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers; state laws that require device manufacturers to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; and other federal and state laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts and data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the GDPR, which became effective in May 2018).
WHO estimates indicate the proportion of the global population with depression to be 4.4% and that there are over 300 million people in the world living with depression. Based on U.S.
The WHO estimates indicate the proportion of the global population with depression to be 4.4% and that there are over 300 million people in the world living with depression. Based on U.S.
We believe that the NeuroStar Advanced Therapy coupled with these advantages offer significant improvement over competing TMS, which lack the ability to reproduce consistent treatments, significant clinical data from randomized outcome trials, practice development resources, and a cloud-based practice management system.
We believe that the NeuroStar Advanced Therapy System coupled with these advantages offer significant improvement over competing TMS, which lack the ability to reproduce consistent treatments, significant clinical data from randomized outcome trials, practice development resources, and a cloud-based practice management system.
These include: ● establishment registration and device listing with the FDA; ● QSR requirements, which require manufacturers, including third-party manufacturers and contract manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and, manufacturing , and distribution process; ● labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; ● clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared 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 or serious adverse events, 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; ● complying with regulations requiring Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; ● 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 efficacy data for the device.
These include: ● establishment registration and device listing with the FDA; ● QSR requirements, which require manufacturers, including third-party manufacturers and contract manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and, manufacturing, and distribution process; 11 Table of Contents ● labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; ● clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared 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 or serious adverse events, 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; ● complying with regulations requiring Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; ● 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 efficacy data for the device.
If a medical device manufacturer’s operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to it, it may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, substantial monetary penalties, individual imprisonment, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, additional reporting obligations and oversight if it becomes subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of operations, any of which could adversely affect the ability of a medical device manufacturer to operate its business and the results of its operations. 14 Table of Contents United States Healthcare Reform In the United States, a number of legislative and regulatory proposals have been considered or enacted to change the healthcare system in ways that could affect a medical device manufacturer’s business.
If a medical device manufacturer’s operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to it, it may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, substantial monetary penalties, individual imprisonment, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, additional reporting obligations and oversight if it becomes subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of operations, any of which could adversely affect the ability of a medical device manufacturer to operate its business and the results of its operations. 15 Table of Contents United States Healthcare Reform In the United States, a number of legislative and regulatory proposals have been considered or enacted to change the healthcare system in ways that could affect a medical device manufacturer’s business.
Our therapy is delivered without general anesthesia or sedation, enabling the patient to drive and resume normal activities immediately following each treatment session. We couple our product’s clinical benefits with significant practice development resources, on-site clinical training and reimbursement and service support to help our psychiatrist customers develop a successful NeuroStar Advanced Therapy practice.
Our therapy is delivered without general anesthesia or sedation, enabling the patient to drive and resume normal activities immediately following each treatment session. We couple our product’s clinical benefits with significant practice development resources, on-site clinical training and reimbursement and service support to help our psychiatrist customers develop a successful NeuroStar Advanced Therapy System practice.
We believe our NeuroStar Advanced Therapy provides our psychiatrist customers and their patients with several benefits, including clinically demonstrated response and remission with durable results, a demonstrated safety profile with limited treatment-emergent side effects and high patient adherence. Additionally, NeuroStar Advanced Therapy was designed to provide a precise and reproducible office-based therapy that is efficient and convenient.
We believe our NeuroStar Advanced Therapy System provides our psychiatrist customers and their patients with several benefits, including clinically demonstrated response and remission with durable results, a demonstrated safety profile with limited treatment-emergent side effects and high patient adherence. Additionally, NeuroStar Advanced Therapy System was designed to provide a precise and reproducible office-based therapy that is efficient and convenient.
Changes to Marketed Devices After a device receives 510(k) marketing clearance, or de novo classification, any modification that could significantly affect its safety or efficacy, or that would constitute a major change or modification in its intended use, will typically require a new 510(k) marketing clearance but may, depending on the modification, require a de novo classification or PMA approval.
Changes to Marketed Devices After a device receives 510(k) marketing clearance, or de novo classification, any modification that could significantly affect its safety or efficacy, or that would constitute a major change or modification in its intended use, will typically require a new 510(k) marketing clearance but may, depending on the modification, require a de novo classification or PMA.
The World Health Organization (the “WHO”) ranks MDD as the single largest contributor to global disability and a major contributor to suicide worldwide. According to a study published in the Journal of PharmacoEconomics in 2021, the economic burden of MDD was estimated to be $326.2 billion, an increase of 37.9% relative to 2010.
The World Health Organization (the “WHO”) ranks MDD as the largest contributor to global disability and a major contributor to suicide worldwide. According to a study published in the Journal of PharmacoEconomics in 2021, the economic burden of MDD was estimated to be $326.2 billion, an increase of 37.9% relative to 2010.
Competition We have competitors that sell other forms of TMS therapy, including Brainsway, Magstim, MagVenture, CloudTMS and Nexstim, that compete directly with the NeuroStar Advanced Therapy System. We also face competition from pharmaceutical and other companies that develop products, such as antidepressant medications, for the treatment of neurohealth disorders.
Competition We have competitors that sell other forms of TMS therapy, including Brainsway, Apollo TMS, Magstim, MagVenture, CloudTMS and Nexstim, that compete directly with the NeuroStar Advanced Therapy System. We also face competition from pharmaceutical and other companies that develop products, such as antidepressant medications, for the treatment of neurohealth disorders.
We primarily sell our products within the United States and also sell our products through distributors in countries where we have received regulatory approval, including Japan, Saudi Arabia, The United Arab Emirates, Singapore, and the Republic of Korea. We primarily focus our commercial efforts outside of the United States on Japan.
We also sell our products through distributors in countries where we have received regulatory approval, including Japan, Saudi Arabia, The United Arab Emirates, Singapore, and the Republic of Korea. We primarily focus our commercial efforts outside of the United States on Japan.
These risks include, among others: ● We have incurred losses in the past and may be unable to achieve or sustain profitability in the future. ● If insurance coverage is unavailable or reimbursement from third-party payors for treatments using our products significantly declines, psychiatrists may be reluctant to use our products. ● Our revenue has been concentrated among a small number of customers, and if we lose any of these customers and fail to replace them, or if any of these customers fail to perform their obligations to us, our revenue may decrease substantially. ● Our success depends upon patient satisfaction with the effectiveness of our NeuroStar Advanced Therapy System. ● We operate in a very competitive environment and if we are unable to compete successfully against our existing or potential competitors, our sales and operating results may be negatively affected. ● The loss of certain members of our senior management or our inability to attract and retain highly skilled executives, salespeople, product development and other personnel could negatively impact our business. ● We rely on single-source suppliers for some components used in our NeuroStar Advanced Therapy System and on a single manufacturer for the assembly of our NeuroStar Advanced Therapy System, and we may be unable to find replacements or immediately transition to alternative parties for these components. ● We rely on a network of third-party distributors to market and distribute our products internationally, and if we are unable to maintain and expand this network, we may be unable to generate anticipated sales. ● If we are not able to obtain and enforce patent protection for our technologies, products, or product candidates, development and commercialization of our products and product candidates may be adversely affected. ● Our products and operations are subject to extensive government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could harm our business. ● Modifications to our products may require new 510(k) clearances or PMA approvals, and may require us to cease marketing or recall the modified products until clearances are obtained. ● Our products must be manufactured in accordance with federal and state regulations, and we could be forced to recall our installed systems or terminate production if we fail to comply with these regulations. ● Our products may cause or contribute to adverse medical events that we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations.
These risks include, among others: ● We have incurred losses in the past and may be unable to achieve or sustain profitability in the future. ● If insurance coverage is unavailable or reimbursement from third-party payors for treatments using our products significantly declines, psychiatrists may be reluctant to use our products. ● Our revenue has been concentrated among a small number of customers, and if we lose any of these customers and fail to replace them, or if any of these customers fail to perform their obligations to us, our revenue may decrease substantially. ● Our success depends upon patient satisfaction with the effectiveness of our NeuroStar Advanced Therapy System. ● We operate in a very competitive environment and if we are unable to compete successfully against our existing or potential competitors, our sales and operating results may be negatively affected. ● The loss of certain members of our senior management or our inability to attract and retain highly skilled executives, salespeople, product development and other personnel could negatively impact our business. ● We rely on single-source suppliers for some components used in our NeuroStar Advanced Therapy System and on a single manufacturer for the assembly of our NeuroStar Advanced Therapy System, and we may be unable to find replacements or immediately transition to alternative parties for these components. ● We rely on a network of third-party distributors to market and distribute our products internationally, and if we are unable to maintain and expand this network, we may be unable to generate anticipated sales. ● If we are not able to obtain and enforce patent protection for our technologies, products, or product candidates, development and commercialization of our products and product candidates may be adversely affected. ● Our products and operations are subject to extensive government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could harm our business. ● Modifications to our products may require new 510(k) clearances, de novo classification or PMAs, and may require us to cease marketing or recall the modified products until clearances are obtained. ● Our products must be manufactured in accordance with federal and state regulations, and we could be forced to recall our installed systems or terminate production if we fail to comply with these regulations. ● Our products may cause or contribute to adverse medical events that we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations.
Most recently, under President Biden, the Department of Justice dropped support of two Supreme Court cases challenging PPACA in addition to a case before the U.S. Court of Appeals for the Fifth Circuit.
Most recently, under President Biden, the Department of Justice dropped its support of two Supreme Court cases challenging PPACA in addition to a case before the U.S. Court of Appeals for the Fifth Circuit.
We designed the NeuroStar Advanced Therapy as a non-invasive therapeutic alternative to treat patients who suffer from MDD and to address many of the key limitations of existing treatment options.
We designed the NeuroStar Advanced Therapy System as a non-invasive therapeutic alternative to treat patients who suffer from MDD and to address many of the key limitations of existing treatment options.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at www.sec.gov .
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov .
Moreover, there are no safe 12 Table of Contents harbors for many common practices, such as reimbursement support programs, educational or research grants, or charitable donations; ● the federal civil and criminal false claims laws and civil monetary penalty laws, such as the FCA, which can be enforced by private citizens through civil qui tam actions, prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment of federal funds, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.
Moreover, there are no safe harbors for many common practices, such as reimbursement support programs, educational or research grants, or charitable donations; ● the federal civil and criminal false claims laws and civil monetary penalty laws, such as the FCA, which can be enforced by private citizens through civil qui tam actions, prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment of federal funds, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.
The discovery of serious safety issues with our 19 Table of Contents products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us. ● We are subject to certain federal, state and foreign fraud and abuse laws, health information privacy and security laws and transparency laws, which, if violated, could subject us to substantial penalties.
The discovery of serious safety issues with our 20 Table of Contents products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us. ● We are subject to certain federal, state and foreign fraud and abuse laws, health information privacy and security laws and transparency laws, which, if violated, could subject us to substantial penalties.
The information contained on, or accessible through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider any information contained in, or that can be accessed through, our website as part of this Annual Report on Form 10-K. 18 Table of Contents Summary Risk Factors An investment in shares of our common stock involves significant risks.
The information contained on, or accessible through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider any information contained in, or that can be accessed through, our website as part of this Annual Report on Form 10-K. 19 Table of Contents Summary Risk Factors An investment in shares of our common stock involves significant risks.
Many patients taking antidepressant medications experience intolerable or troubling side effects that contribute to a delay or failure in attaining an effective or optimal antidepressant dose, poor patient treatment 2 Table of Contents adherence or discontinuation of treatment therapy. The likelihood of achieving remission is limited and declines with each successive medication attempt.
Many patients taking antidepressant medications experience intolerable or troubling side effects that contribute to a delay or failure in attaining an effective or optimal antidepressant dose, poor patient 3 Table of Contents treatment adherence or discontinuation of treatment therapy. The likelihood of achieving remission is limited and declines with each successive medication attempt.
National Institute of Mental Health that enrolled more than 4,000 adult MDD patients at 41 clinical sites to examine the outcomes to a sequenced series of antidepressant medication attempts that mimicked best practices. In the study, only approximately 28% and 21% of patients achieved remission in their first and second medication attempts, respectively.
National Institute of Mental Health that enrolled more than 4,000 adult MDD patients at 41 clinical sites to examine the outcomes to a sequenced series of antidepressant medication attempts that mimicked best practices. In the STAR*D Study, only approximately 28% and 21% of patients achieved remission in their first and second medication attempts, respectively.
For a more comprehensive discussion of the risks related to our intellectual property, please see “Risk Factors—Risks Related to Intellectual Property.” Manufacturing and Supply We manage all aspects of product supply through our operations team based in Malvern, Pennsylvania. We outsource the manufacturing of components and high-level assemblies, which are produced and tested to our specifications.
For a more comprehensive discussion of the risks related to our intellectual property, please see “Risk Factors—Risks Related to Intellectual Property.” Raw Materials, Manufacturing and Supply We manage all aspects of product supply through our operations team based in Malvern, Pennsylvania. We outsource the manufacturing of components and high-level assemblies, which are produced and tested to our specifications.
The system is cleared by the United States Food and Drug Administration (the “FDA”) to treat adult patients with major depressive disorder (“MDD”) that have failed to achieve satisfactory improvement from at least one prior antidepressant medication in the current MDD episode.
The system is cleared by the United States Food and Drug Administration (the “FDA”) to treat adult patients with major depressive disorder (“MDD”) who have failed to achieve satisfactory improvement from at least one prior antidepressant medication in the current MDD episode.
Revenues from treatment sessions represented 71% of our U.S. revenues for the year ended December 31, 2022 compared to 73% of our U.S. revenues for the prior year. Our Strategy Our goal is to maintain and extend our leadership position in TMS therapy for patients with neurohealth disorders.
Revenues from treatment sessions represented 73% of our U.S. revenues for the year ended December 31, 2023 compared to 71% of our U.S. revenues for the prior year. Our Strategy Our goal is to maintain and extend our leadership position in TMS therapy for patients with neurohealth disorders.
The Social Security Act also has a provision that provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or Medicaid beneficiary that such person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of any item or service payable by a federal health care program.
The Social Security Act also has a provision that provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or Medicaid beneficiary that such person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the 13 Table of Contents order or receipt of any item or service payable by a federal health care program.
We make available, free of charge on our website, our annual report on Form 10 ‑ K, quarterly reports on Form 10 ‑ Q, current reports on Form 8 ‑ K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as soon as reasonably practicable after we electronically file those reports with, or furnish them to, the Securities and Exchange Commission (“SEC”).
We make available, free of charge on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as soon as reasonably practicable after we electronically file those reports with, or furnish them to, the SEC.
The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.
The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event 8 Table of Contents reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.
We plan to expand our sales and customer support team to increase the number of patients treated at new and existing active customer sites using our NeuroStar Advanced Therapy Systems in the United States. We currently have 1,101 active customer sites in the United States.
We plan to expand our sales and customer support team to increase the number of patients treated at new and existing active customer sites using our NeuroStar Advanced Therapy Systems in the United States. We currently have 1,145 active customer sites in the United States.
In Japan, we have an exclusive distribution agreement with Teijin, for the commercialization of our products. The current term of this distribution agreement expires March 31, 2025, subject to automatic renewal unless terminated by either party.
In Japan, we have an exclusive distribution agreement with Teijin for the commercialization of our products. The current term of this distribution agreement expires March 31, 2027, subject to automatic renewal unless terminated by either party.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: ● warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; ● recalls, withdrawals, or administrative detention or seizure of our products; ● operating restrictions or partial suspension or total shutdown of production; ● refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; ● withdrawing 510(k) clearances or PMA approvals that have already been authorized; ● refusal to authorize export or import approvals for our products; or ● criminal prosecution.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: ● warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; ● recalls, withdrawals, or administrative detention or seizure of our products; ● operating restrictions or partial suspension or total shutdown of production; 12 Table of Contents ● refusing or delaying requests for 510(k) marketing clearance or PMAs of new products or modified products; ● withdrawing 510(k) clearances or PMAs that have already been authorized; ● refusal to authorize export or import approvals for our products; or ● criminal prosecution.
Clinical Trials A clinical trial is typically required to support a PMA application or de novo classification and is sometimes required for a 510(k) pre-market notification, particularly in the case of changes to indications. Clinical trials for significant risk devices generally require submission of an application for an Investigational Device Exemption (“IDE”) to the FDA.
Clinical Trials A clinical trial is typically required to support a PMA application or de novo classification and is sometimes required for a 510(k) pre-market notification, particularly in the case of changes to indications. Clinical trials 10 Table of Contents for significant risk devices generally require submission of an application for an Investigational Device Exemption (“IDE”) to the FDA.
We created the role of clinical training manager to partner with our customers to conduct initial and ongoing on-site clinical training to ensure clinical and practice success. Practice Management Support and Psychiatrist Training—United States Our PDMs play a pivotal role in ensuring the success of our customers as they implement a new service line into their practice.
We created the role of clinical training manager to partner with our customers to conduct initial and ongoing on-site clinical training to ensure clinical and practice success. 6 Table of Contents Practice Management Support and Psychiatrist Training—United States Our PDMs play a pivotal role in ensuring the success of our customers as they implement a new service line into their practice.
The safety, effectiveness and durability of NeuroStar Advanced Therapy is supported by a large clinical data set published in 28 articles in peer-reviewed medical journals, including from 15 clinical studies that have collectively enrolled more than 1,000 adult patients suffering from MDD.
The safety, effectiveness and durability of NeuroStar Advanced Therapy System is supported by a large clinical data set published in 31 articles in peer-reviewed medical journals, including from 15 clinical studies that have collectively enrolled more than 1,000 adult patients suffering from MDD.
Our area sales managers are responsible for identifying key customer prospects, educating them on the value of NeuroStar Advanced Therapy System, gaining their commitment for capital placement and introducing them to our PDMs. Our PDMs enhance the operational experience for 5 Table of Contents providers and drive implementation of the NeuroStar Advanced Therapy System into our customers’ practices.
Our area sales managers are responsible for identifying key customer prospects, educating them on the value of NeuroStar Advanced Therapy System, gaining their commitment for capital placement and introducing them to our PDMs. Our PDMs enhance the operational experience for providers and drive implementation of the NeuroStar Advanced Therapy System into our customers’ practices.
It is likely that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for a medical device manufacturer’s products or additional pricing pressure.
It is likely that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and 16 Table of Contents services, which could result in reduced demand for a medical device manufacturer’s products or additional pricing pressure.
Based on our commercial data, we believe psychiatrists can recoup their initial capital investment in our system by providing a standard course of treatment to approximately 12 patients, assuming these patients receive reimbursement from Medicare or commercial insurance at rates that are similar to what our customers have observed for existing and prior patients.
Based on our commercial data, we believe psychiatrists can recoup their initial capital investment in our system by providing a standard course of treatment to approximately 12 patients, assuming these patients receive reimbursement from federal healthcare programs or commercial insurance at rates that are similar to what our customers have observed for existing and prior patients.
However, it is possible that such initiatives could have an adverse effect on our ability to obtain approval and/or successfully commercialize products in the United States in the future. For example, U.S. federal government and state legislatures have continued to implement cost containment programs, including 15 Table of Contents price controls and restrictions on coverage and reimbursement.
However, it is possible that such initiatives could have an adverse effect on our ability to obtain approval and/or successfully commercialize products in the United States in the future. For example, U.S. federal government and state legislatures have continued to implement cost containment programs, including price controls and restrictions on coverage and reimbursement.
Our clinical training consultants take the burden of clinical training off our NeuroStar practice consultants and provide a dedicated training resource to each customer. Clinical training consultants conduct at least a day, hands-on training course that is scheduled after system installation at each practice and also provide ongoing advanced on-site clinical training.
Our clinical training managers take the burden of clinical training off our NeuroStar practice consultants and provide a dedicated training resource to each customer. Clinical training managers conduct a hands-on training course that is scheduled after system installation at each practice and also provide ongoing advanced on-site clinical training.
Corporate Information We were incorporated in Delaware in April of 2003. Our principal executive offices are located at 3222 Phoenixville Pike, Malvern, Pennsylvania 19355, and our telephone number is (610) 640-4202. Our website address is www.neurostar.com .
Corporate Information We were incorporated in Delaware in April of 2003. Our principal executive offices are located at 3222 Phoenixville Pike, Malvern, Pennsylvania 19355, and our telephone number is (610) 640-4202. Our website address is https://neurostar.com/neuronetics/ .
If our employees or our independent distributors fail to adequately promote, market and sell our products, our sales could significantly decrease. ● We may need to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations. ● The terms of our credit facility place restrictions on our operating and financial flexibility.
If our employees or our independent distributors fail to adequately promote, market and sell our products, our sales could significantly decrease. ● We may need to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations. ● The terms of our credit facility place restrictions on our operating and financial flexibility and could subject us to potential default.
We rely on third parties to provide components used in existing products and we expect to continue to do so for future products. We establish our relationships with our third-party manufacturers and suppliers through supplier contracts and purchase orders. In most cases, these supplier relationships may be terminated by either party upon short notice.
We rely on third parties to acquire the raw materials and provide components used in existing products and we expect to continue to do so for future products. We establish our relationships with our third-party manufacturers and suppliers through supplier contracts and purchase orders. In most cases, these supplier relationships may be terminated by either party upon short notice.
The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the “de novo” classification process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.
The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with 9 Table of Contents the “de novo” classification process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.
We believe the effectiveness of TMS depends on the psychiatrist’s ability to deliver a precise amount of magnetic pulses to a specific area of the brain in a manner that can be consistently repeated during each treatment session.
We believe the effectiveness of TMS depends on the healthcare provider’s ability to deliver a precise amount of magnetic pulses to a specific area of the brain in a manner that can be consistently repeated during each treatment session.
Other International Regulation 16 Table of Contents Sales and marketing of medical devices outside of the United States are subject to foreign regulatory requirements that vary widely from country to country. The global regulatory environment is increasingly stringent and unpredictable.
Other International Regulation Sales and marketing of medical devices outside of the United States are subject to foreign regulatory requirements that vary widely from country to country. The global regulatory environment is increasingly stringent and unpredictable.
We were granted marketing authorization for our system using the de novo classification process after receiving a not substantially equivalent determination following the 9 Table of Contents submission of a 510(k) premarket notification.
We were granted marketing authorization for our system using the de novo classification process after receiving a not substantially equivalent determination following the submission of a 510(k) premarket notification.
We estimate, based on data from the Sequenced Treatment Alternatives to Relieve Depression study (the “STAR*D Study”) that approximately 6.4 million of these patients have failed to achieve remission of their MDD from their prior antidepressant medication therapy and that approximately 3.8 million of those patients have commercial insurance or Medicare coverage for NeuroStar Advanced Therapy.
We estimate, based on data from the Sequenced Treatment Alternatives to Relieve Depression study (the “STAR*D Study”) that approximately 6.4 million of these patients have failed to achieve remission of their MDD from their prior antidepressant medication therapy and that approximately 3.8 million of those patients have commercial insurance or federal healthcare programs coverage for NeuroStar Advanced Therapy System.
In 2022, our largest customer acquired our second-largest customer. The combined entity accounted for over 17% of our revenue in 2022. We executed a new long-term, exclusive agreement with the customer in January 2023, which covers sales to the combined organization on what we believe are mutually beneficial terms.
In 2022, our largest customer acquired our second-largest customer. The combined entity accounted for 15% of our revenue in 2023. We executed a new long-term, exclusive agreement with the customer in 2023, which covers sales to the combined organization on what we believe are mutually beneficial terms.
The IDE application must be approved in advance by the FDA for a specified number of patients, unless the product is deemed a non-significant risk device and eligible for more abbreviated IDE requirements.
The IDE application must be approved in advance by the FDA for a specified number of patients, unless the study is deemed a non-significant risk and eligible for more abbreviated IDE requirements.
In the EU, a single regulatory approval process exists, in which a Notified Body assesses the conformity of the medical device intended to be marketed with the legal requirements set forth in the EU MDR.
In the EU, a single regulatory approval process exists, in which a Notified Body assesses the conformity of the medical device intended to be marketed with the legal 17 Table of Contents requirements set forth in the EU MDR.
Reimbursement, Payor Relations and Customer Support Based on our estimates, over 65 major private insurers in the United States, including the top 25 largest private insurers and Medicare, have coverage policies for reimbursement of TMS, including NeuroStar Advanced Therapy, representing over 300 million covered lives or about 95% of the total payor covered lives in the United States.
Reimbursement, Payor Relations and Customer Support Based on our estimates, over 65 major private insurers in the United States, including the top 25 largest private insurers and federal healthcare programs, have coverage policies for reimbursement of TMS, including NeuroStar Advanced Therapy System, representing over 300 million covered lives or about 95% of the total payor covered lives in the United States.
To reach our target practices, we also plan to expand our advertising efforts, both online and through more traditional approaches, such as targeting leading psychiatric journals, practice outreach and education through monthly webcasts, attendance at key psychiatric trade shows and sponsoring clinical symposiums and product theaters. ● Increase utilization of our new and existing active customer sites of NeuroStar Advanced Therapy Systems.
To reach our target practices, we also plan to expand our advertising efforts, both online and through more traditional approaches, such as targeting leading psychiatric journals, practice outreach and education through webinars and in person events, attendance at key psychiatric trade shows and sponsoring clinical symposiums and product theaters . ● Increase utilization of our new and existing active customer sites of NeuroStar Advanced Therapy Systems.
In 2023, we plan to continue to expand our sales and customer support teams to have the largest direct sales and customer support team in the industry, including 47 NeuroStar practice development managers, 19 area sales managers, 7 clinical training managers, 18 field service and technical support specialists, 15 sales leaders, 8 customer service representatives, 3 inside sales managers and 10 reimbursement specialists and managers.
In 2024, we plan to continue to expand our sales and customer support teams to have the largest direct sales and customer support team in the industry, including 47 NeuroStar practice development managers, 18 area sales managers, 7 clinical training managers, 18 field service and technical support specialists, 15 sales leaders, 8 customer service representatives, 4 inside sales managers and 10 reimbursement specialists and managers.
At the state level, individual states in the United States are also increasingly passing legislation and implementing regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.
At the state level, individual states in the United States are also increasingly passing legislation and implementing regulations designed to control product pricing or manufacturer interactions with healthcare providers, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.
Our dedicated reimbursement managers help each practice navigate all issues regarding the reimbursement process including investigation of benefits, prior authorizations and claims documentation. This group has assisted our customers to conduct over 31,000 benefit investigations. Psychiatrists and staff training on the NeuroStar Advanced Therapy System is a key to success within each practice.
Our dedicated reimbursement managers help practices navigate issues regarding the reimbursement process including investigation of benefits, prior authorizations and claims documentation. This group has assisted our customers to conduct over 69,900 benefit investigations. Psychiatrists and staff training on the NeuroStar Advanced Therapy System is a key to success within each practice.
We worked with Teijin to obtain reimbursement approval for the NeuroStar Advanced Therapy System in June 2019 and will continue to provide sales, marketing and clinical support to ensure our commercial success.
We worked 5 Table of Contents with Teijin to obtain reimbursement approval for the NeuroStar Advanced Therapy System in June 2019 and will continue to provide sales, marketing and clinical support to ensure our commercial success.
Throughout our history, we have provided material support to more than 65 investigator-initiated trials of such prospective additional indications. We are currently considering a number of potential new indications for the use of the NeuroStar Advanced Therapy System related to neurohealth disorders.
Throughout our history, we have provided material support to more than 65 investigator-initiated trials and are currently considering a number of new indications for the use of the NeuroStar Advanced Therapy System related to neurohealth disorders.
If the FDA agrees that the device is substantially equivalent 8 Table of Contents to a predicate device currently on the market, it will issue a “substantially equivalent” letter, which serves as the clearance to commercially market the device.
If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will issue a “substantially equivalent” letter, which serves as the clearance to commercially market the device.
Since the NeuroStar Advanced Therapy System is classified as a Class III device by Japan’s definition, Neuronetics has followed the Shonin process for pre-market approval. After approval is received, the MHLW issues a Shonin approval to Neuronetics’ D-MAH, thereby permitting such entity to import the device into Japan for sale.
Since the NeuroStar Advanced Therapy System is classified as a Class III under Japanese law, Neuronetics has followed the Shonin process for pre-market approval. After approval is received, the MHLW issues a Shonin approval to Neuronetics’ D-MAH, thereby permitting such entity to import the device into Japan for sale.
A course of treatment typically requires treatment sessions five times a week for up to six weeks that can last from as low as three to as long as forty-five minutes per session.
A course of treatment typically requires treatment sessions five times per week for up to six weeks and can last from as short as three to as long as forty-five minutes per session.
We target these practices by the number of psychiatrists within their practices, the number of patients they treat and their acceptance of commercial insurance and Medicare. We believe that our psychiatrist targeting strategy makes for a well-defined customer base that is accessible by our direct sales organization.
We target approximately 53,000 psychiatrists across 26,000 psychiatric practices, We target these practices by the number of psychiatrists within their practices, the number of patients they treat and their acceptance of commercial insurance and Medicare. We believe that our psychiatrist targeting strategy makes for a well-defined customer base that is accessible by our direct sales organization.
Sales and Customer Support Team and Customer Training As of December 31, 2022, our sales and customer support team consisted of 84 employees working collaboratively across the following departments: sales, marketing, field service and customer support, and reimbursement.
Sales and Customer Support Team and Customer Training As of December 31, 2023, our sales and customer support team consisted of 91 employees working collaboratively across the following departments: sales, marketing, field service and customer support, and reimbursement.
On a worldwide basis, as of December 31, 2022, our patent estate included over 100 issued or allowed patents and pending patent 6 Table of Contents applications for our products and novel design methods, manufacturing processes, novel TMS devices and systems and future combination products that are mainly designed to treat psychiatric conditions or perform diagnostic procedures.
On a worldwide basis, as of December 31, 2023, our patent estate included over 98 issued or allowed patents and 18 pending patent applications for our products and novel design methods, manufacturing processes, novel TMS devices and systems and future combination products that are mainly designed to treat psychiatric conditions or perform diagnostic procedures.
There are also criminal penalties, including imprisonment and criminal fines, for making or presenting false, fictitious or fraudulent claims to the federal government; ● HIPAA, among other things, established various criminal health care fraud laws, which impose criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and creates federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services.
Notably, however, the Stark Law is a strict liability statute and compliance is difficult to assure; ● HIPAA, among other things, established various criminal health care fraud laws, which impose criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and creates federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services.
The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including voluntary or mandatory device corrections or removals. 11 Table of Contents The FDA has broad regulatory compliance and enforcement powers.
The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including voluntary or mandatory device corrections or removals.
Clinical trials for a significant risk device may begin once the IDE application is approved by the FDA as well as the appropriate institutional review boards at the clinical trial sites, and the informed consent of the patients participating in the clinical trial is obtained.
Clinical trials may begin once the IDE application is approved by the FDA (or abbreviated IDE due to non-significant risk determination) as well as the appropriate institutional review boards at the clinical trial sites, and the informed consent of the patients participating in the clinical trial is obtained.
For the year ended December 31, 2022, our U.S. revenues were $63.4 million, compared to $53.4 million for the year ended December 31, 2021, which represented an increase of 19% compared to the prior period.
For the year ended December 31, 2023, our U.S. revenues were $69.3 million, compared to $63.4 million for the year ended December 31, 2022, which represented an increase of 9% compared to the prior period.
False Claims Act liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties of $13,508 to $27,018 (as of January 2023) per false or fraudulent claim or statement.
False Claims Act liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties of $13,946 to $27,894 (beginning in 2024) per false or fraudulent claim or statement.
Our initial international commercial focus is Japan, which has the third largest healthcare spend globally. We have entered into an exclusive distribution agreement with Teijin Pharma Limited (“Teijin”) a leading Japanese healthcare company, to further expand our commercialization efforts in this market.
Our initial international commercial focus is Japan, which has the third largest healthcare spend globally. We have entered into an exclusive distribution agreement with Teijin Pharma Limited (“Teijin”) a leading Japanese healthcare company, to further expand our commercialization efforts in this market. We are also evaluating the use of enhancements to our NeuroStar Advanced Therapy System to treat additional indications.
We have 17 Table of Contents never had a work stoppage and none of our employees are covered by collective bargaining agreements or represented by a labor union. We believe that our employee relations are strong. We recruit employees with the skills and training relevant to functional responsibilities. We believe that cultural fit and energy are important considerations.
All of our employees are employed full time. We have never had a work stoppage and none of our employees are covered by collective bargaining agreements or represented by a labor union. We believe that our employee relations are strong. We recruit employees with the skills and training relevant to functional responsibilities.
Among other ways in which it may impact a medical device manufacturer’s business, the PPACA: ● established a Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical efficacy research in an effort to coordinate and develop such research; ● 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; and ● expanded the eligibility criteria for Medicaid program s.
Among other ways in which it may impact a medical device manufacturer’s business, the PPACA: ● established a Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical efficacy research in an effort to coordinate and develop such research; ● required manufacturers to report certain payments and other transfers of value pursuant to the Physician Payments Sunshine Act, described above; ● 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; and ● expanded the eligibility criteria for Medicaid programs and, originally, required certain employers to provide, and all individuals to obtain, health insurance .
MDD is a mood disorder characterized by the presence of one or both of two major diagnostic criteria: a depressed mood or loss of interest in pleasure that continues for at least two weeks.
We generated revenues of $71.3 million for the year ended December 31, 2023. MDD is a mood disorder characterized by the presence of one or both of two major diagnostic criteria: a depressed mood or loss of interest in pleasure that continues for at least two weeks.
Our worldwide intellectual property portfolio includes multiple pending patent applications relating to methods and apparatuses for the treatment of psychiatric health conditions in Australia, Canada, the European Union, Japan and the United States.
In 2024, we expect that five U.S. patents will expire and 14 non -U.S. patents will expire. Our worldwide intellectual property portfolio includes multiple pending patent applications relating to methods and apparatuses for the treatment of psychiatric health conditions in Australia, Canada, the European Union, Japan and the United States.
Government Regulation Our products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in foreign jurisdictions. 7 Table of Contents FDA Our products are subject to regulation as medical devices under the U.S Federal Food, Drug, and Cosmetic Act, as amended (the “FDCA”), as implemented and enforced by the FDA.
Government Regulation Our products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in foreign jurisdictions. FDA Our products are subject to regulation as medical devices under the U.S.
We also plan to invest further in our direct to consumer marketing programs, which is comprised of paid search, display advertising, social media, radio, health portals and public relations. 4 Table of Contents ● Expand our international market opportunities.
We also plan to invest further in our direct to consumer marketing programs, which is comprised of paid search, display advertising, social media, billboards, radio and public relations. ● Expand our international market opportunities. We primarily sell our products within the United States.
If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance or PMA approval is obtained.
If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance or PMA is obtained. Also, in these circumstances, we may be subject to significant regulatory fines or penalties.
In the United States, as of December 31, 2022, we owned or licensed 41 issued or allowed patents and 7 patent applications filed that are directed to our TMS technology. Outside the United States, as of December 31, 2022, we owned or licensed 58 issued or allowed patents, 7 pending patent applications and zero pending Patent Cooperation Treaty applications.
In the United States, as of December 31, 2023, we owned or licensed 38 issued or 7 Table of Contents allowed patents and 10 pending patent applications that are directed to our TMS technology.
We currently have 39 NeuroStar practice development managers in 2022 (“PDMs”), to focus exclusively on helping increase patient utilization of NeuroStar Advanced Therapy in a practice. We intend to add to this team to support our revenue growth. Our NeuroStar practice consultants focus their efforts on helping psychiatrist customers implement our 5 Stars Solution for Practice Success.
We currently have 47 NeuroStar practice development managers in 2023 (“PDMs”), to focus exclusively on helping increase patient utilization of NeuroStar Advanced Therapy System in a practice. We intend to add to this team to support our revenue growth.
Congressional inquiries and proposed federal legislation designed to, among other things, bring more transparency to product pricing, reduce the cost of certain products under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies.
Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. congressional inquiries and proposed federal legislation designed to, among other things, bring more transparency to product pricing, reduce the cost of certain products under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies.
It is also cleared by the FDA as an adjunct for adults with obsessive-compulsive disorder (“OCD”), and to decrease anxiety symptoms in adult patients with MDD that may exhibit comorbid anxiety symptoms (anxious depression). NeuroStar Advanced Therapy is safe, clinically effective, reproducible and precise and we believe is supported by the largest clinical data set of any competing TMS system.
It is also cleared by the FDA as an adjunct for adults with obsessive-compulsive disorder (“OCD”), and to decrease anxiety symptoms in adult patients with MDD that may exhibit comorbid anxiety symptoms (anxious depression).
For the year ended December 31, 2022, we generated revenues of $65.2 million and had a net loss of $37.2 million. Our revenues increased 18% during the year ended December 31, 2022 compared to the year ended December 31, 2021.
We derive the majority of our revenues from recurring treatment sessions. For the year ended December 31, 2023, we generated revenues of $71.3 million and had a net loss of $30.2 million. Our revenues increased 9% during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Also, in these circumstances, we may be subject to significant regulatory fines or penalties. 10 Table of Contents Post-Market Regulation After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply.
Post-Market Regulation After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDepartment of Health and Human Services Office for Civil Rights issued a Notice of Proposed Rulemaking, which if finalized, would make changes to some of HIPAA’s regulatory requirements, which would apply to business associates; ● the federal Physician Payments Sunshine Act created under the PPACA, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report annually to the United States Department of Health and Human Services, Centers for Medicare and Medicare Services, or CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and ● foreign and state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers; state laws that require device manufacturers to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; and other federal and state laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts and data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018).
Biggest changeHITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; ● the federal physician payment transparency requirements, sometimes referred to as the “Physician Payments Sunshine Act” created under the PPACA, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report annually to the United States Department of Health and Human Services, Centers for Medicare and Medicare Services (“CMS”), information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) other professionals (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and ● foreign and state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers; state laws that require device manufacturers to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; and other federal and state laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts and data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the GDPR, which became effective in May 2018).
In addition, the FDA may place significant limitations upon the intended uses of our products as a condition to a 510(k) clearance or PMA approval. Product applications can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following clearance or approval.
In addition, the FDA may place significant limitations upon the intended uses of our products as a condition to a 510(k) clearance or PMA. Product applications can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following clearance or approval.
It is not always possible to identify and deter misconduct by our employees, distributors, and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
It is not always possible to identify and deter misconduct by our employees, distributors, and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
Factors that could cause volatility in the market price of our common stock include, but are not limited to: ● the actual or anticipated fluctuations in our financial condition and operating results; ● the actual or anticipated changes in our growth rate; ● the commercial success and market acceptance of our products; ● the success of our competitors in developing or commercializing products; 57 Table of Contents ● media exposure of our products or of those of others in our industry; ● our ability to commercialize or obtain regulatory approvals for our products, or delays in commercializing or obtaining regulatory approvals; ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments; ● the addition or departure of key personnel; ● product liability claims; ● general prevailing economic, industry and market conditions, including factors unrelated to our operating performance or the operating performance of our competitors; ● business disruptions caused by earthquakes, fires, pandemic diseases (such as from coronavirus), or other natural disasters; ● disputes or other developments concerning our intellectual property or other proprietary rights, including litigation; ● the FDA or other U.S. or foreign regulatory actions affecting us or the healthcare or medical device industry; ● healthcare reform measures in the United States; ● third-party payor developments in the United States and other countries; ● sales of our common stock by our directors, officers, or stockholders; ● the timing and amount of our investments in the growth of our business; ● inability to obtain additional funding; ● future sales or issuances of equity or debt securities by us; ● failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public; and ● the issuance of new or changed securities analysts’ reports or recommendations regarding us .
Factors that could cause volatility in the market price of our common stock include, but are not limited to: ● the actual or anticipated fluctuations in our financial condition and operating results; 58 Table of Contents ● the actual or anticipated changes in our growth rate; ● the commercial success and market acceptance of our products; ● the success of our competitors in developing or commercializing products; ● media exposure of our products or of those of others in our industry; ● our ability to commercialize or obtain regulatory approvals for our products, or delays in commercializing or obtaining regulatory approvals; ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments; ● the addition or departure of key personnel; ● product liability claims; ● general prevailing economic, industry and market conditions, including factors unrelated to our operating performance or the operating performance of our competitors; ● business disruptions caused by earthquakes, fires, pandemic diseases (such as from coronavirus), or other natural disasters; ● disputes or other developments concerning our intellectual property or other proprietary rights, including litigation; ● the FDA or other U.S. or foreign regulatory actions affecting us or the healthcare or medical device industry; ● healthcare reform measures in the United States; ● third-party payor developments in the United States and other countries; ● sales of our common stock by our directors, officers, or stockholders; ● the timing and amount of our investments in the growth of our business; ● inability to obtain additional funding; ● future sales or issuances of equity or debt securities by us; ● failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public; and ● the issuance of new or changed securities analysts’ reports or recommendations regarding us .
Similar to the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it or to have committed a violation; ● HIPAA, as amended by HITECH, and their implementing regulations, which imposes privacy, security, transmission and breach reporting obligations with respect to individually identifiable health information upon “covered entities” subject to the law, including health plans, healthcare clearinghouses and certain healthcare providers and their respective business associates that perform services on their behalf that involve individually identifiable health information.
Similar to the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the applicable statute or specific intent to violate it or to have committed a violation; ● HIPAA, as amended by HITECH, and their implementing regulations, which imposes privacy, security, transmission and breach reporting obligations with respect to individually identifiable health information upon “covered entities” subject to the law, including health plans, healthcare clearinghouses and certain healthcare providers and their respective business associates that perform services on their behalf that involve individually identifiable health information.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: ● any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect our products; ● any of our pending patent applications or those of our licensors may issue as patents; 37 Table of Contents ● others will not or may not be able to make, use, offer to sell, or sell products that are the same as or similar to our own but that are not covered by the claims of the patents that we own or license; ● we will be able to successfully commercialize our products on a substantial scale, if approved, before the relevant patents that we own or license expire; ● we were the first to make the inventions covered by each of the patents and pending patent applications that we own or license; ● we or our licensors were the first to file patent applications for these inventions; ● others will not develop similar or alternative technologies that do not infringe the patents we own or license; ● any of the patents we own or license will be found to ultimately be valid and enforceable; ● any patents issued to us or our licensors will provide a basis for an exclusive market for our commercially viable products or will provide us with any competitive advantages; ● a third party may not challenge the patents we own or license and, if challenged, a court would hold that such patents are valid, enforceable and infringed; ● we may develop or in-license additional proprietary technologies that are patentable; ● the patents of others will not have an adverse effect on our business; ● our competitors do not conduct research and development activities in countries where we do not have enforceable patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● we will develop additional proprietary technologies or products that are separately patentable; or ● our commercial activities or products will not infringe upon the patents of others.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: ● any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect our products; ● any of our pending patent applications or those of our licensors may issue as patents; ● others will not or may not be able to make, use, offer to sell, or sell products that are the same as or similar to our own but that are not covered by the claims of the patents that we own or license; ● we will be able to successfully commercialize our products on a substantial scale, if approved, before the relevant patents that we own or license expire; ● we were the first to make the inventions covered by each of the patents and pending patent applications that we own or license; ● we or our licensors were the first to file patent applications for these inventions; ● others will not develop similar or alternative technologies that do not infringe the patents we own or license; ● any of the patents we own or license will be found to ultimately be valid and enforceable; ● any patents issued to us or our licensors will provide a basis for an exclusive market for our commercially viable products or will provide us with any competitive advantages; 38 Table of Contents ● a third party may not challenge the patents we own or license and, if challenged, a court would hold that such patents are valid, enforceable and infringed; ● we may develop or in-license additional proprietary technologies that are patentable; ● the patents of others will not have an adverse effect on our business; ● our competitors do not conduct research and development activities in countries where we do not have enforceable patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● we will develop additional proprietary technologies or products that are separately patentable; or ● our commercial activities or products will not infringe upon the patents of others.
Collaborations are subject to numerous risks, which may include that: ● collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; ● collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities; ● collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates; ● a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; ● we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; ● collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; ● disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; ● collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; ● collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and 44 Table of Contents ● a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
Collaborations are subject to numerous risks, which may include that: ● collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; ● collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities; ● collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates; ● a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; ● we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; ● collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; ● disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; ● collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; ● collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and ● a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
In the first quarter, our results can be impacted by the resetting of annual U.S. patient healthcare insurance plan deductibles, which may cause delays in patients seeking NeuroStar Advanced Therapy treatments. Historically, we have seen a sequential decline in third quarter revenues, which we believe is attributable to summer vacation plans of psychiatrists and patients.
In the first quarter, our results can be impacted by the resetting of annual U.S. patient healthcare insurance plan deductibles, which may cause delays in patients seeking NeuroStar Advanced Therapy System treatments. Historically, we have seen a sequential decline in third quarter revenues, which we believe is attributable to summer vacation plans of psychiatrists and patients.
These risks include our ability to: ● manage rapidly changing and expanding operations; ● increase awareness of our brand and strengthen customer loyalty; ● successfully execute our business and marketing strategy; ● respond effectively to competitive pressures and developments; ● continue to develop and enhance our products and products in development; ● obtain regulatory clearance or approval to commercialize new products and enhance our existing products; ● refrain from infringing on the intellectual property rights of others, and maintaining appropriate legal policies and procedures; ● expand our presence in existing and commence operations in new international markets; and ● attract, retain and motivate qualified personnel. 24 Table of Contents If we are unable to adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products and we may never generate sufficient revenues to achieve or sustain profitability.
These risks include our ability to: ● manage rapidly changing and expanding operations; ● increase awareness of our brand and strengthen customer loyalty; ● successfully execute our business and marketing strategy; ● respond effectively to competitive pressures and developments; ● continue to develop and enhance our products and products in development; ● obtain regulatory clearance or approval to commercialize new products and enhance our existing products; ● refrain from infringing on the intellectual property rights of others, and maintaining appropriate legal policies and procedures; ● expand our presence in existing and commence operations in new international markets; and ● attract, retain and motivate qualified personnel. 25 Table of Contents If we are unable to adequately address our customers’ needs, it could negatively impact sales and market acceptance of our products and we may never generate sufficient revenues to achieve or sustain profitability.
Even if granted, a 510(k) clearance, de novo classification, or PMA approval imposes substantial restrictions on how our devices may be marketed or sold, and the FDA continues to place considerable restrictions on our products and operations. For example, the manufacture of medical devices must comply with the FDA’s Quality System Regulation (QSR).
Even if granted, a 510(k) clearance, de novo classification, or PMA imposes substantial restrictions on how our devices may be marketed or sold, and the FDA continues to place considerable restrictions on our products and operations. For example, the manufacture of medical devices must comply with the FDA’s Quality System Regulation (QSR).
If our facilities or those of our manufacturers or suppliers are found to be in violation of applicable laws and regulations, or if we or our manufacturers or suppliers fail to take satisfactory corrective action in response to an adverse inspection, the regulatory authority could take enforcement action, including any of the following sanctions: untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; customer notifications or repair, replacement, refunds, recalls, detention or seizure of our products; operating restrictions or partial suspension or total shutdown of production; refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; withdrawing 510(k) marketing clearances or PMA approvals that have already been granted; refusing to provide Certificates for Foreign Government; refusing to grant export approval for our products; or pursuing criminal prosecution.
If our facilities or those of our manufacturers or suppliers are found to be in violation of applicable laws and regulations, or if we or our manufacturers or suppliers fail to take satisfactory corrective action in response to an adverse inspection, the regulatory authority could take enforcement action, including any of the following sanctions: untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; customer notifications or repair, replacement, refunds, recalls, detention or seizure of our products; operating restrictions or partial suspension or total shutdown of production; refusing or delaying requests for 510(k) marketing clearance or PMA of new products or modified products; withdrawing 510(k) marketing clearances or PMAs that have already been granted; refusing to provide Certificates for Foreign Government; refusing to grant export approval for our products; or pursuing criminal prosecution.
However, our customers may not select appropriate patient candidates for NeuroStar Advanced Therapy treatment, which may produce results that may not meet patients’ expectations. In addition, the efficacy of treatment is dependent on proper patient set up at the initial treatment session and duplication of that set up at future treatment sessions.
However, our customers may not select appropriate patient candidates for NeuroStar Advanced Therapy System treatment, which may produce results that may not meet patients’ expectations. In addition, the efficacy of treatment is dependent on proper patient set up at the initial treatment session and duplication of that set up at future treatment sessions.
In some cases, such studies may be requested for a 510(k) as well. We may not be able to meet the requirements to obtain 510(k) clearance or PMA approval (or a de novo classification request), in which case the FDA may not grant any necessary clearances or approvals.
In some cases, such studies may be requested for a 510(k) as well. We may not be able to meet the requirements to obtain 510(k) clearance or PMA (or a de novo classification request), in which case the FDA may not grant any necessary clearances or approvals.
This training process generally requires psychiatrists to review and study product materials, engage in multi-day, hands-on training sessions for up to four hours a day and participate in a multi-day observational period prior to treating patients independently.
This training process generally requires psychiatrists to review and study product materials, engage in multi-day, hands-on training sessions for up to four hours per day and participate in a multi-day observational period prior to treating patients independently.
Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt, pay dividends, repurchase our stock, make investments and engage in merger, consolidation or asset sale transactions.
Debt financing, if available, may involve covenants further restricting our operations or our ability to incur additional debt, pay dividends, repurchase our stock, make investments and engage in merger, consolidation or asset sale transactions.
Potential and completed acquisitions, strategic investments, licenses and other alliances involve numerous risks, including: ● difficulty assimilating or integrating acquired or licensed technologies, products or business operations; ● issues maintaining uniform standards, procedures, controls and policies; ● unanticipated costs associated with acquisitions or strategic alliances, including the assumption of unknown or contingent liabilities and the incurrence of debt or future write-offs of intangible assets or goodwill; ● diversion of management’s attention from our core business and disruption of ongoing operations; ● adverse effects on existing business relationships with suppliers, distributors and customers; ● risks associated with entering new markets in which we have limited or no experience; ● potential losses related to investments in other companies; ● potential loss of key employees of the acquired businesses; and ● increased legal and accounting compliance costs.
Potential and completed acquisitions, strategic investments, licenses and other alliances involve numerous risks, including: ● difficulty assimilating or integrating acquired or licensed technologies, products or business operations; ● issues maintaining uniform standards, procedures, controls and policies; ● unanticipated costs associated with acquisitions or strategic alliances, including the assumption of unknown or contingent liabilities and the incurrence of debt or future write-offs of intangible assets or goodwill; ● diversion of management’s attention from our core business and disruption of ongoing operations; ● adverse effects on existing business relationships with suppliers, distributors and customers; ● risks associated with entering new markets in which we have limited or no experience; ● potential losses related to investments in other companies; 35 Table of Contents ● potential loss of key employees of the acquired businesses; and ● increased legal and accounting compliance costs.
Moreover, there are no safe harbors for many common practices, such as reimbursement support programs, educational or research grants, or charitable donations; ● the federal civil and criminal false claims laws and civil monetary penalty laws, such as the FCA, which can be enforced by private citizens through civil qui tam actions, prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment of federal funds, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.
Moreover, there are no safe 52 Table of Contents harbors for many common practices, such as reimbursement support programs, educational or research grants, or charitable donations; ● the federal civil and criminal false claims laws and civil monetary penalty laws, such as the FCA, which can be enforced by private citizens through civil qui tam actions, prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment of federal funds, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.
Regulatory marketing authorizations in these foreign jurisdictions typically require device testing, conformance to classification requirements, pre-market requests to authorize commercialization, and in some cases inspections. Modifications to our products may require new 510(k) clearances. de novo classification, or PMA approvals, and may require us to cease marketing or recall the modified products until clearances or approvals are obtained.
Regulatory marketing authorizations in these foreign jurisdictions typically require device testing, conformance to classification requirements, pre-market requests to authorize commercialization, and in some cases inspections. Modifications to our products may require new 510(k) clearances. de novo classification, or PMAs, and may require us to cease marketing or recall the modified products until clearances or approvals are obtained.
Shares of common stock that are either subject to outstanding options, or are outstanding but subject to vesting or reserved for future issuance under our 2018 Equity Incentive Plan, or the 2018 Plan, will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, Rule 144 and Rule 701 under the Securities Act.
Shares of common stock that are either subject to outstanding options, or are outstanding but subject to vesting or reserved for future issuance under our 2018 Equity Incentive Plan (the “2018 Plan”), will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, Rule 144 and Rule 701 under the Securities Act.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, 56 Table of Contents and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.
Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending ourselves against any of these claims or investigations. 29 Table of Contents We rely in part on third parties to conduct our clinical trials.
Whether or not we are successful in defending against such 30 Table of Contents actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending ourselves against any of these claims or investigations. We rely in part on third parties to conduct our clinical trials.
Our clinical trials are managed by our own staff and personnel, but we rely in part upon certain third parties, including clinical trial sites, medical institutions, clinical research organizations, (“CRO”s), and private practices, for, among other things, site monitoring, statistical work and electronic data capture in our clinical trials.
Our clinical trials are managed by our own staff and personnel, but we rely in part upon certain third parties, including clinical trial sites, medical institutions, clinical research organizations, (“CROs”), and private practices, for, among other things, site monitoring, statistical work and electronic data capture in our clinical trials.
Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with applicable protocols, and legal, regulatory and scientific standards, including current good clinical practices, (“cGCP”s), which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for clinical trials.
Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with applicable protocols, and legal, regulatory and scientific standards, including current good clinical practices, (“CGCPs”), which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for clinical trials.
While these suppliers 26 Table of Contents have generally met our demand requirements on a timely basis in the past, their ability and willingness to continue to do so going forward may be limited for several reasons, including our lack of long-term agreements with those suppliers, our relative importance as a customer of those suppliers, or, as applicable, their ability to produce the components for or provide assembly services to manufacture our NeuroStar Advanced Therapy System.
While these suppliers have generally met our demand requirements on a timely basis in the past, their ability and willingness to continue to do so going forward may be limited for several reasons, including our lack of long-term agreements with those suppliers, our relative importance as a customer of those suppliers, or, as applicable, their ability to produce the components for or provide assembly services to manufacture our NeuroStar Advanced Therapy System.
Additional factors that we expect may contribute to variability in our sales and gross profit over the course of the year include: ● the growth or decline of our installed system base; ● the unpredictability of future sales by our international distributors, including through our exclusive distributor in Japan; ● the demand for, and pricing of, our products and the products of our competitors; ● the timing of or failure to obtain regulatory clearances or approvals for other products, indications or treatments; or ● the costs, benefits and timing of new product introductions.
Additional factors that we expect may contribute to variability in our sales and gross profit over the course of the year include: ● the growth or decline of our installed system base; ● the unpredictability of future sales by our international distributors, including through our exclusive distributor in Japan; ● the demand for, and pricing of, our products and the products of our competitors; 36 Table of Contents ● the timing of or failure to obtain regulatory clearances or approvals for other products, indications or treatments; or ● the costs, benefits and timing of new product introductions.
We currently sell our products in five countries outside of the United States and plan to market and sell our products through our exclusive distribution agreement in Japan once we attain reimbursement approval. We 27 Table of Contents are assessing the opportunity to continue expanding into other international markets.
We currently sell our products in five countries outside of the United States and plan to market and sell our 28 Table of Contents products through our exclusive distribution agreement in Japan once we attain reimbursement approval. We are assessing the opportunity to continue expanding into other international markets.
We have also filed a registration statement permitting certain shares of common stock issued under our 2003 Stock Incentive Plan, or the 2003 Plan, and shares of common stock issued pursuant to the 2018 Plan or our 2018 Employee Stock Purchase Plan, or the 2018 ESPP, to be freely resold by plan participants in the public market, subject to applicable vesting schedules and, for shares held by directors, executive officers and other affiliates, volume limitations under Rule 144 under the Securities Act.
We have also filed a registration statement permitting certain shares of common stock issued under our 2003 Stock Incentive Plan, or the 2003 Plan, and shares of common stock issued pursuant to the 2018 Plan or our 2018 Employee Stock Purchase Plan (the “2018 ESPP”), to be freely resold by plan participants in the public market, subject to applicable vesting schedules and, for shares held by directors, executive officers and other affiliates, volume limitations under Rule 144 under the Securities Act.
The Social Security Act also has a provision that provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or Medicaid beneficiary that such person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of any item or service payable by a federal health care program, known as beneficiary inducement.
The Social Security Act also has a provision that provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or Medicaid beneficiary that such person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of any item or service payable by a federal health care program.
Because the market for TMS therapy is still developing and 20 Table of Contents contains a limited number of market participants, sales of our products could be negatively impacted by unfavorable market reactions to our or other TMS devices.
Because the market for TMS therapy is still developing and 21 Table of Contents contains a limited number of market participants, sales of our products could be negatively impacted by unfavorable market reactions to our or other TMS devices.
Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including passage of the newly enacted federal income tax law, changes in the mix of our profitability from state to state, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws.
Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including passage of the newly enacted federal income tax law, changes in the mix of our profitability from state to 34 Table of Contents state, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws.
Further, patients who are treated in-office for a medical condition generally rely on third-party payors to reimburse all or part of the costs associated with the treatment and may be unwilling to undergo such treatment in the absence of coverage and adequate reimbursement, or due to large annual deductibles associated with certain health insurance plans.
Further, patients who are treated in-office for a medical condition generally rely on third-party payors to reimburse all or part of the costs associated with 22 Table of Contents the treatment and may be unwilling to undergo such treatment in the absence of coverage and adequate reimbursement, or due to large annual deductibles associated with certain health insurance plans.
Recent Accounting Pronouncements” in our audited financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. 35 Table of Contents Our sales volumes and our results of operations may fluctuate over the course of the year. We have experienced and may continue to experience meaningful variability in our sales and gross profit among fiscal quarters.
Recent Accounting Pronouncements” in our audited financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Our sales volumes and our results of operations may fluctuate over the course of the year. We have experienced and may continue to experience meaningful variability in our sales and gross profit among fiscal quarters.
These laws and regulations, among other impacts, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with 53 Table of Contents psychiatrists, other healthcare provides, or other potential purchasers of our products. We have also entered into consulting agreements with physicians, which are subject to these laws.
These laws and regulations, among other impacts, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with psychiatrists, other healthcare provides, or other potential purchasers of our products. We have also entered into consulting agreements with physicians, which are subject to these laws.
Foreign Corrupt Practices Act of 1977, (the “FCPA”), and anti-money laundering laws; ● differing regulatory requirements for obtaining clearances or approvals to market our products; ● changes in, or uncertainties relating to, foreign rules and regulations that may impact our ability to sell our products, perform services or repatriate profits to the United States; ● tariffs and trade barriers, export regulations, sanctions and other regulatory and contractual limitations on our ability to sell our products in certain foreign markets; 28 Table of Contents ● potential adverse tax consequences, including imposition of limitations on or increases of withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures; ● imposition of differing labor laws and standards; ● armed conflicts or economic, political, health (including pandemic diseases such as COVID-19 from coronavirus) or social instability in foreign countries and regions; ● fluctuations in foreign currency exchange rates; ● an inability, or reduced ability, to protect our intellectual property, including any effect of compulsory licensing imposed by government action; ● availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us; and ● conducting post-market surveillance on product performance.
Foreign Corrupt Practices Act of 1977, (the “FCPA”), and anti-money laundering laws; ● differing regulatory requirements for obtaining clearances or approvals to market our products; ● changes in, or uncertainties relating to, foreign rules and regulations that may impact our ability to sell our products, perform services or repatriate profits to the United States; 29 Table of Contents ● tariffs and trade barriers, export regulations, sanctions and other regulatory and contractual limitations on our ability to sell our products in certain foreign markets; ● potential adverse tax consequences, including imposition of limitations on or increases of withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures; ● imposition of differing labor laws and standards; ● armed conflicts or economic, political, health (including pandemic diseases) or social instability in foreign countries and regions; ● fluctuations in foreign currency exchange rates; ● an inability, or reduced ability, to protect our intellectual property, including any effect of compulsory licensing imposed by government action; ● availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us; and ● conducting post-market surveillance on product performance.
Further, collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability. Also, we may be obligated under our agreements with our collaborators, licensors, suppliers and others to indemnify and hold them harmless for damages arising from intellectual property infringement by us.
Further, collaborators may infringe the intellectual property rights 41 Table of Contents of third parties, which may expose us to litigation and potential liability. Also, we may be obligated under our agreements with our collaborators, licensors, suppliers and others to indemnify and hold them harmless for damages arising from intellectual property infringement by us.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. 43 Table of Contents Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
The significance of the impact of a global pandemic on our operations depends on numerous evolving factors that we may not be able to accurately predict or effectively respond to, including, among others: ​ ● the effect on global economic activity and the resulting impact on our customer’s businesses, their credit and liquidity, and their demand for our solutions and services, as well as their ability to pay; ● our ability to deliver and implement our solutions in a timely manner, including as a result of supply chain disruptions and related cost increases; and ● actions taken by U.S., foreign, state, and local governments, suppliers, and individuals in response to the outbreak. ​ If insurance coverage is unavailable or reimbursement from third-party payors for treatments using our products significantly declines, psychiatrists may be reluctant to use our products.
The significance of the impact of a global pandemic on our operations depends on numerous evolving factors that we may not be able to accurately predict or effectively respond to, including, among others: ​ ● the effect on global economic activity, financial markets and the resulting impact on our customer’s businesses, their credit and liquidity, and their demand for our solutions and services, as well as their ability to pay; ● our ability to deliver and implement our solutions in a timely manner, including as a result of supply chain disruptions and related cost increases; and ● actions taken by U.S., foreign, state, and local governments, suppliers, and individuals in response to the outbreak (including the extent of travel restrictions and business closures). ​ If insurance coverage is unavailable or reimbursement from third-party payors for treatments using our products significantly declines, psychiatrists may be reluctant to use our products.
Accordingly, industry practices that involve providing remuneration to those who prescribe, purchase, or recommend medical device products, including discounts, or engaging individuals as speakers, consultants, or advisors, may be subject to scrutiny if they do not fit squarely within an exception or a safe harbor.
Practices that involve remuneration to those who prescribe, purchase, or recommend medical device products, including discounts, or engaging individuals as speakers, consultants, or advisors, may be subject to scrutiny if they do not fit squarely within an exception or a safe harbor.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on our behalf, other than an action or suit to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction, (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or amended and restated bylaws or (v) any action asserting a claim governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on our behalf, other than an action or suit to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction, (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General 61 Table of Contents Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or amended and restated bylaws or (v) any action asserting a claim governed by the internal affairs doctrine.
Risks Related to Our Business and Industry We have incurred losses in the past and may be unable to achieve or sustain profitability in the future. We have incurred net losses since inception, including net losses of $37.2 million and $31.2 million for the years ended December 31, 2022 and 2021, respectively.
Risks Related to Our Business and Industry We have incurred losses in the past and may be unable to achieve or sustain profitability in the future. We have incurred net losses since inception, including net losses of $30.2 million and $37.2 million for the years ended December 31, 2023 and 2022, respectively.
Our determination of the expiration date of any patent in the United States or abroad that we consider relevant 39 Table of Contents may be incorrect, which may negatively impact our ability to develop and market our products or product candidates. Significant litigation regarding patent rights occurs in our industry.
Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our products or product candidates. Significant litigation regarding patent rights occurs in our industry.
Any delays or failure to obtain FDA clearance or approval of new products we develop, any limitations imposed by the FDA on new product use or the costs of obtaining FDA 46 Table of Contents clearance or approvals could have a material adverse effect on our business, financial condition, and results of operations.
Any delays or failure to obtain FDA clearance or approval of new products we develop, any limitations imposed by the FDA on new product use or the costs of obtaining FDA clearance or approvals could have a material adverse effect on our business, financial condition, and results of operations.
Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core 40 Table of Contents business and harm our reputation.
Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation.
To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data are sometimes required to support substantial equivalence.
To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data are sometimes required to support substantial 46 Table of Contents equivalence.
Our ability to compete successfully will depend on our ability to develop products that reach the market in a timely manner, to receive adequate coverage and reimbursement from third-party payors, and to successfully demonstrate to psychiatrists and patients the merits of our products compared to those of our competitors.
Our ability to 24 Table of Contents compete successfully will depend on our ability to develop products that reach the market in a timely manner, to receive adequate coverage and reimbursement from third-party payors, and to successfully demonstrate to psychiatrists and patients the merits of our products compared to those of our competitors.
Any of these sanctions could impair our ability to produce or commercialize our products in a cost-effective and timely manner in order to meet our customers’ demands and could have a material adverse effect on our reputation, business, results of operations and financial condition.
Any of these sanctions could impair our ability to produce or commercialize our products in a cost-effective and timely manner in 47 Table of Contents order to meet our customers’ demands and could have a material adverse effect on our reputation, business, results of operations and financial condition.
Our business prospects depend in part on our ability to develop and commercialize new products and applications for our technology, including in new markets that develop as a result of 25 Table of Contents technological, pharmaceutical and scientific advances, while improving the performance and cost-effectiveness of our products.
Our business prospects depend in part on our ability to develop and commercialize new products and applications for our technology, including in new markets that develop as a result of technological, pharmaceutical and scientific advances, while improving the performance and cost-effectiveness of our products.
Any successful opposition to these patents or any other patents owned by or, if applicable in the future, 36 Table of Contents licensed to us could deprive us of rights necessary for the practice of our technologies or the successful commercialization of any products or product candidates that we may develop.
Any successful opposition to these patents or any other patents owned by or, if applicable in the future, licensed to us could deprive us of rights necessary for the practice of our technologies or the successful commercialization of any products or product candidates that we may develop.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and 47 Table of Contents performance of the products during normal conditions of use.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
In early 2022 and throughout the year ended 2021, we experienced a material impact to revenue particularly with regards to U.S. treatment session revenues as a result of the COVID-19 pandemic. Capital equipment sales and treatment session revenues may continue to be materially impacted by the pandemic as customers defer capital purchase decisions and delay new patient treatment starts.
Throughout the year ended 2021 and into early 2022, we experienced a material impact to revenue particularly with regard to U.S. treatment session revenues as a result of the COVID-19 pandemic. Capital equipment sales and treatment session revenues may continue to be materially impacted by the pandemic as customers defer capital purchase decisions and delay new patient treatment starts.
In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. 43 Table of Contents If we fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we could lose license rights that are critical to our business.
In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. If we fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we could lose license rights that are critical to our business.
Though our agreements with third parties typically restrict the ability of our advisors, employees, collaborators, licensors, suppliers, third-party 41 Table of Contents contractors and consultants to publish data potentially relating to our trade secrets, our agreements may contain certain limited publication rights.
Though our agreements with third parties typically restrict the ability of our advisors, employees, collaborators, licensors, suppliers, third-party contractors and consultants to publish data potentially relating to our trade secrets, our agreements may contain certain limited publication rights.
Accordingly, from time to time we may consider opportunities to acquire, make investments in or license other technologies, products and businesses that may enhance our capabilities, complement our current products 34 Table of Contents or expand the breadth of our markets or customer base.
Accordingly, from time to time we may consider opportunities to acquire, make investments in or license other technologies, products and businesses that may enhance our capabilities, complement our current products or expand the breadth of our markets or customer base.
If we are not 23 Table of Contents successful in convincing others of the merits of our products, including in comparison to those of our competitors, or educating them on the use of our products, they may not use our products or use them effectively and we may be unable to increase our sales.
If we are not successful in convincing others of the merits of our products, including in comparison to those of our competitors, or educating them on the use of our products, they may not use our products or use them effectively and we may be unable to increase our sales.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending 42 Table of Contents intellectual property rights in certain foreign jurisdictions.
Misconduct by these parties could include intentional, reckless or negligent conduct or other unauthorized activities that violate the regulations of the FDA and other U.S. healthcare regulators, as well as non-U.S. regulators, including by violating laws requiring the reporting of true, complete and accurate information to such regulators, manufacturing standards, healthcare fraud and abuse laws and regulations in the United States and abroad or laws that require the true, complete, and accurate reporting of financial information or data.
Misconduct by these parties could include intentional, reckless or 55 Table of Contents negligent conduct or other unauthorized activities that violate, regardless of intent, regulations of the FDA and other U.S. healthcare regulators, as well as non-U.S. regulators, including by violating laws requiring the reporting of true, complete and accurate information to such regulators, manufacturing standards, healthcare fraud and abuse laws and regulations in the United States and abroad or laws that require the true, complete, and accurate reporting of financial information or data.
Our business practices and relationships with providers, patients and third-party payors are subject to scrutiny under these laws. We may also be subject to patient information privacy and security regulation by both the federal government in 51 Table of Contents addition to the states and foreign jurisdictions in which we conduct our business.
Our business practices and relationships with providers, patients and third-party payors are subject to scrutiny under these laws. We may also be subject to patient information privacy and security regulation by both the federal government in addition to the states and foreign jurisdictions in which we conduct our business.
If our revenues or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline 58 Table of Contents substantially.
If our revenues or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially.
For example, patents for our core technology will begin to expire in the United States in 2024, and our patents outside of the United States are expected to remain in effect until between 38 Table of Contents 2024 and 2035.
For example, patents for our core technology will begin to expire in the United States in 2024, and our patents outside of the United States are expected to remain in effect until between 2024 and 2035.
In addition, these provisions may frustrate or prevent any attempt by our stockholders to replace or 59 Table of Contents remove our current management by making it more difficult to replace or remove our board of directors.
In addition, these provisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our board of directors.
For us to be successful, our suppliers and contract manufacturer must be able to provide us with components in substantial quantities, in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable costs and on a timely basis.
For us to be successful, our suppliers and contract manufacturer must be able to 27 Table of Contents provide us with components in substantial quantities, in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable costs and on a timely basis.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer or patient incentive programs, and other business, investment or compensation arrangements.
In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the U.S.
In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S.
The security measures we have implemented relating to our NeuroStar Advanced Therapy System and TrakStar database, specifically, and our operations, generally, may not prevent security breaches that could harm our business.
The security measures we have implemented relating to our NeuroStar Advanced Therapy System and TrakStar database, specifically, and our operations, generally, may not prevent security breaches that could 33 Table of Contents harm our business.
Any 48 Table of Contents delay or failure in obtaining required clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.
Any delay or failure in obtaining required clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.
Other parties may develop and obtain patent protection for alternative and possibly more effective technologies, designs or methods. We may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, suppliers, vendors, former employees and current employees.
Competitors may also be able to design around our patents. Other parties may develop and obtain patent protection for alternative and possibly more effective technologies, designs or methods. We may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, suppliers, vendors, former employees and current employees.
Advances in computer capabilities, inadequate technology or facility security measures or other factors may result in a compromise or breach of our systems and the data and PHI we store and process. Our security measures may be breached as a result of actions by third parties or employee error or 32 Table of Contents malfeasance.
Advances in computer capabilities, inadequate technology or facility security measures or other factors may result in a compromise or breach of our systems and the data and PHI we store and process. Our security measures have been and may in the future be breached as a result of actions by third parties or employee error or malfeasance.
Our present and future funding requirements will depend on many other factors, including: ● our ability to achieve revenue growth and improve operating margins; ● our ability to improve or maintain coverage and reimbursement arrangements with domestic third-party and government payors; ● our rate of progress in establishing coverage and reimbursement arrangements from international commercial third-party and government payors, particularly in Japan; ● the cost of expanding our operations and offerings, including our sales and marketing efforts; 55 Table of Contents ● our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products and maintaining or improving our sales to our current customers; ● the cost of research and development activities, including research and development relating to additional indications; ● the effect of competing technological and market developments; ● costs related to international expansion; and ● the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.
Our present and future funding requirements will depend on many other factors, including: ● our ability to achieve revenue growth and improve operating margins; ● our ability to comply with financial and other restrictive covenants in our credit facility, which, among other things, requires us to maintain specified financial covenants; ● our ability to improve or maintain coverage and reimbursement arrangements with domestic third-party and government payors; ● our rate of progress in establishing coverage and reimbursement arrangements from international commercial third-party and government payors, particularly in Japan; ● the cost of expanding our operations and offerings, including our sales and marketing efforts; ● our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products and maintaining or improving our sales to our current customers; 56 Table of Contents ● the cost of research and development activities, including research and development relating to additional indications; ● the effect of competing technological and market developments; ● costs related to international expansion; and ● the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.
The negative covenants include, among others, restrictions on us transferring collateral, changing businesses, engaging in mergers or acquisitions, incurring additional indebtedness and encumbering collateral.
The negative covenants include, among others, restrictions on us transferring collateral, changing businesses, engaging in 57 Table of Contents mergers or acquisitions, incurring additional indebtedness and encumbering collateral.
Thus, medical device manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.
In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.
Such proceedings could include supplemental examination or contested post-grant proceedings such as review, reexamination, interference or derivation proceedings before the U.S. Patent and Trademark Office and challenges in U.S. District Court. Patents may be subjected to opposition, post-grant review or comparable proceedings lodged in various foreign, both national and regional, patent offices.
Such proceedings could include supplemental examination or contested post-grant proceedings such 40 Table of Contents as review, reexamination, interference or derivation proceedings before the USPTO and challenges in U.S. District Court. Patents may be subjected to opposition, post-grant review or comparable proceedings lodged in various foreign, both national and regional, patent offices.
Our principal stockholders and management own a significant percentage of our stock and are able to exert control over matters subject to stockholder approval. As of February 27, 2023, our officers and directors, together with holders of 5% or more of our outstanding common stock and their respective affiliates, beneficially owned approximately 20.7% of our outstanding common stock.
Our principal stockholders and management own a significant percentage of our stock and are able to exert control over matters subject to stockholder approval. As of February 29, 2024, our officers and directors, together with holders of 5% or more of our outstanding common stock and their respective affiliates, beneficially owned approximately 10% of our outstanding common stock.
Moreover, the government may assert that a claim for reimbursement that includes items resulting from a violation of the federal healthcare Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act (“FCA”), as described in more detail below.
Moreover, the government may assert that a claim for reimbursement that includes items resulting from a violation of the federal healthcare Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act (“FCA”).
In particular, sales, marketing, and business arrangements in the healthcare industry, including the sale of medical devices, are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices, as described herein.
In particular, sales, marketing, and business arrangements in the healthcare industry, including the sale, promotion and labeling of medical devices or arrangements with healthcare providers, are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, patient steering and other abusive practices, as described herein.
Many pharmaceutical and medical device manufacturers have been investigated and have reached substantial settlements under the FCA in connection with alleged off label promotion of their products, providing improper renumeration to healthcare providers or other personnel involved in recommending products, and allegedly providing free products to customers with the expectation that the customers would bill federal health care programs for the product.
Many pharmaceutical and medical device manufacturers have been investigated and have reached substantial settlements under the FCA in connection with alleged off label promotion of their products, and allegedly providing free products to customers with the expectation that the customers would bill federal health care programs for the product.
Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in that intellectual property.
Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in that intellectual property. Either outcome could harm our business and competitive position.
We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, cybersecurity liability, employee benefits liability, property, umbrella, workers’ compensation, products and clinical trial liability and directors’ and officers’ insurance. We do not know, however, if these policies will provide us with adequate levels of coverage.
Some of the policies we currently maintain include general liability, cybersecurity liability, employee benefits liability, property, umbrella, workers’ compensation, products and clinical trial liability and directors’ and officers’ insurance. We do not know, however, if these policies will provide us with adequate levels of coverage.
If any actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, individual imprisonment, disgorgement, possible exclusion from participation in government healthcare programs, additional reporting obligations and oversight if we becomes subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings and the curtailment of our operations.
Noncompliance may result in the imposition of significant fines or other sanctions, including civil, criminal and administrative penalties, monetary damages, fines, individual imprisonment, disgorgement, possible exclusion from participation in government healthcare programs, additional reporting obligations and oversight if we becomes subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings and the curtailment of our operations.
Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that a treatment is neither experimental nor investigational, safe, effective, and medically 21 Table of Contents necessary, appropriate for the specific patient, cost-effective, supported by peer-reviewed medical journals and included in clinical practice guidelines.
Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that a treatment is neither experimental nor investigational, safe, effective, medically reasonable and necessary (which may include provision of treatment only in the absence of certain alternatives), appropriate for the specific patient, cost-effective, supported by peer-reviewed medical journals and/or included in clinical practice guidelines.
Regardless of the merit or eventual outcome, product liability claims may result in: ● decreased demand for our products; ● injury to our reputation; ● significant litigation costs; ● substantial monetary awards to or costly settlements with patients; ● product recalls; ● material defense costs; ● loss of revenues; ● the inability to commercialize new products or product candidates; and ● diversion of management attention from pursuing our business strategy. 30 Table of Contents Our existing product liability insurance coverage may be inadequate to protect us from any liabilities we might incur.
Regardless of the merit or eventual outcome, product liability claims may result in: ● decreased demand for our products; ● injury to our reputation; ● significant litigation costs; ● substantial monetary awards to or costly settlements with patients; ● product recalls; ● material defense costs; ● loss of revenues; ● the inability to commercialize new products or product candidates; and 31 Table of Contents ● diversion of management attention from pursuing our business strategy.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also occupy an approximately 9,600 square foot facility in Charlotte, North Carolina, under a lease that ends in 2027, to be used as a training facility for our NeuroStar Advanced Therapy Systems. We have an option to extend the lease for an additional one-year term.
Biggest changeWe also occupy an approximately 9,600 square foot facility in Charlotte, North Carolina, under a lease that ends in 2027, which is being used as a training facility for our NeuroStar Advanced Therapy Systems. We have an option to extend the lease for an additional one-year term.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeManagement believes that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on the Company’s results of operations, financial condition, or cash flows. ​ Item 4. Mine Safety Disclosures. Not applicable. ​ ​ 63 Table of Contents PART II
Biggest changeManagement believes that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on the Company’s results of operations, financial condition, or cash flows. ​ Item 4. Mine Safety Disclosures. Not applicable. ​ ​ 65 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures. 63 ​ ​ PART II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 64 Item 6 . [Reserved] 65 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . 65 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 77 Item 8.
Biggest changeItem 4. Mine Safety Disclosures. 65 ​ ​ PART II ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 66 Item 6 . [Reserved] 67 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . 67 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 77 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeEquity Compensation Plans The following table details information regarding our existing equity compensation plans as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ Securities ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ ​ ​ ​ ​ Available for ​ ​ Number of ​ ​ ​ ​ Future ​ ​ Securities to ​ ​ ​ ​ Issuance ​ ​ be Issued ​ Weighted ​ Under Equity ​ ​ Upon ​ Average ​ Compensation ​ ​ Exercise of ​ Exercise ​ Plans ​ ​ Outstanding ​ Price of ​ (Excluding ​ ​ Options, ​ Outstanding ​ Securities ​ ​ Warrants ​ Options, ​ reflected ​ ​ and Rights ​ Warrants ​ in Column (a) ​ ​ (in thousands) ​ and Rights ​ (in thousands) Plan Category (a) (b) (c) Equity compensation plans approved by security holders 1,301 ​ $ 4.07 ​ 2,203 Equity compensation plans not approved by security holders — ​ — (1) 435 Total 1,301 ​ $ 4.07 ​ 2,637 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) This number includes 426.8 thousand shares available for issuance under the 2020 Inducement Incentive Plan as of December 31, 2022.
Biggest changeEquity Compensation Plans The following table details information regarding our existing equity compensation plans as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ Securities ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ ​ ​ ​ ​ Available for ​ ​ Number of ​ ​ ​ ​ Future ​ ​ Securities to ​ ​ ​ ​ Issuance ​ ​ be Issued ​ Weighted ​ Under Equity ​ ​ Upon ​ Average ​ Compensation ​ ​ Exercise of ​ Exercise ​ Plans ​ ​ Outstanding ​ Price of ​ (Excluding ​ ​ Options, ​ Outstanding ​ Securities ​ ​ Warrants ​ Options, ​ reflected ​ ​ and Rights ​ Warrants ​ in Column (a) ​ ​ (in thousands) ​ and Rights ​ (in thousands) Plan Category (a) (b) (c) Equity compensation plans approved by security holders 1,270 ​ $ 3.90 ​ 2,028 Equity compensation plans not approved by security holders — ​ — (1) 285 Total 1,270 ​ $ 3.90 ​ 2,313 ​ (1) This number includes 284.9 thousand shares available for issuance under the 2020 Inducement Incentive Plan as of December 31, 2023.
Employee Benefit Plans” for additional information on compensation plans under which equity securities of the registrant are authorized for issuance without the approval of stockholders. ​ ​ 64 Table of Contents Issuer Purchases of Equity Securities ​ None ​ ​ ​ ​
Employee Benefit Plans” for additional information on compensation plans under which equity securities of the registrant are authorized for issuance without the approval of stockholders. ​ ​ 66 Table of Contents Issuer Purchases of Equity Securities ​ None ​ ​ ​ ​
Holders of Record As of February 27, 2023, there were approximately 54 holders of record of our common stock, solely based upon the count our transfer agent provided to us as of that date. Sales of Unregistered Securities None.
Holders of Record As of February 29, 2024, there were approximately 54 holders of record of our common stock, solely based upon the count our transfer agent provided to us as of that date. Sales of Unregistered Securities None.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOther Income, Net Other income, net consists primarily of interest income earned on our money market account balances and note receivables. 68 Table of Contents Results of Operations Comparison of the Years ended December 31, 2022 and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ Increase / (Decrease) ​ ​ ​ 2022 2021 Dollars Percentage ​ ​ (in thousands, except percentages) Revenues ​ $ 65,206 ​ $ 55,312 ​ $ 9,894 18 % Cost of revenues ​ 15,483 ​ 11,653 ​ 3,830 33 % Gross Profit ​ 49,723 ​ 43,659 ​ 6,064 14 % Gross Margin ​ 76.3 % 78.9 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ Sales and marketing ​ 49,982 ​ 37,746 ​ 12,236 32 % General and administrative ​ 25,516 ​ 25,554 ​ (38) (0) % Research and development ​ 9,336 ​ 7,923 ​ 1,413 18 % Total operating expenses ​ 84,834 ​ 71,223 ​ 13,611 19 % Loss from Operations ​ (35,111) ​ (27,564) ​ (7,547) (27) % Other (income) expense: ​ ​ ​ ​ Interest expense ​ 4,251 ​ 4,019 ​ 232 6 % Other income, net ​ (2,203) ​ (390) ​ (1,813) (465) % Net Loss ​ $ (37,159) ​ $ (31,193) ​ $ (5,966) (19) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues by Geography ​ ​ Years ended December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ Amount Revenues Amount Revenues ​ ​ (in thousands, except percentages) United States ​ $ 63,406 ​ 97 % $ 53,447 ​ 97 % International ​ 1,800 3 % 1,865 3 % Total revenues ​ $ 65,206 100 % $ 55,312 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
Biggest changeResults of Operations Comparison of the Years ended December 31, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ Increase / (Decrease) ​ ​ ​ 2023 2022 Dollars Percentage ​ ​ (in thousands, except percentages) Revenues ​ $ 71,348 ​ $ 65,206 ​ $ 6,142 9 % Cost of revenues ​ 19,643 ​ 15,483 ​ 4,160 27 % Gross Profit ​ 51,705 ​ 49,723 ​ 1,982 4 % Gross Margin ​ 72.5 % 76.3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ Sales and marketing ​ 47,318 ​ 49,982 ​ (2,664) (5) % General and administrative ​ 25,426 ​ 25,516 ​ (90) (0) % Research and development ​ 9,515 ​ 9,336 ​ 179 2 % Total operating expenses ​ 82,259 ​ 84,834 ​ (2,575) (3) % Loss from Operations ​ (30,554) ​ (35,111) ​ 4,557 13 % Other (income) expense: ​ ​ ​ ​ Interest expense ​ 5,424 ​ 4,251 ​ 1,173 28 % Other income, net ​ (5,789) ​ (2,203) ​ (3,586) (163) % Net Loss ​ $ (30,189) ​ $ (37,159) ​ $ 6,970 19 % ​ 70 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues by Geography ​ ​ Years ended December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ Amount Revenues Amount Revenues ​ ​ (in thousands, except percentages) United States ​ $ 69,336 ​ 97 % $ 63,406 ​ 97 % International ​ 2,012 3 % 1,800 3 % Total revenues ​ $ 71,348 100 % $ 65,206 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
The increase in net operating assets was primarily due to increases in accounts receivable, inventory and prepaid commission expense, which were offset by increases in accrued expenses as a result of timing and accrued 2022 compensation and commissions as of December 31, 2022.
The increase in net operating assets was primarily due to increases in accounts receivable, inventory and prepaid commission expense, which were offset by increases in accounts payable and accrued expenses as a result of timing and accrued 2022 compensation and commissions as of December 31, 2022.
Summary of Significant Accounting Policies” in our audited financial statements and related notes thereto appearing elsewhere in this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies. 75 Table of Contents Revenue Recognition We account for revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers .
Summary of Significant Accounting Policies” in our audited financial statements and related notes thereto appearing elsewhere in this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies. 76 Table of Contents Revenue Recognition We account for revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers .
Based on our commercial data, we believe psychiatrists can 65 Table of Contents recoup their initial capital investment in our system by providing a standard course of treatment to approximately 12 patients. We believe psychiatrists can generate approximately $8,500 of average revenue per patient for a standard course of treatment, which may provide meaningful incremental income to their practices.
Based on our commercial data, we believe psychiatrists can recoup their initial capital investment in our system by providing a standard course of treatment to approximately 12 patients. We believe psychiatrists can generate approximately $8,500 of average revenue per patient for a standard course of treatment, which may provide meaningful incremental income to their 67 Table of Contents practices.
Sales in the United States represented 97% of our total revenues for the years ending December 31, 2022 and 2021, respectively, and have been generated by our direct sales force. Outside the United States, our sales are made through local third-party distributors. International revenues were 3% for the years ended December 31, 2022 and 2021, respectively.
Sales in the United States represented 97% of our total revenues for the years ending December 31, 2023 and 2022, respectively, and have been generated by our direct sales force. Outside the United States, our sales are made through local third-party distributors. International revenues were 3% for the years ended December 31, 2023 and 2022, respectively.
As a result, we expect our research and development expenses to increase during 2023 compared to our 2022 expenses. Interest Expense Interest expense consists of cash interest payable under our credit facility and non-cash interest attributable to the accrual of final payment fees and the amortization of deferred financing costs related to our indebtedness.
As a result, we expect our research and development expenses to increase during 2024 compared to our 2023 expenses. Interest Expense Interest expense consists of cash interest payable under our credit facility and non-cash interest attributable to the accrual of final payment fees and the amortization of deferred financing costs related to our indebtedness.
Net cash used in investing activities for the year ended December 31, 2021 was attributable to issuance of our promissory note and purchases of property and equipment and capitalized software costs.
Net cash used in investing activities for the year ended December 31, 2021 was attributable to issuance of our promissory note and purchase of property and equipment and capitalized software costs.
Our current and future funding requirements will depend on many factors, including: ● the impact of COVID-19 and related governmental responses; ● our ability to achieve revenue growth and improve operating margins; ● compliance with the terms and conditions, including covenants, set forth in our credit facility; ● the cost of expanding our operations and offerings, including our sales and marketing efforts; ● our ability to improve or maintain coverage and reimbursement arrangements with domestic third-party and government payors, particularly in Japan; ● our rate of progress in establishing coverage and reimbursement arrangements from international commercial third-party and government payors; ● our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products and maintaining or improving our sales to our current customers; ● the cost of research and development activities, including research and development relating to additional indications of neurohealth disorders; ● the effect of competing technological and market developments; ● costs related to international expansion; and ● the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.
Our current and future funding requirements will depend on many factors, including: ● our ability to achieve revenue growth and improve operating margins; ● compliance with the terms and conditions, including covenants, set forth in our credit facility; ● the cost of expanding our operations and offerings, including our sales and marketing efforts; ● our ability to improve or maintain coverage and reimbursement arrangements with domestic third-party and government payors, particularly in Japan; ● our rate of progress in establishing coverage and reimbursement arrangements from international commercial third-party and government payors; ● our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our products and maintaining or improving our sales to our current customers; 73 Table of Contents ● the cost of research and development activities, including research and development relating to additional indications of neurohealth disorders; ● the effect of competing technological and market developments; ● costs related to international expansion; and ● the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.
Our first commercial product, the NeuroStar Advanced Therapy System, is a non-invasive and non-systemic office-based treatment that uses transcranial magnetic stimulation, (“TMS”), to create a pulsed, MRI-strength magnetic field that induces electrical currents designed to stimulate specific areas of the brain associated with mood.
Our first commercial product, the NeuroStar Advanced Therapy System, is a non-invasive and non-systemic office-based treatment that uses TMS to create a pulsed, MRI-strength magnetic field that induces electrical currents designed to stimulate specific areas of the brain associated with mood.
Leases The Company has lease arrangements for equipment and certain facilities, including corporate headquarters and our warehouse in Malvern, Pennsylvania and a training facility in Charlotte, North Carolina. As of December 31, 2022, the Company had fixed lease payment obligations of $4.5 million, including $0.9 million due within the next twelve months.
Leases The Company has lease arrangements for equipment and certain facilities, including corporate headquarters and our warehouse in Malvern, Pennsylvania and a training facility in Charlotte, North Carolina. As of December 31, 2023, the Company had fixed lease payment obligations of $3.7 million, including $0.9 million due within the next twelve months.
NeuroStar Advanced Therapy System Revenues . NeuroStar Advanced Therapy System revenues consist primarily of sales or rentals of a capital component, including upgrades to the equipment attributable to the initial sale of the system. NeuroStar Advanced Therapy Systems can be purchased outright or on a rent-to-own basis by certain customers. Treatment Session Revenues .
NeuroStar Advanced Therapy System revenues consist primarily of sales or rentals of a capital component, including equipment upgrades to the initial sale of the system. NeuroStar Advanced Therapy Systems can be purchased outright or on a rent-to-own basis by certain customers. Treatment Session Revenues . Treatment session revenues primarily include sales of NeuroStar Treatment Sessions and SenStar treatment links.
Other significant sales and marketing costs include conferences and trade shows, promotional and marketing activities, including direct and online marketing, practice support programs, television and radio media campaigns, travel and training expenses.
Other significant sales and marketing costs include conferences and trade shows, promotional and marketing activities, including direct and online marketing, practice support programs, primarily digital media campaigns, travel and training expenses.
We incurred negative cash flows from operating activities of $30.7 million and $28.0 million for the years ended December 31, 2022 and 2021, respectively.
We incurred negative cash flows from operating activities of $32.0 million and $30.7 million for the years ended December 31, 2023 and 2022, respectively.
Net cash provided by financing activities for the year ended December 31, 2021 was $83.0 million and primarily consisted of additional proceeds from our secondary public offering and sale of our common stock on February 2, 2021 and cash proceeds related to stock option exercises.
Net cash provided by financing activities for the year ended December 31, 2021 was $83.0 million and primarily consisted of additional proceeds from our secondary public offering and sale of our common stock on February 2, 2021 and cash proceeds related to stock option exercises. ​ 75 Table of Contents Indebtedness Refer to “Note 12.
We base the fair value of the training using stand-alone service rates. Our sales to our third-party distributors outside the United States do not have these post-sale obligations. In addition, we provide a one year warranty for systems sold in the United States.
We base the fair value of the training using stand-alone service rates. Our sales to our third-party distributors outside the United States do not have these post-sale obligations. In addition, we provide a one-year warranty for systems sold in the United States. Terms of product warranty differ amongst our third-party distributors outside the United States, but are generally one year.
Comparison of the Years ended December 31, 2021 and 2020 ​ The information required within this section is incorporated by reference to the information set forth in the section titled “Comparison of the Years ended December 31, 2021 and 2020” in “Management’s Discussion and Analysis of our Financial Condition and Results of Operations” in our 2021 Annual Report on Form 10-K filed on March 8, 2022. ​ ​ Liquidity and Capital Resources Overview As of December 31, 2022, we had cash and cash equivalents of $70.3 million and an accumulated deficit of $345.9 million, compared to cash and cash equivalents of $94.1 million and an accumulated deficit of $308.7 million as of December 31, 2021.
Comparison of the Years ended December 31, 2022 and 2021 ​ The information required within this section is incorporated by reference to the information set forth in the section titled “Comparison of the Years ended December 31, 2022 and 2021” in “Management’s Discussion 72 Table of Contents and Analysis of our Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K filed on March 7, 2023. ​ ​ Liquidity and Capital Resources Overview As of December 31, 2023, we had cash and cash equivalents of $59.7 million and an accumulated deficit of $376.1 million, compared to cash and cash equivalents of $70.3 million and an accumulated deficit of $345.9 million as of December 31, 2022.
We use third-party contract manufacturing partners to produce the components for and assemble the completed NeuroStar Advanced Therapy Systems. Cost of revenues also includes costs related to personnel, royalties, warranty, shipping, and our operations and field service departments. We expect our cost of revenues to increase to the extent our revenues grow.
We use third-party contract manufacturing partners to produce the components for and assemble the completed NeuroStar Advanced Therapy Systems. Cost of revenues also includes costs related to personnel, royalties, warranty, shipping, amortization of capitalized software and our operations and field service departments.
Net cash provided by investing activities for the year ended December 31, 2022 was due to the repayment of our promissory note offset partially by purchases of property and equipment and capitalized software costs.
Net cash provided by investing activities for the year ended December 31, 2022 was attributable to repayment of a promissory note and purchases of property and equipment and capitalized software costs.
Debt”) (in thousands): ​ ​ ​ ​ ​ ​ Principal Year: ​ Payments 2023 ​ $ 13,125 2024 ​ 17,500 2025 ​ 4,375 2026 ​ — 2027 ​ — Total principal payments ​ $ 35,000 ​ Common Stock Offering On February 2, 2021, we closed a secondary public offering of our common stock in which we issued and sold 5,566,000 shares of our common stock, which included shares pursuant to an option granted to underwriters to purchase additional shares, at a public offering price of $15.50 per share.
Debt”) (in thousands): ​ ​ ​ ​ ​ ​ Principal Year: ​ Payments 2024 ​ $ — 2025 ​ — 2026 ​ 22,500 2027 ​ 30,000 2028 ​ 7,500 Total principal payments ​ $ 60,000 ​ Common Stock Offering On February 2, 2021, we closed a secondary public offering of our common stock in which we issued and sold 5,566,000 shares of our common stock, which included shares pursuant to an option granted to underwriters to purchase additional shares, at a public offering price of $15.50 per share.
We expect to continue to expand our direct sales and customer support team to further penetrate the market by demonstrating the benefits of our NeuroStar Advanced Therapy to psychiatrists and their MDD patients. Some of our customers have and may purchase more than one NeuroStar Advanced Therapy System.
Our sales force targets an estimated 53,000 psychiatrists across 26,000 practices. We expect to continue to expand our direct sales and customer support team to further penetrate the market by demonstrating the benefits of our NeuroStar Advanced Therapy System to psychiatrists and their MDD patients. Some of our customers have and may purchase more than one NeuroStar Advanced Therapy System.
Treatment session revenues primarily include sales of NeuroStar Treatment Sessions and SenStar treatment links. The NeuroStar Treatment Sessions are access codes that are delivered electronically in the United States. The SenStar treatment links are disposable units containing single-use access codes that are sold and used outside the United States.
The NeuroStar Treatment Sessions are access codes that are delivered electronically in the United States. The SenStar treatment links are disposable units containing single-use access codes that are sold and used outside the United States.
Treatment sessions revenues represented 71% and 78% of total revenues in the United States for the years ended December 31, 2022 and 2021, respectively, and increased by 7% from $41.9 million for the year ended December 31, 2021 to $45.1 million for the year ended December 31, 2022.
Treatment sessions revenues represented 73% and 71% of total revenues in the United States for the years ended December 31, 2023 and 2022, respectively, and increased by 13% from $45.1 million for the year ended December 31, 2022 to $50.9 million for the year ended December 31, 2023.
Access codes are purchased separately by our customers, primarily on an as-needed basis, and are required by the NeuroStar Advanced Therapy System in order to deliver treatment sessions. Other Revenues . Other revenues are derived primarily from service and repair extended warranty contracts with our existing customers.
Access codes are purchased separately by our customers, primarily on an as-needed basis, and are required by the NeuroStar Advanced Therapy System in order to deliver treatment sessions. Other Revenues .
Our total revenues increased by $9.9 million, or 18%, from $55.3 million for the year ended December 31, 2021 to $65.2 million for the year ended December 31, 2022.
Our total revenues increased by $6.1 million, or 9%, from $65.2 million for the year ended December 31, 2022 to $71.3 million for the year ended December 31, 2023.
General and administrative expenses also include the cost of insurance, outside legal fees, accounting and other consulting services, audit fees from our independent registered public accounting firm, board of directors’ fees and other administrative costs, such as corporate facility costs, including rent, utilities, depreciation and maintenance not otherwise included in cost of revenues.
General and administrative expenses also include the cost of insurance, outside legal fees, accounting and other consulting services, audit fees from our independent registered public accounting firm, board of directors’ fees and other administrative costs, such as corporate facility costs, including rent, utilities, depreciation and maintenance not otherwise included in cost of revenues. 69 Table of Contents We anticipate that our general and administrative expenses will remain relatively consistent during 2024 compared to our 2023 expenses.
We believe the increase in overall volume of treatment session revenue between these two periods was primarily due to the growth in active customer sites of 142 from 959 as of December 31, 2021 to 1,101 as of December 31, 2022.
We 71 Table of Contents believe the increase in overall volume of treatment session revenue between these two periods was primarily due to the growth in active customer sites of 44 from 1,101 as of December 31, 2022 to 1,145 as of December 31, 2023 and increase in overall utilization.
The increase in U.S. treatment session revenue was primarily the result of an increase in 50,608 treatment sessions sold from 521,979 units for the year ended December 31, 2021 to 572,587 for the year ended December 31, 2022.
The increase in U.S. treatment session revenue was primarily the result of an increase of 218,244 treatment sessions sold from 572,587 units for the year ended December 31, 2022 to 791,023 for the year ended December 31, 2023.
Our gross profit is calculated by subtracting our cost of revenues from our revenues. We calculate our gross margin as our gross profit divided by our revenues. Our gross margin has been and will continue to be affected by a variety of factors, primarily product sales mix, pricing and third-party contract manufacturing costs.
Our gross margin has been and will continue to be affected by a variety of factors, primarily product sales mix, pricing and third-party contract manufacturing costs.
Critical Accounting Policies and Use of Estimates The preparation of our financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, and the rules and regulations of the SEC requires us to make estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
GAAP and the rules and regulations of the SEC requires us to make estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Our research and development efforts are focused on the following: hardware and software product developments and enhancements of our NeuroStar Advanced Therapy System and clinical development relating to additional indications.
We expect our international revenues to be consistent as a percentage of our total revenue. Our research and development efforts are focused on the following: hardware and software product developments and enhancements of our NeuroStar Advanced Therapy System and clinical development relating to additional indications.
Cash Flows The following table sets forth a summary of our cash flows for the years ended December 31, 2022, 2021, and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Cash Used in Operating Activities ​ $ (30,739) ​ $ (27,983) ​ $ (28,390) Net Cash Provided by (Used in) Investing Activities ​ 6,731 ​ (9,839) ​ (730) Net Cash Provided by Financing Activities ​ 207 ​ 83,006 ​ 2,369 Net (Decrease) Increase in Cash and Cash Equivalents ​ $ (23,801) ​ $ 45,184 ​ $ (26,751) ​ Net Cash Used in Operating Activities Net cash used in operating activities for 2022 was $30.7 million, consisting primarily of a net loss of $37.2 million and an increase in net operating assets of $4.8 million, partially offset by non-cash charges of $11.2 million.
Cash Flows The following table sets forth a summary of our cash flows for the years ended December 31, 2023, 2022, and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Cash Used in Operating Activities ​ $ (32,038) ​ $ (30,739) ​ $ (27,983) Net Cash (Used in) Provided by Investing Activities ​ (1,322) ​ 6,731 ​ (9,839) Net Cash Provided by Financing Activities ​ 22,697 ​ 207 ​ 83,006 Net (Decrease) in Cash and Cash Equivalents ​ $ (10,663) ​ $ (23,801) ​ $ 45,184 ​ 74 Table of Contents Net Cash Used in Operating Activities Net cash used in operating activities for 2023 was $32.0 million, consisting primarily of a net loss of $30.2 million and an increase in net operating assets of $ 14 .1 million, partially offset by non-cash charges of $12.3 million.
Net cash used in investing activities for the year ended December 31, 2020 was attributable to purchases of property and equipment and capitalized software costs. ​ Net Cash Provided by Financing Activities Net cash provided by financing activities for the year ended December 31 2022 was $0.2 million attributable primarily to proceeds related to stock option exercises.
Net cash provided by financing activities for the year ended December 31, 2022 was $0.2 million attributable primarily to proceeds related to stock option exercises.
Revenues by Product Category ​ ​ Years ended December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ Amount Revenues Amount Revenues ​ ​ (in thousands, except percentages) NeuroStar Advanced Therapy System ​ $ 16,575 ​ 26 % $ 9,760 ​ 18 % Treatment sessions ​ 45,077 71 % 41,933 78 % Other ​ 1,754 3 % 1,754 4 % Total U.S. revenues ​ $ 63,406 100 % $ 53,447 100 % ​ 69 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States NeuroStar Advanced Therapy System ​ ​ Revenues by Type ​ ​ Years ended December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ Amount Revenues Amount Revenues ​ ​ (in thousands, except percentages) NeuroStar Capital ​ $ 15,792 ​ 95 % $ 8,820 ​ 90 % Operating lease ​ ​ 222 2 % 279 3 % Other ​ ​ 561 3 % 661 7 % Total United States NeuroStar Advanced Therapy System revenues ​ ​ 16,575 100 % $ 9,760 100 % ​ Revenues Total revenues increased by $9.9 million, or 18%, from $55.3 million for the year ended December 31, 2021 to $65.2 million for the year ended December 31, 2022.
Revenues by Product Category ​ ​ Years ended December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ Amount Revenues Amount Revenues ​ ​ (in thousands, except percentages) NeuroStar Advanced Therapy System ​ $ 16,460 ​ 24 % $ 16,575 ​ 26 % Treatment sessions ​ 50,896 73 % 45,077 71 % Other ​ 1,980 3 % 1,754 4 % Total U.S. revenues ​ $ 69,336 100 % $ 63,406 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States NeuroStar Advanced Therapy System ​ ​ Revenues by Type ​ ​ Years ended December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ Amount Revenues Amount Revenues ​ ​ (in thousands, except percentages) NeuroStar capital ​ $ 15,805 ​ 96 % $ 15,792 ​ 95 % Operating lease ​ ​ 162 1 % 222 1 % Other ​ ​ 493 3 % 561 3 % Total United States NeuroStar Advanced Therapy System revenues ​ ​ 16,460 100 % $ 16,575 100 % ​ Revenues Total revenues increased by $6.1 million, or 9%, from $65.2 million for the year ended December 31, 2022 to $71.3 million for the year ended December 31, 2023.
We refer you to the section titled “Critical Accounting Policies and Use of Estimates—Revenue Recognition” appearing elsewhere in this Annual Report on Form 10-K for additional information regarding how we account for revenues.
Other revenues are derived primarily from service and repair extended warranty contracts with our existing customers. 68 Table of Contents We refer you to the section titled “Critical Accounting Policies and Use of Estimates—Revenue Recognition” appearing elsewhere in this Annual Report on Form 10-K for additional information regarding how we account for revenues.
Revenues in the United States increased by $10.0 million, or 19%, from $53.4 million for the year ended December 31, 2021 to $63.4 million for the year ended December 31, 2022.
Revenues in the United States increased by $5.9 million, or 9%, from $63.4 million for the year ended December 31, 2022 to $69.3 million for the year ended December 31, 2023.
For further information, refer to “Risk Factors” in “Item 1A” of this Annual Report on Form 10-K. 66 Table of Contents Components of Our Results of Operations Revenues To date, we have generated revenues primarily from the capital portion of our business and related sales and rentals of the NeuroStar Advanced Therapy System and the recurring revenues from our sale of treatment sessions in the United States.
Components of Our Results of Operations Revenues To date, we have generated revenues primarily from the capital portion of our business and related sales and rentals of the NeuroStar Advanced Therapy System and the recurring revenues from our sale of treatment sessions in the United States. NeuroStar Advanced Therapy System Revenues .
The Company expects to recognize future recurring treatment session revenue related to the sale of 213 NeuroStar Advanced Therapy systems, for the year ended December 31, 2022 compared to 147 units including 18 units recognized as operating leases for the December 31, 2021 period.
NeuroStar capital sales consisted of 204 units in NeuroStar Advanced Therapy Systems for the year ended December 31, 2023 compared to 213 units for the year ended December 31, 2022. The Company expects to recognize future recurring treatment session revenue related to the sale of 204 NeuroStar Advanced Therapy systems for the year ended December 31, 2023.
We obtained reimbursement coverage for NeuroStar Advanced Therapy in Japan, which went into effect on June 1, 2019 and covers patients who are treated in the largest inpatient and outpatient psychiatric facilities in Japan. We expect our international revenues to increase as a percentage of our total revenues as we grow our presence in Japan.
We received regulatory approval for our system in Japan in September 2017. We obtained reimbursement coverage for NeuroStar Advanced Therapy System in Japan, which went into effect on June 1, 2019 and covers patients who are treated in the largest inpatient and outpatient psychiatric facilities in Japan.
For the year ended December 31, 2022, our U.S. revenues were $63.4 million, compared to $53.4 million for the year ended December 31, 2021, which represented an increase of 19% period over period.
For the year ended December 31, 2023, our U.S. revenues were $69.3 million, compared to $63.4 million for the year ended December 31, 2022, which represented an increase of 9% period over period. As of December 31, 2023, we had an accumulated deficit of $376.1 million.
For the year ended December 31, 2022, revenues from sales of our treatment sessions and NeuroStar Advanced Therapy Systems represented 71% and 26% of our U.S. revenues, respectively. For the year ended December 31, 2021, revenues from sales of our treatment sessions and NeuroStar Advanced Therapy Systems represented 78% and 18% of our U.S. revenues, respectively.
We derive the majority of our revenues from recurring treatment sessions. For the year ended December 31, 2023, revenues from sales of our treatment sessions and NeuroStar Advanced Therapy Systems represented 73% and 24% of our U.S. revenues, respectively.
Other Income, Net Other income, net increased by $1.8 million from $0.4 million for the year ended December 31, 2021 to $2.2 million for the year ended December 31, 2022, primarily as a result of increased interest income earned on the Company’s money market accounts and note receivables.
Other Income, Net Other income, net increased by $3.5 million from $2.2 million for the year ended December 31, 2022 to $5.8 million for the year ended December 31, 2023, primarily as a result of the Employee Retention Credit (the “ERC”) of $2.9 million, increased interest income earned on the Company’s money market accounts and increase in notes receivable interest .
In October 2017, we entered into an exclusive distribution agreement with Teijin Pharma Limited, (“Teijin”), for the distribution of our NeuroStar Advanced Therapy Systems and treatment sessions to customers who will treat patients with MDD in Japan. We received regulatory approval for our system in Japan in September 2017.
International revenues represented 3% of our total revenues for the years ended December 31, 2023 and 2022, respectively. In October 2017, we entered into an exclusive distribution agreement with Teijin, for the distribution of our NeuroStar Advanced Therapy Systems and treatment sessions to customers who will treat patients with MDD in Japan.
We have incurred operating losses since our inception, and we anticipate that our operating losses will continue in the near term as we seek to expand our sales and marketing initiatives to support our growth in existing and new markets, invest funds in additional research and development activities and utilize cash for other corporate purposes. 71 Table of Contents Our primary sources of capital to date have been from our IPO, private placements of our convertible preferred securities, borrowings under our credit facility, sales of our products and a secondary public offering of our common stock.
We have incurred operating losses since our inception, and we anticipate that our operating losses will continue in the near term as we seek to expand our sales and marketing initiatives to support our growth in existing and new markets, invest funds in additional research and development activities and utilize cash for other corporate purposes.
Our gross margins on revenues from sales of NeuroStar Advanced Therapy Systems are lower than our gross margins on revenues from sales of treatment sessions and, as a result, the sales mix between NeuroStar Advanced Therapy Systems and treatment sessions can affect the gross margin in any reporting period. 67 Table of Contents Sales and Marketing Expenses Sales and marketing expenses consist of market research and commercial activities related to the sale of our NeuroStar Advanced Therapy Systems and treatment sessions and salaries and related benefits, sales commissions and share-based compensation for employees focused on these efforts.
Sales and marketing Expenses Sales and marketing expenses consist of market research and commercial activities related to the sale of our NeuroStar Advanced Therapy Systems and treatment sessions and salaries and related benefits, sales commissions and share-based compensation for employees focused on these efforts.
The Company’s material cash requirements include the following contractual and other obligations. 72 Table of Contents Debt As of December 31, 2022, the Company had $35.0 million of borrowings outstanding under the Solar credit facility, which has a final maturity in February 2025 (“maturity”). The interest rate on borrowings under the credit facility is variable and resets monthly.
The Company’s material cash requirements include the following contractual and other obligations. Debt In March 2020, the Company entered into the Solar Facility. As of December 31, 2023, the Company had $60.0 million of borrowings outstanding under the Solar Facility, which has a final maturity in March 2028.
Travel expense increased by $0.9 million driven by inflation and additional head count. General and Administrative Expenses General and administrative expenses remained relatively consistent at $25.5 million for the year ended December 31, 2022 compared with $25.6 million for the year ended December 31, 2021.
General and Administrative Expenses General and administrative expenses remained relatively consistent at $25.4 million for the year ended December 31, 2023 compared with $25.5 million for the year ended December 31, 2022.
Recent Accounting Pronouncements We refer you to “Note 4. Recent Accounting Pronouncements” in our audited financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. ​
We also earn revenue from customers from services outside of their warranty term or annual service contracts. Such service revenue is recognized as the services are provided. Recent Accounting Pronouncements We refer you to “Note 4. Recent Accounting Pronouncements” in our audited financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. ​
We currently sell our NeuroStar Advanced Therapy System and recurring treatment sessions in the United States through our sales and customer support team.
For the year ended December 31, 2022, revenues from sales of our treatment sessions and NeuroStar Advanced Therapy Systems represented 71% and 26% of our U.S. revenues, respectively. We currently sell our NeuroStar Advanced Therapy System and recurring treatment sessions in the United States through our sales and customer support team.
For the period ended December 31, 2022, U.S. revenue increased by 19% and international revenue marginally decreased by 3% over the comparative prior year period. The U.S. revenue growth was primarily due to an increase in NeuroStar Advanced Therapy System revenues.
For the period ended December 31, 2023, U.S. revenue increased by 9% and international revenue increased by 12% over the comparative prior year period. The U.S. revenue growth was primarily due to an increase in Treatment sessions revenues in connection with the growth of active customer sites and utilization.
Solar Credit Facility The following table sets forth by year our required future principal payments under the term loan portion of the Solar Facility (as discussed in “Note 12.
Debt” in our audited financial statements and related notes thereto appearing elsewhere in this Annual Report on Form 10-K for information regarding our current Solar Facility. Solar Credit Facility The following table sets forth by year our required future principal payments under the term loan portion of the Solar Facility (as discussed in “Note 12.
Management believes that the Company’s cash and cash equivalents as of December 31, 2022 and anticipated revenues from sales of its products are sufficient to fund the Company’s operations for at least 12 months from the issuance of these financial statements.
As of December 31, 2023, we had $60.0 million of borrowings outstanding under our credit facility, which has a final maturity in March 2028. Management believes that the Company’s cash and cash equivalents as of December 31, 2023 and anticipated revenues from sales of its products are sufficient to fund the Company’s operations for at least 12 months.
We generated revenues of $65.2 million and $55.3 million for the years ended December 31, 2022 and 2021, respectively. We designed the NeuroStar Advanced Therapy System as a non-invasive therapeutic alternative to treat patients who suffer from MDD and to address many of the key limitations of existing treatment options.
We designed the NeuroStar Advanced Therapy System as a non-invasive therapeutic alternative to treat patients who suffer from MDD and to address many of the key limitations of existing treatment options. We generate revenues from initial capital sales of our systems, sales of our recurring treatment sessions and from service and repair and extended warranty contracts.
Cost of Revenues and Gross Margin Future Issuance Cost of revenues increased by $3.8 million, or 33%, from $11.7 million for the year ended December 31, 2021 to $15.5 million for the year ended December 31, 2022. Gross margin was 76.3% for the year ended December 31, 2022 compared to 78.9% for the year ended December 31, 2021.
Cost of Revenues and Gross Margin Cost of revenues increased by $4.2 million, or 27%, from $15.5 million for the year ended December 31, 2022 to $19.6 million for the year ended December 31, 2023.
Non-cash charges consisted of depreciation and amortization, non-cash interest expense, share-based compensation, and the cost of rental units purchased by customers. Net cash used in operating activities for 2020 was $28.4 million, consisting primarily of a net loss of $27.5 million and an increase in net operating assets of $8.3 million, partially offset by non-cash charges of $7.3 million.
Net cash used in operating activities for 2022 was $30.7 million, consisting primarily of a net loss of $37.2 million and an increase in net operating assets of $4.8 million, partially offset by non-cash charges of $11.2 million.
Terms of product warranty differ amongst our third-party distributors outside the United States, but are generally one year. We provide for the estimated cost to repair or replace products under any warranty at the time of sale. We also offer our customers in the United States annual service contracts.
We provide for the estimated cost to repair or replace products under any warranty at the time of sale. We also offer our customers in the United States annual service contracts. Revenue from the sale of annual service contracts is recognized on a straight-line basis over the period of the applicable contract.
Research and Development Expenses Research and development expenses increased by $1.4 million, or 18%, from $7.9 million for the year ended December 31, 2021 to $9.3 million for the year ended December 31, 2022.
Research and Development Expenses Research and development expenses remained relatively consistent at $9.5 million for the year ended December 31, 2023 compared with $9.3 million for the year ended December 31, 2022 Interest Expense Interest expense increased by $1.2 million, or 28%, from $4.2 million for the year ended December 31, 2022 to $5.4 million for the year ended December 31, 2023 due to interest rates and debt balance increases.
The increase in net operating assets was primarily due to an increase in net investment in sales-type leases and prepaid commission expense, which were offset by a decrease in accrued expense due to timing and the 2020 payments of 2019 incentive compensation and commission accrued as of December 31, 2019. 73 Table of Contents Non-cash charges consisted of depreciation and amortization, non-cash interest expense, share-based compensation, and the cost of rental units purchased by customers, and the loss on debt extinguishment.
The increase in net operating assets was primarily due to increases in accounts receivable and prepaid commission expense, and decreases in accrued compensation. Non-cash charges consisted of depreciation and amortization, inventory impairment, non-cash interest expense, share-based compensation, and the cost of rental units purchased by customers.
Net Cash Provided by (Used in) Investing Activities Net cash provided by (used in) investing activities for the year ended December 31, 2022, 2021 and 2020 was $6.7 million, $(9.8) million and $(0.7) million, respectively.
Non-cash charges consisted of depreciation and amortization, non-cash interest expense, share-based compensation, and the cost of rental units purchased by customers. Net Cash (Used in) Provided by Investing Activities Net cash (used in) provided by investing activities for the years ended December 31, 2023, 2022 and 2021 was $(1.3) million, $6.7 million and $(9.8) million, respectively.
The decrease in gross margin was the result of a change in the product mix of revenue versus the prior year. 70 Table of Contents Sales and Marketing Expenses Sales and marketing expenses increased by $12.2 million, or 32%, from $37.7 million for the year ended December 31, 2021 to $50.0 million for the year ended December 31, 2022.
Sales and marketing Expenses Sales and marketing expenses decreased by $2.7 million, or 5%, from $50.0 million for the year ended December 31, 2022 to $47.3 million for the year ended December 31, 2023. The decrease was primarily driven by the discontinuation of a sales compensation program in 2023.
We have a diverse customer base of psychiatrists in group psychiatric practices in the United States. One customer accounted for more than 10% of our revenues for the years ended December 31, 2022 and 2021. Patients are reimbursed by Medicare and the vast majority of commercial payors in the United States for treatment sessions utilizing our NeuroStar Advanced Therapy System.
We have a diverse customer base of psychiatrists in group psychiatric practices in the United States. For the years ended December 31, 2023, 2022 and 2021 one customer accounted for 15%, 17% and 20% respectively, of the Company’s revenue.
We anticipate that our general and administrative expenses will remain materially consistent during 2023 compared to our 2022 expenses.
We anticipate that our sales and marketing expenses will remain materially consistent during 2024 compared to 2023 expenses, with the exception of the planned growth in our co-op marketing program.
The system is cleared by the United States Food and Drug Administration, (“FDA”), to treat adult patients with major depressive disorder, (“MDD”), that have failed to achieve satisfactory improvement from prior antidepressant medication in the current MDD episode.
The system is cleared by the FDA to treat adult patients with MDD that have failed to achieve satisfactory improvement from prior antidepressant medication in the current MDD episode. NeuroStar Advanced Therapy System is safe, clinically effective, reproducible and precise and we believe is supported by the largest clinical data set of any competing TMS system.
NeuroStar Advanced Therapy is safe, clinically effective, reproducible and precise and we believe is supported by the largest clinical data set of any competing TMS system. We believe we are the market leader in TMS therapy based on the estimated 147,431 global patients treated with over 5.3 million of our treatment sessions through December 31, 2022.
We believe we are the market leader in TMS therapy based on the estimated 169,068 global patients treated with over 6.1 million of our treatment sessions through December 31, 2023. We generated revenues of $71.3 million and $65.2 million for the years ended December 31, 2023 and 2022, respectively.
NeuroStar Advanced Therapy System revenue in the United States increased by $6.8 million, or 70%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily driven by a 79% increase in NeuroStar Advanced Therapy System capital revenue, which includes capital sales and sales-type leases.
NeuroStar Advanced Therapy System revenue in the United States for year ended December 31, 2023 was $16.5 million which was in line with revenue at December 31, 2022 at $16.6 million.
Under the current facility, the Company will be required to make a final payment fee of $1.9 million at maturity. Future interest payments related to the current facility total $5.4 million, including $3.7 million due within the next twelve months as of December 31, 2022.
Future interest payments related to the facility total $22.0 million, including $6.7 million due within the next twelve months as of December 31, 2023. On March 7, 2024, the Company entered into a sixth amendment (the “Solar Sixth Amendment”) to the Solar Facility.
We market our products in a few select markets outside the United States through independent distributors. International revenues represented 3% and 3% of our total revenues for the years ended December 31, 2022 and 2021, respectively.
Patients are reimbursed by federal healthcare programs and the vast majority of commercial payors in the United States for treatment sessions utilizing our NeuroStar Advanced Therapy System. We market our products in a few select markets outside the United States through independent distributors.
Net cash provided by financing activities for the year ended December 31, 2020 was $2.4 million and attributable primarily to proceeds from the exercise of stock options. ​ 74 Table of Contents Indebtedness Refer to “Note 12.
Net Cash Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $22.7 million attributable primarily to additional debt net of final payment and amendment fee paid in connection with the two amendments of the Solar Facility in 2023.
Prior to the Company commencing principal payments on the facility in March 2023 with total borrowings of $35.0 million coming due in monthly installments, the Company and Solar agreed to delay the first principal payment while negotiating a refinanced credit facility.
The interest rate on borrowings under the credit facility is variable and resets monthly. The Company will commence principal payments on the facility starting April 2026 with total borrowings of $60.0 million due at maturity. In addition, the Company will make a final payment fee of $1.9 million at maturity.
Removed
We generate revenues from initial capital sales of our systems, sales of our recurring treatment sessions and from service and repair and extended warranty contracts. We derive the majority of our revenues from recurring treatment sessions.
Added
We expect our cost of revenues to decrease as our product mix changes and we realize efficiencies with our new contract manufacturer. Our gross profit is calculated by subtracting our cost of revenues from our revenues. We calculate our gross margin as our gross profit divided by our revenues.
Removed
Our sales force targets an estimated 50,000 psychiatrists across 26,000 practices that we estimate, based on a 2020 dataset from Symphony Health and our own internal estimates, treat approximately 42% of the total MDD patients in the United States who meet our labeled indication and are insured.
Added
Our gross margins on revenues from sales of NeuroStar Advanced Therapy Systems are lower than our gross margins on revenues from sales of treatment sessions and, as a result, the sales mix between NeuroStar Advanced Therapy Systems and treatment sessions can affect the gross margin in any reporting period.
Removed
We expect to continue to incur losses for the next several years as we expand our commercial organization to support our planned sales growth and while continuing to invest in our pipeline indications. As of December 31, 2022, we had an accumulated deficit of $345.9 million.
Added
Other Income, Net Other income, net consists primarily of interest income earned on our money market account balances and notes receivable.
Removed
Recent Developments COVID-19 We have monitored the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it has and will continue to impact the Company’s customers, supply chain, employees and other business partners.
Added
This increase was primarily due to the recording of a $1.9 million inventory impairment for specialized component parts secured for discontinued NeuroStar Advanced Therapy Systems for which costs exceed net realizable value. Also capitalized software and the corresponding amortization expense increased by $1.3 million associated with the latest product release.
Removed
We experienced significant disruptions, in the first quarter of 2022 and in the years ended 2021 and 2020 from the COVID-19 pandemic.
Added
One-time expense relating to our transition to a new contract manufacturer amounted to $0.7 million. Gross margin was 72.5% for the year ended December 31, 2023 compared to 76.3% for the year ended December 31, 2022.
Removed
Although business conditions during the rest of 2022 were largely not impacted by the COVID-19 pandemic, we are unable to predict whether the COVID-19 pandemic may have a material impact on our financial condition, results of operations and cash flows in the future due to numerous uncertainties.
Added
The decrease in gross margin was driven by the one-time inventory impairment, the higher operational costs related to our transition to a new third-party contract manufacturing partner and software amortization expense from the latest product release.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Our cash is held on deposit in demand accounts at a large financial institution in amounts in excess of the Federal Deposit Insurance Corporation, (“FDIC”), insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Our cash is held in an insured cash sweep account at a large financial institution, which manages our risk by limiting the amount of cash in any one financial institution up to $250,000.
We have reviewed the financial statements of this institution and believe it has sufficient assets and liquidity to conduct its operations in the ordinary course of business with little or no credit risk to us. Financial instruments that potentially subject us to concentrations of credit risk principally consist of cash equivalents and accounts receivable.
We have reviewed the financial statements of this institution and believe it has sufficient assets and liquidity to conduct its operations in the ordinary course of business with limited credit risk to us. Financial instruments that potentially subject us to concentrations of credit risk principally consist of cash equivalents and accounts receivable.
We do not currently have any exposure to foreign currency fluctuations and do not engage in any hedging activities as part of our normal course of business. ​ 77 Table of Contents
We do not currently have any exposure to foreign currency fluctuations and do not engage in any hedging activities as part of our normal course of business. ​
Debt” in our audited financial statements and related notes thereto appearing elsewhere in of this Annual Report on Form 10-K, our credit facility bears interest at 7.65% plus the greater of (a) 1.66% or (b) the rate per annum rate published by the Intercontinental Exchange Benchmark Administration Ltd.
Debt” in our audited financial statements and related notes thereto appearing elsewhere in of this Annual Report on Form 10-K, our credit facility bears interest which resets monthly and is equal to the greater of (a) 3.95% or (b) Daily Simple Secured Overnight Financing Rate (“SOFR”) for a term of one month, plus 5.65% .
As a result, we are exposed to risks from changes in interest rates. We believe that a one-point increase in interest rates would result in an approximate $0.4 million increase to our interest expense for the year ended December 31, 2022. Inflationary factors, such as increases in our cost of revenues and operating expenses, may adversely affect our operating results.
As a result, a 1% increase in interest would result in approximately $0.6 million in additional interest expense. Inflationary factors, such as increases in our cost of revenues and operating expenses, may adversely affect our operating results.
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These balances are insured by the Federal Deposit Insurance Corporation (“FDIC”), which provides an insurance coverage limit of $250,000 per 77 Table of Contents depositor, per FDIC-insured bank, per ownership category.

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