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What changed in TACTILE SYSTEMS TECHNOLOGY INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TACTILE SYSTEMS TECHNOLOGY INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+371 added−365 removedSource: 10-K (2025-02-18) vs 10-K (2024-02-20)

Top changes in TACTILE SYSTEMS TECHNOLOGY INC's 2024 10-K

371 paragraphs added · 365 removed · 314 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

114 edited+23 added−8 removed198 unchanged
Biggest changeTo pursue a direct-to-patient and -provider 20 Table of Contents sales model, our manufacturing competitors would need to meet national accreditation and state-by-state licensing requirements, secure Medicare billing privileges, as well as compete directly with the home medical equipment providers that many rely on across their entire home care businesses.
Biggest changeTo pursue a direct-to-patient and -provider sales model, our manufacturing competitors would need to meet national accreditation and state-by-state licensing requirements, secure Medicare billing privileges, as well as compete directly with the home medical equipment providers that many rely on across their entire home care businesses. 19 Table of Contents We anticipate that, given the size of the available market, we will face increased competition in the future as existing companies and competitors develop new or improved products and distribution strategies and as new companies enter the market with new technologies and distribution strategies.
Our reimbursement function includes payer relations and reimbursement operations. Our payer relations function focuses on payer policy development, education, contract negotiations, and data analysis. Our reimbursement operations function is responsible for verifying patient insurance benefits, individual patient case development, prior authorization submissions, case follow-up, and appeals when necessary.
Our reimbursement function includes payer relations and reimbursement operations. Our payer relations function focuses on payer policy development, education, payer contract negotiations, and data analysis. Our reimbursement operations function is responsible for verifying patient insurance benefits, individual patient case development, prior authorization submissions, case follow-up, and appeals when necessary.
Experts from the American Venous Forum, American Venous and Lymphatic 8 Table of Contents Society and Society for Vascular Medicine provided the consensus guidance on diagnosis and patient treatment pathways for lymphedema. Over a majority of the panel (92%) agreed with the statement that sequential pneumatic compression should be recommended for lymphedema patients, with 34% strongly agreeing.
Experts from the American Venous Forum, American Venous and Lymphatic Society and Society for Vascular Medicine provided the consensus guidance on diagnosis and patient treatment pathways for lymphedema. Over a majority of the panel (92%) agreed with the statement that sequential 8 Table of Contents pneumatic compression should be recommended for lymphedema patients, with 34% strongly agreeing.
FDA Regulation In the United States, the FDA regulates medical devices, including the following activities that we perform, or that are performed on our behalf with respect to our devices: product design and development, pre-clinical and clinical testing, manufacturing, labeling, storage, servicing, premarket clearance or approval, record keeping, product marketing, advertising and promotion, sales and distribution, and post-marketing surveillance.
FDA Regulation In the United States, the FDA regulates medical devices, including the following activities that we perform, or that are performed on our behalf with respect to our devices: product design and development, pre-clinical and clinical testing, manufacturing, labeling, storage, servicing, premarket clearance or approval, record keeping, product marketing, advertising and promotion, sales and distribution, and post-marketing surveillance, including reporting.
We believe these investments are critical to driving payer, clinician and patient adoption of our technologies, and together with our commercial infrastructure, represent a significant competitive advantage. Health insurance coverage for our Flexitouch Plus and Entre Plus systems is in place with private payers, Medicare, the Veterans Administration and certain Medicaid programs.
We believe these investments are critical to driving payer, clinician and patient adoption of our technologies, and together with our commercial infrastructure, represent a significant competitive advantage. Health insurance coverage for our Flexitouch Plus, Entre Plus and Nimbl systems is in place with private payers, Medicare, the Veterans Administration and certain Medicaid programs.
Kylee™ allows patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources. ​ Our AffloVest product is packaged and shipped to the DME provider or drop-shipped directly to a patient, as directed. We utilize third-party carriers for delivery and pick up of our AffloVest products.
Kylee™ allows patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources. ​ Our AffloVest product is packaged and shipped to the DME provider representative or drop-shipped directly to a patient, as directed. We utilize third-party carriers for delivery and pick up of our AffloVest products.
Order Fulfillment and Patient Education With respect to our Flexitouch Plus and Entre Plus systems, once we have a complete patient order and appropriate documentation from the payer, we package and ship the system, configured to their physician's prescription, directly to the patient. We utilize third-party carriers for delivery and pick up of our devices.
Order Fulfillment and Patient Education With respect to our Flexitouch Plus, Entre Plus and Nimbl systems, once we have a complete patient order and appropriate documentation from the payer, we package and ship the system, configured to their physician's prescription, directly to the patient. We utilize third-party carriers for delivery and pick up of our devices.
Our proprietary Flexitouch and Entre systems are clinically proven at-home solutions for patients with vascular disorders such as lymphedema. Patients with lymphedema or chronic venous insufficiency are typically treated by vascular surgeons, vascular medicine physicians, oncology care teams, wound physicians, nurses and therapists. Our current lymphedema products are the Flexitouch Plus and Entre Plus systems.
Our proprietary Flexitouch, Entre and Nimbl systems are clinically proven at-home solutions for patients with vascular disorders such as lymphedema. Patients with lymphedema or chronic venous insufficiency are typically treated by vascular surgeons, vascular medicine physicians, oncology care teams, wound physicians, nurses and therapists. Our current lymphedema products are the Flexitouch Plus, Entre Plus and Nimbl systems.
Our quality management system has been certified to ISO 13485:2003 in 2012, 2014 and 2017, and to ISO 13485:2016 in 2019, 2020, 2021, 2022 and 2023. In 2021, we also received our Medical Device Single Audit Program (“MDSAP”) certification, which was renewed in 2023.
Our quality management system has been certified to ISO 13485:2003 in 2012, 2014 and 2017, and to ISO 13485:2016 in 2019, 2020, 2021, 2022, 2023 and 2024. In 2021, we also received our Medical Device Single Audit Program (“MDSAP”) certification, which was renewed in 2024.
All of our past and current models of our Flexitouch, Entre and AffloVest systems are Class II devices under the FDA classification system requiring 510(k) clearance. We obtained 510(k) clearance for our Flexitouch system in October 2006 and for a discontinued predecessor system in July 2002.
All of our past and current models of our Flexitouch, Entre, Nimbl and AffloVest systems are Class II devices under the FDA classification system requiring 510(k) clearance. We obtained 510(k) clearance for our Flexitouch system in October 2006 and for a discontinued predecessor system in July 2002.
In situations in which the product is shipped to the DME provider, they are responsible for completing the delivery to the patient. Upon receipt of the product, patients are able to utilize materials included with the product to complete self-training or engage with the DME provider for additional support.
In situations in which the product is shipped to the DME provider representative, they are responsible for completing the delivery to the patient. Upon receipt of the product, patients are able to utilize materials included with the product to complete self-training or engage with the DME provider representative for additional support.
The standards promulgated under HIPAA's regulations include those that: ● restrict the use and disclosure of individually identifiable health information, or "protected health information"; 25 Table of Contents ● establish standards for common electronic healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures; ● require covered entities to implement and maintain certain security measures to safeguard certain electronic health information, including the adoption of administrative, physical and technical safeguards to protect such information; and ● require covered entitles to provide notification to affected individuals, the Department of Health and Human Services and the media in the event of a breach of unsecured protected health information.
The standards promulgated under HIPAA's regulations include those that: ● restrict the use and disclosure of individually identifiable health information, or "protected health information"; ● establish standards for common electronic healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures; 24 Table of Contents ● require covered entities to implement and maintain certain security measures to safeguard certain electronic health information, including the adoption of administrative, physical and technical safeguards to protect such information; and ● require covered entitles to provide notification to affected individuals, the Department of Health and Human Services and the media in the event of a breach of unsecured protected health information.
Trademarks We have registered the trademarks Tactile Medical, Flexitouch, Flexitouch Plus, the Flexitouch logo design, ComfortEase, Entre, AffloVest, AffloVest Pro, and Kylee with the United States Patent and Trademark Office on the Principal Register. We rely in the United States on common law rights to the Tactile Medical design trademark.
Trademarks We have registered the trademarks Tactile Medical, Flexitouch, Flexitouch Plus, the Flexitouch logo design, ComfortEase, Entre, AffloVest, AffloVest Pro, Kylee and Nimbl with the United States Patent and Trademark Office on the Principal Register. We rely in the United States on common law rights to the Tactile Medical design trademark.
Violation of these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain governments or other persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences.
Violation of these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain governments or other persons, importation restriction, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences.
High frequency chest wall oscillation is used to treat bronchiectasis and over 40 other International Classification of Disease (“ICD”)-10 diagnosis codes. Traditional Treatment and Limitations ​ Airway clearance therapy (“ACT”) utilizes physical or mechanical means of percussion or vibration to mobilize mucus and phlegm to facilitate airway clearance by coughing.
High frequency chest wall oscillation is used to treat bronchiectasis and over 70 other International Classification of Disease (“ICD”)-10 diagnosis codes. Traditional Treatment and Limitations ​ Airway clearance therapy (“ACT”) utilizes physical or mechanical means of percussion or vibration to mobilize mucus and phlegm to facilitate airway clearance by coughing.
We are also subject to announced and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities or other sites of our subcontractors to audit any part of our quality system. We were audited three times since January 2010 by the FDA and found to be in compliance with the Quality System Regulation.
We are also subject to announced and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities or other sites of our subcontractors to audit any part of our quality system. We were inspected three times since January 2010 by the FDA and found to be in compliance with the Quality System Regulation.
The respiratory DME channel also already serves the chronic respiratory community, enabling them to identify complex respiratory candidates who are regularly on other respiratory therapies (such as oxygen, nebulizers, 16 Table of Contents non-invasive ventilators, etc.) and who might benefit from the use of our AffloVest.
The respiratory DME channel also already serves the chronic respiratory community, enabling them to identify complex respiratory candidates who are regularly on other respiratory therapies (such as oxygen, nebulizers, 15 Table of Contents non-invasive ventilators, etc.) and who might benefit from the use of our AffloVest.
The below chart reflects these models: Our direct-to-patient and -provider lymphedema business is composed of a direct sales force, patient training and support, reimbursement capabilities and medical expertise to educate, expand awareness, coordinate referrals and obtain payment for our products. The chart below describes our U.S. direct-to-patient and -provider model for the majority of our lymphedema business.
The below chart reflects these models: Our direct-to-patient and -provider lymphedema business is composed of a direct sales force, patient training and support, reimbursement capabilities and clinical expertise to educate, expand awareness, coordinate referrals and obtain payment for our products. The chart below describes our U.S. direct-to-patient and -provider model for the majority of our lymphedema business.
Foreign Corrupt Practices Act (the “FCPA”) is a criminal statute that prohibits an individual or business from paying, offering, promising or authorizing the provision of money (such as a bribe or kickback) or anything else of value (such as an improper gift, hospitality, or favor), directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision in order to assist the individual or business in obtaining, retaining, or directing business or other advantages (such as favorable regulatory rulings).
Foreign Corrupt Practices Act (the “FCPA”) is a criminal statute that prohibits an individual 23 Table of Contents or business from paying, offering, promising or authorizing the provision of money (such as a bribe or kickback) or anything else of value (such as an improper gift, hospitality, or favor), directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision in order to assist the individual or business in obtaining, retaining, or directing business or other advantages (such as favorable regulatory rulings).
We provide all employees training on workplace safety and require employees to follow standards and practices supporting a safe and healthy work environment. Talent and Retention: In 2023, we continued to focus on recruitment, hiring, and retention to ensure high quality talent and a strong fit for specific roles within the Company.
We provide all employees training on workplace safety and require employees to follow standards and practices supporting a safe and healthy work environment. Talent and Retention: In 2024, we continued to focus on recruitment, hiring, and retention to ensure high quality talent and a strong fit for specific roles within the Company.
The Ethics in Patient Referrals Act, commonly known as the "Stark Law," prohibits a physician from making referrals for certain "designated health services" payable by Medicare to an entity, including a company 23 Table of Contents that furnishes durable medical equipment, in which the physician or an immediate family member of such physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement unless an exception applies.
The Ethics in Patient Referrals Act, commonly known as the "Stark Law," prohibits a physician from making referrals for certain "designated health services" payable by Medicare to an entity, including a company that furnishes durable medical equipment, in which the physician or an immediate family member of such physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement unless an exception applies.
This was driven by 59% fewer mean annual hospitalizations (0.13 vs 0.32; P ​ ​ 12 Table of Contents Impact on Clinical Outcomes and Healthcare Costs with Use of our Flexitouch System A retrospective study published by the American Medical Association in JAMA Dermatology demonstrated significant improvement in key clinical endpoints and immediate cost reductions for individuals with lymphedema following receipt of our Flexitouch system.
This was driven by 59% fewer mean annual hospitalizations (0.13 vs 0.32; P Impact on Clinical Outcomes and Healthcare Costs with Use of our Flexitouch System A retrospective study published by the American Medical Association in JAMA Dermatology demonstrated significant improvement in key clinical endpoints and immediate cost reductions for individuals with lymphedema following receipt of our Flexitouch system.
These DME providers are staffed by trained respiratory therapists who are required in some states to set up patients on at-home prescription respiratory therapies like AffloVest. We market to, and educate, DME providers and clinicians about the AffloVest advantages.
These DME providers are staffed by trained respiratory therapists who are required in some states to set up patients on at-home prescription respiratory therapies like AffloVest. We market to, and educate, DME provider representatives and clinicians about the AffloVest advantages.
Patients in the intervention group reported improvement in perceived ability to control lymphedema (baseline: 5/19, 26% good or excellent; 8 weeks: 16/19, 84% good or excellent, p=0.003) and visible external swelling (front view p AffloVest Clinical Evidence The use of the AffloVest in patients with cystic fibrosis (“CF”) has been studied and reported on in non-peer reviewed journals.
Patients in the intervention group reported improvement in perceived ability to control lymphedema (baseline: 5/19, 26% good or excellent; 14 Table of Contents 8 weeks: 16/19, 84% good or excellent, p=0.003) and visible external swelling (front view p AffloVest Clinical Evidence The use of the AffloVest in patients with cystic fibrosis (“CF”) has been studied and reported on in non-peer reviewed journals.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Seasonality.” Human Capital Resources As a company, our focus is on developing and selling solutions that help increase clinical efficacy, reduce overall healthcare costs and improve the quality of life for patients with chronic conditions by treating them at home.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Seasonality.” 27 Table of Contents Human Capital Resources As a company, our focus is on developing and selling solutions that help increase clinical efficacy, reduce overall healthcare costs and improve the quality of life for patients with chronic conditions by treating them at home.
A predecessor to our Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in July 2002, and we introduced the system to address the many limitations of self-administered home-based manual lymphatic drainage therapy. We began selling our more advanced Flexitouch system after receiving 510(k) clearance from the FDA in October 2006.
A predecessor to our Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in July 2002, and we introduced the system to address the many limitations of self-administered home-based manual lymphatic drainage therapy. We began selling our more advanced Flexitouch system after 5 Table of Contents receiving 510(k) clearance from the FDA in October 2006.
Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions. 24 Table of Contents The U.S. Foreign Corrupt Practices Act and Other Anti-Corruption Laws. We may be subject to a variety of domestic and foreign anti-corruption laws with respect to our regulatory compliance efforts and operations.
Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions. The U.S. Foreign Corrupt Practices Act and Other Anti-Corruption Laws. We may be subject to a variety of domestic and foreign anti-corruption laws with respect to our regulatory compliance efforts and operations. The U.S.
Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. 26 Table of Contents Foreign Government Regulation International sales of medical devices are subject to foreign governmental regulations, which vary substantially from country to country.
Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. Foreign Government Regulation International sales of medical devices are subject to foreign governmental regulations, which vary substantially from country to country.
These include: ● establishment registration and device listing; ● quality system regulation, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process; ● labeling regulations and the FDA prohibitions against the promotion of products for un-cleared, unapproved or "off-label" uses, and other requirements related to promotional activities; ● medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; ● corrections and removals 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 that may present a risk to health; and ● post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: ● establishment registration and device listing; 20 Table of Contents ● quality system regulation, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation, current good manufacturing practice, as applicable, and other quality assurance procedures during all aspects of the manufacturing process; ● labeling regulations and the FDA prohibitions against the promotion of products for un-cleared, unapproved or "off-label" uses, and other requirements related to promotional activities; ● medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; ● corrections and removals 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 that may present a risk to health; and ● post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Thus, modifications or changes in use of our existing devices will be evaluated to ensure ongoing compliance to the FDA requirements. 21 Table of Contents Further, even after a device receives clearance or approval by the FDA and is placed on the market, numerous regulatory requirements apply.
Thus, modifications or changes in use of our existing devices will be evaluated to ensure ongoing compliance to the FDA requirements. Further, even after a device receives clearance or approval by the FDA and is placed on the market, numerous regulatory requirements apply.
The success and growth of our business depends, in large part, on our ability to attract, retain and develop a diverse population of talented and high-performing employees at all levels of our organization, including the individuals who comprise our workforce as well as executive officers and other key personnel.
The success and growth of our business depends, in large part, on our ability to attract, retain and develop talented and high-performing employees at all levels of our organization, including the individuals who comprise our workforce as well as executive officers and other key personnel.
When our system is activated, air passes through the hoses, delivering sequential inflation and deflation to the garments and applying gentle pressure to the skin. The inflation sequence is designed to stimulate the lymphatic system, moving lymph fluid from the impaired areas toward healthy regions of the body.
When our system is activated, air passes through the hoses, delivering sequential inflation and deflation to the 10 Table of Contents garments and applying gentle pressure to the skin. The inflation sequence is designed to stimulate the lymphatic system, moving lymph fluid from the impaired areas toward healthy regions of the body.
Failure to comply with applicable U.S. requirements may subject us to a variety of administrative or judicial sanctions, such as warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. The FDA can also refuse to clear or approve pending applications.
Failure to comply with applicable U.S. requirements may subject us to a variety of administrative, enforcement, or judicial sanctions, such as warning letters, import alerts, debarment, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. The FDA can also refuse to clear or approve pending applications.
Our customers can use Kylee to track their orders for our devices and view onboarding tutorials for using the device. Once a patient starts using the device, they can use Kylee to record their treatments and symptoms, 11 Table of Contents and capture photos of their condition for sharing with their healthcare team.
Our customers can use Kylee to track their orders for our devices and view onboarding tutorials for using the device. Once a patient starts using the device, they can use Kylee to record their treatments and symptoms, and capture photos of their condition for sharing with their healthcare team.
In September 2023 the FDA released additional draft guidance around best practices for selecting a predicate device to support a premarket notification submission which further provides best practices for selecting a predicate device. A premarket approval application must be submitted to the FDA if the device cannot be cleared through the 510(k) process.
In September 2023 the FDA released additional draft guidance around best practices for selecting a predicate device to support a premarket notification submission. A premarket approval application must be submitted to the FDA if the device cannot be cleared through the 510(k) process.
Clinical Results and Studies Overview A key part of our success is our ability to demonstrate the effectiveness of our products by funding studies that generate clinical and economic outcome data supporting our products. We have developed a significant body of clinical data supporting the efficacy and safety of our products.
Clinical Results and Studies Overview A key part of our success is our ability to demonstrate the effectiveness of our products by funding studies that generate clinical and economic outcome data supporting our products. We have developed a 11 Table of Contents significant body of clinical data supporting the efficacy and safety of our products.
The AffloVest is reimbursed under HCPCS code E0483, high frequency chest wall oscillation for bronchiectasis, and over 65 other ICD-10 diagnosis codes.
The AffloVest is reimbursed under HCPCS code E0483, high frequency chest wall oscillation for bronchiectasis, and over 70 other ICD-10 diagnosis codes.
Overview of Lymphedema and Chronic Venous Insufficiency Lymphedema The lymphatic system, a fundamental part of the cardiovascular system, consists of lymph vessels and lymph organs that protect the body against harmful bacteria and transport lymph fluid from the body’s tissues back to the cardiovascular system.
Overview of Lymphedema and Chronic Venous Insufficiency Lymphedema The lymphatic system, a fundamental part of the cardiovascular system, consists of lymph vessels and lymph organs that protect the body against harmful bacteria and transport lymph fluid from the body’s tissues 6 Table of Contents back to the cardiovascular system.
We intend to continue this strategic approach to further expand coverage for our solutions, as well as to meet payer-specific requirements on behalf of patients. ​ 10 Table of Contents Our Products We market Flexitouch Plus and Entre Plus systems as at-home therapies for the treatment of lymphedema and chronic venous insufficiency.
We intend to continue this strategic approach to further expand coverage for our solutions, as well as to meet payer-specific requirements on behalf of patients. ​ Our Products We market Flexitouch Plus, Entre Plus and Nimbl systems as at-home therapies for the treatment of lymphedema and chronic venous insufficiency.
In September 2016, we received 510(k) clearance from the FDA for the Flexitouch system in treating lymphedema of the head and neck. In June 2017, we announced that 5 Table of Contents we received 510(k) clearance from the FDA for the Flexitouch Plus, the third-generation version of our Flexitouch system.
In September 2016, we received 510(k) clearance from the FDA for the Flexitouch system in treating lymphedema of the head and neck. In June 2017, we announced that we received 510(k) clearance from the FDA for the Flexitouch Plus, the third-generation version of our Flexitouch system.
Lymph nodes are located in several areas of the body, including superficial and deep lymph nodes under each arm, at the hip, in the groin, above the collar bones in the neck, in the abdomen, 6 Table of Contents tonsils and spleen, and in bone marrow.
Lymph nodes are located in several areas of the body, including superficial and deep lymph nodes under each arm, at the hip, in the groin, above the collar bones in the neck, in the abdomen, tonsils and spleen, and in bone marrow.
Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a noncompliant arrangement, civil penalties and exclusion from Medicare or other Federal health care programs.
Violation of the Stark Law could result in denial of payment, 22 Table of Contents disgorgement of reimbursements received under a noncompliant arrangement, civil penalties and exclusion from Medicare or other Federal health care programs.
While this approach has had positive impact, we do not know if or when additional payers may adopt more restrictive criteria like the LCD nor do we know how they will choose to interpret it.
While this approach has had positive impact, we do not know if or when additional payers may adopt more restrictive criteria nor do we know how they will choose to interpret it.
As of December 31, 2023, we also employed a small group of respiratory specialists, who educate DME provider representatives, provide product demonstrations for targeted clinicians and support technical questions related to the AffloVest. 17 Table of Contents The chart below describes our DME model.
As of December 31, 2024, we also employed a small group of respiratory specialists, who educate DME provider representatives, provide product demonstrations for targeted clinicians and support technical questions related to the AffloVest. 16 Table of Contents The chart below describes our DME model.
Our Medicare business was 24% of revenue in 2023 compared to 19% in 2022. Because Medicare criteria is extensive, we have a team dedicated to educating clinicians to help them understand how Medicare policy affects their patients and the medical record documentation needed to meet Medicare requirements.
Our Medicare business was 18% of revenue in 2024 compared to 24% in 2023. Because Medicare criteria is extensive, we have a team dedicated to educating clinicians to help them understand how Medicare policy affects their patients and the medical record documentation needed to meet Medicare requirements.
We received U.S. FDA clearance to market a first-of-its-kind system to treat patients suffering from lymphedema of the head and neck, a frequent consequence of head and neck cancer and its treatment. Patient symptoms often include significant skin changes, pain and discomfort, as well as difficulty breathing and swallowing.
FDA clearance to market a first-of-its-kind system to treat patients suffering from lymphedema of the head and neck, a frequent consequence of head and neck cancer and its treatment. Patient symptoms often include significant skin changes, pain and discomfort, as well as difficulty breathing and swallowing.
The direct channel allows us to focus on two of our primary call points, vascular and oncology. For AffloVest, we utilize the respiratory DME channel as our go-to-market method. Our utilization of DME representatives gives us access to a larger channel than competitors that market and sell directly.
The direct channel allows us to focus on three of our primary call points, vascular, therapy and oncology. For AffloVest, we utilize the respiratory DME channel as our go-to-market method. Our utilization of DME provider representatives gives us access to a larger channel than competitors that market and sell directly.
We receive no additional reimbursement for patient support, but provide high-quality customer service and continuity to enhance patient comfort, satisfaction, compliance and safety with our products. Our Flexitouch Plus system controller is reimbursed under HCPCS code E0652, and our Entre Plus system controller is reimbursed under HCPCS code E0651.
We receive no additional reimbursement for patient support, but provide high-quality customer service and continuity to enhance patient comfort, satisfaction, compliance and safety with our products. Our Flexitouch Plus system controller is reimbursed under HCPCS code E0652, and our Entre Plus and Nimbl system controllers are each reimbursed under HCPCS code E0651.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. We also make financial information, news releases and other information available on our corporate website at www.tactilemedical.com.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. 28 Table of Contents We also make financial information, news releases and other information available on our corporate website at www.tactilemedical.com.
We believe that many patients with lymphedema, chronic venous insufficiency and chronic respiratory conditions remain undiagnosed or undertreated. We intend to further educate physicians, nurses, therapists, patients, payers and DME providers to raise awareness of these diseases, the associated health burdens of such diseases on patients and society, and the clinical and economic benefits of using our products.
We believe that many patients with lymphedema, chronic venous insufficiency and chronic respiratory conditions remain undiagnosed or undertreated. We intend to continue to educate physicians, nurses, therapists, patients, payers and DME provider representatives to raise awareness of these diseases, the associated health burdens of such diseases on patients and society, and the clinical and economic benefits of using our products.
We began doing business with Medicare in 2007. We have an in-depth understanding of specific payer coverage criteria, and our submission materials are tailored to address an individual payer's distinct requirements. Our dedicated customer service team is available to answer patient questions regarding reimbursement, account status, device operation and troubleshooting during normal business hours.
We have an in-depth understanding of specific payer coverage criteria, and our submission materials are tailored to address an individual payer's distinct requirements. Our dedicated customer service team is available to answer patient questions regarding reimbursement, account status, device operation and troubleshooting during normal business hours.
Our research and development expenses, including spending on our clinical evidence development efforts, totaled $7.8 million and $7.1 million for the years ended December 31, 2023 and 2022, respectively.
Our research and development expenses, including spending on our clinical evidence development efforts, totaled $8.8 million and $7.8 million for the years ended December 31, 2024 and 2023, respectively.
Based on our estimates, we are contracted or enrolled as an in-network provider with payers covering over 275 million lives in the United States. In 2023 we served over 77,000 patients with our compression therapy devices and cumulatively have served over 472,000 patients since they launched. AffloVest also benefits from a relatively mature reimbursement landscape.
Based on our estimates, we are contracted or enrolled as an in-network provider with payers covering over 275 million lives in the United States. In 2024 we served over 79,000 patients with our compression therapy devices and cumulatively have served over 551,000 patients since they launched. AffloVest also benefits from a relatively mature reimbursement landscape.
After delivery and when requested by our patient, we coordinate a virtual or at-home visit from one of our trainers to provide education and instruction on use and care of their therapy system. These trainers are professionally trained and instructed on proper use of our products.
After delivery and when requested by our patient, we coordinate a virtual or at-home visit from one of our trainers to provide education and instruction on use and care of their therapy system. These trainers are professionally trained and instructed on proper use of our products. Patient visits and training sessions are assigned by our staff.
For people with cancer, the build-up of lymph fluid can be caused by 7 Table of Contents surgery, especially when lymph nodes are removed, radiation therapy that can damage lymph nodes and vessels, infections that damage surrounding tissue or cause scarring, and other conditions. In the fourth quarter of 2016 we expanded the indications for use of the Flexitouch system.
For people with cancer, the build-up of lymph fluid can be caused by surgery, especially when lymph nodes are removed, radiation therapy that can damage lymph nodes and vessels, infections that damage surrounding tissue or cause scarring, and other conditions. In the fourth quarter of 2016 we expanded the indications for use of the Flexitouch system. We received U.S.
The simple pneumatic compression device used in the study was a Bio Compression 2004 Sequential Circulator pneumatic compression device. The primary objective of the study was to determine whether our Flexitouch system provides better outcomes, as measured by arm edema and tissue water reductions, compared to a simple pneumatic compression device in patients with arm lymphedema.
The primary objective of the study was to determine whether our Flexitouch system provides better outcomes, as measured by arm edema and tissue water reductions, compared to a simple pneumatic compression device in patients with arm lymphedema.
We sell the AffloVest to DME providers in the U.S. that service patients and bill third-party payers for the product. The DME providers obtain the prescription and coordinate with patients and payers to determine insurance eligibility and payment.
We sell the AffloVest to DME providers in the U.S. whose representatives service patients and bill third-party payers for the product. The DME provider representatives obtain the prescription and coordinate with patients and payers to determine insurance eligibility and payment.
In December 2020, we received 510(k) clearance for two new indications for our Flexitouch Plus system: phlebolymphedema and lipedema. We obtained 510(k) clearance for our Entre system in May 2015. 510(k) clearance for the AffloVest system was obtained in 2013.
In December 2020, we received 510(k) clearance for two new indications for our Flexitouch Plus system: phlebolymphedema and lipedema. We obtained 510(k) clearance for our Entre system in May 2015. In June 2024 we received 510(k) clearance for our Nimbl device. 510(k) clearance for the AffloVest system was obtained in 2013.
The number of lower-extremity 14 Table of Contents ulcers pre- and post-Flexitouch system use decreased from seven to two ( P =0.007).
The number of lower-extremity ulcers pre- and post-Flexitouch system use decreased from seven to two ( P =0.007).
We maintain open communication with physician key opinion leaders and with Medicare contractors to provide data as it becomes available that could potentially influence coverage 27 Table of Contents decisions.
We maintain open communication with physician key opinion leaders and with Medicare contractors to provide data as it becomes available that could potentially influence coverage decisions.
This, in addition to the estimated five million individuals living in the U.S. with cancer-related and primary lymphedema, increases the prevalence estimates to over 20 million individuals.
This, in addition to the estimated five million individuals living in the U.S. with cancer-related and primary 7 Table of Contents lymphedema, increases the prevalence estimates to over 20 million individuals.
The Tactile Medical trademark is registered in Australia and Japan, and the AffloVest trademark is registered in Australia, the European Union, New Zealand and the United Kingdom. 28 Table of Contents Seasonality Our business is affected by seasonality.
The Tactile Medical trademark is registered in Australia and Japan, and the AffloVest trademark is registered in Australia, the European Union, New Zealand and the United Kingdom. Seasonality Our business is affected by seasonality.
Market Opportunity Lymphedema and CVI are costly and lifelong conditions with debilitating physical and psychological impacts on patients. Based on a study performed by Dr. Steven Dean et al., it is estimated that more than 16 million people in the United States are living with lymphedema due to CVI.
Market Opportunity Lymphedema and CVI are costly and lifelong conditions with debilitating physical and psychological impacts on patients. Based on a study published in 2020 by Dr. Steven Dean of Ohio State Medical Center et al., it is estimated that more than 16 million people in the United States are living with lymphedema due to CVI.
We manage our arrangements with our third-party manufacturers and suppliers to adjust delivery schedules and quantities of components to match our changing manufacturing requirements. We forecast our component needs based on historical trends, current utilization patterns and sales forecasts of future demand.
We manage our arrangements with our third-party manufacturers and suppliers to adjust delivery schedules and quantities of components to match our changing manufacturing requirements. We forecast our component needs based on historical trends, current utilization patterns and sales forecasts of future demand. We establish our relationships with our third-party manufacturers and suppliers through supplier contracts and purchase orders.
This model allows us to engage directly with patients and clinicians, which are both critical audiences to which we can provide clinical evidence and education. For our respiratory therapy products, we have a durable medical equipment (“DME”) distribution model, utilizing mature comprehensive respiratory DME providers to service patients. We sell the AffloVest product to accredited DME providers.
This model allows us to engage directly with patients and clinicians, which are both critical audiences to which we can provide clinical evidence and education. For our respiratory therapy products, we have a durable medical equipment (“DME”) distribution model, utilizing mature comprehensive respiratory DME provider representatives to service patients.
Under this process, when a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is "substantially equivalent" to a previously cleared and legally marketed 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of a premarket approval application, which is commonly known as the "predicate device." In 2019, the FDA released an optional Safety and Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device.
Under this process, when a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is "substantially equivalent" to a previously cleared and legally marketed 510(k) device, a legally marketed device which has been reclassified from high to low or moderate risk or a device that was in commercial distribution before May 28, 1976 for which the FDA does not require the submission of a premarket approval application, which is commonly known as the "predicate device." In 2019, the FDA released a final guidance for industry regarding an optional Safety and Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device.
In 2023, our second-generation system, Entre Plus, was introduced. Kylee In 2022, we introduced Kylee™, a free mobile application to help patients learn about lymphedema, track their symptoms and treatment, and share their progress with their doctor. The purpose behind Kylee is to help support and encourage patients to embrace self-care and become more educated about their condition.
Kylee In 2022, we introduced Kylee™, a free mobile application to help patients learn about lymphedema, track their symptoms and treatment, and share their progress with their doctor. The purpose behind Kylee is to help support and encourage patients to embrace self-care and become more educated about their condition.
Of the 98 patients who responded, 66% reported being "very satisfied" with the treatment by our Flexitouch system and 29, or 30%, of patients reported being "satisfied" with the treatment by our Flexitouch system.
Of the 98 patients who responded, 70% reported being "very satisfied" with the treatment by our Flexitouch system and 30% reported being "satisfied" with the treatment by our Flexitouch system.
Our AffloVest system has received 510(k) clearance as a HFCWO device and is intended for promoting airway clearance and improvement of bronchial drainage by enhancing mobilization of bronchial secretions where manipulation of the thorax is the physician’s choice of treatment.
The user can set and store their personalized default treatment settings. Our AffloVest system has received 510(k) clearance as a HFCWO device and is intended for promoting airway clearance and improvement of bronchial drainage by enhancing mobilization of bronchial secretions where manipulation of the thorax is the physician’s choice of treatment.
As of December 31, 2023, we employed 270 field sales representatives who provide support throughout the United States for our lymphedema and respiratory therapies compared to 251 field sales representatives as of December 31, 2022. Our marketing team leads our efforts in brand development, product messaging, tradeshow attendance, medical educational forums, website development, social media and advertising.
As of December 31, 2024, we employed 298 account managers and specialists who provide support throughout the United States for our lymphedema and respiratory therapies compared to 270 account managers and specialists as of December 31, 2023. Our marketing team leads our efforts in brand development, product messaging, tradeshow attendance, medical educational forums, website development, social media and advertising.
Chronic venous insufficiency is a condition that occurs when the venous wall and/or valves in the veins are not working effectively, making it difficult for blood to return to the heart from the affected region(s). Phlebolymphedema is the convergence of lymphedema and chronic venous insufficiency.
Lymphedema is progressive in nature, worsens over time, and has no known cure. Chronic venous insufficiency is a condition that occurs when the venous wall and/or valves in the veins are not working effectively, making it difficult for blood to return to the heart from the affected region(s). Phlebolymphedema is the convergence of lymphedema and chronic venous insufficiency.
Garments that cover various parts of the body are used with these systems and billed using HCPCS codes E0656, E0657, E0667, E0668 and E0669. Our head and neck garments do not currently have billing codes assigned. To date, over 1,100 payers have paid for our products.
Garments that cover various parts of the body are used with these systems and billed using HCPCS codes E0656, E0657, E0667, E0668 and E0669. Our head and neck garment does not currently have a billing code assigned; it is currently billed using the miscellaneous DMEPOS HCPCS code E1399. To date, over 1,100 payers have paid for our products.
We believe the strength of our employees is the cornerstone to achieving these goals. As of December 31, 2023, we had 992 employees. We have 592 employees who are based throughout the United States, as well as 400 employees who are primarily based in our corporate/manufacturing locations in the Minneapolis metropolitan area.
We believe the strength of our employees is the cornerstone to achieving these goals. As of December 31, 2024, we had 1,037 employees. We have 613 employees who are based throughout the United States, as well as 424 employees who are primarily based in our corporate/manufacturing locations in the Minneapolis metropolitan area.
Reimbursement, Payer Relations and Customer Support Process Private insurers and other payers represented approximately 54% and 57% of our revenue in 2023 and 2022, respectively, while Medicare represented approximately 24% and 19% of our revenue in 2023 and 2022, respectively, Veterans Administration hospitals represented approximately 10% of our revenue in each of 2023 and 2022, and DME distributors represented approximately 12% and 14% of our revenue in 2023 and 2022, respectively.
Reimbursement, Payer Relations and Customer Support Process Private insurers and other payers represented approximately 60% and 54% of our revenue in 2024 and 2023, respectively, while Medicare represented approximately 18% and 24% of our revenue in 2024 and 2023, respectively, Veterans Administration hospitals represented approximately 11% and 10% of our revenue in 2024 and 2023, respectively, and DME distributors represented approximately 11% and 12% of our revenue in 2024 and 2023, respectively.
The time required to obtain clearance or approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may be different. Many countries also impose product standards, packaging requirements, environmental requirements, labeling requirements, and import restrictions on medical devices. Each country has its own tariff regulations, duties and tax requirements.
The time required to obtain clearance or approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may be different. Many countries also impose product standards, packaging requirements, environmental 25 Table of Contents requirements, labeling requirements, and import restrictions on medical devices.
Comparison of our Flexitouch System with Simple Pneumatic Compression Devices A prospective, randomized controlled trial published in Supportive Care in Cancer demonstrated that our Flexitouch system provides better clinical outcomes as compared to those achieved with a simple 13 Table of Contents pneumatic compression device for home-based treatment of breast cancer-related lymphedema.
Comparison of our Flexitouch System with Simple Pneumatic Compression Devices A prospective, randomized controlled trial published in Supportive Care in Cancer demonstrated that our Flexitouch system provides better clinical outcomes as compared to those achieved with a simple pneumatic compression device for home-based treatment of breast cancer-related lymphedema. The study was conducted in the United States and involved 36 patients.
Failure to comply with applicable foreign regulatory requirements may subject a company to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, criminal prosecution or other consequences.
Each country has its own tariff regulations, duties and tax requirements. Failure to comply with applicable foreign regulatory requirements may subject a company to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, criminal prosecution or other consequences.
As of December 31, 2023, we owned about 171 issued patents globally, of which 63 were issued U.S. patents. As of December 31, 2023, we owned about 24 pending patent applications pending globally, of which 9 were pending patent applications in the United States.
As of December 31, 2024, we owned about 171 issued patents globally, of which 65 were issued U.S. patents. As of December 31, 2024, we owned about 20 pending patent applications pending globally, of which 7 were pending patent applications in the United States.
The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the SEC.
The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the SEC. Information About our Executive Officers Certain information with respect to our executive officers as of February 14, 2025 is set forth below.
The greatest contributor to this change was a 54% reduction in outpatient hospital costs from $1,517 to $694 (p Flexitouch System Impact on Limb Volume and Patient-Reported Outcomes A prospective study published in the European Journal of Vascular and Endovascular Surgery demonstrated that use of our Flexitouch system is associated with statistically significant reduction in limb volume, improvement in quality of life and no significant adverse effects.
Outpatient hospital costs for the non-cancer patients declined by 65% from $1,726 to $606 (p Flexitouch System Impact on Limb Volume and Patient-Reported Outcomes A prospective study published in the European Journal of Vascular and Endovascular Surgery demonstrated that use of our Flexitouch system is associated with statistically significant reduction in limb volume, improvement in quality of life and no significant adverse effects.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.
Biggest changeOur efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations. 64 Table of Contents Risks Related to Ownership of Our Common Stock The trading price of the shares of our common stock has been and could continue to be highly volatile, and purchasers of our common stock may not be able to resell their shares of our common stock at or above the price at which they purchased their shares and could incur substantial losses.
A premarket approval application must be submitted to the FDA if the device cannot be cleared through the 510(k) process. The premarket approval application process is much more demanding and in-depth than the 510(k) premarket notification process and requires the payment of significant user fees.
A premarket approval application must be submitted to the FDA if the device cannot be cleared through the 510(k) process. The premarket approval application process is much more demanding and in-depth than the 510(k) premarket notification process and requires the payment of more significant user fees.
In order to achieve this growth strategy, we must: ● increase clinician and consumer awareness of these diseases, which are often underserved; ● introduce the clinical and economic benefits of our solutions to physicians, therapists and other clinicians across several specialties and in various clinical settings; and ● demonstrate consistent coverage and reimbursement for our solutions by private payers, Medicare, the Veterans Administration and certain Medicaid programs.
In order to achieve this growth strategy, we must: ● increase clinician and consumer awareness of these diseases, which are often underserved; ● introduce the clinical and economic benefits of our solutions to physicians, clinical lymphatic therapists and other clinicians across several specialties and in various clinical settings; and ● demonstrate consistent coverage and reimbursement for our solutions by private payers, Medicare, the Veterans Administration and certain Medicaid programs.
For example, California has laws that g ive California residents certain privacy rights in the collection and disclosure of their personal information and requires businesses to make certain disclosures and take certain other acts in furtherance of those rights, and has recently created a new agency, the California Privacy Protection Agency, authorized to implement and enforce California’s privacy laws, which could result in increased privacy and information security regulatory actions.
For example, California has laws that g ive California residents certain privacy rights in the collection and disclosure of their personal information and requires businesses to make certain disclosures and take certain other acts in furtherance of those rights, and has created a new agency, the California Privacy Protection Agency, authorized to implement and enforce California’s privacy laws, which could result in increased privacy and information security regulatory actions.
If we expand internationally, we would be subject to additional risks related to entering into international markets, including: ● difficulty obtaining approvals under foreign regulatory requirements, such as more stringent requirements for regulatory clearance of products; ● difficulty successfully training patients and physicians on using our products; ● difficulty hiring a qualified direct-sales force or finding and entering into commercially acceptable agreements with suitable third-parties to market our products; 41 Table of Contents ● reduced protection for intellectual property rights; ● increased or different tariffs, trade barriers and regulatory requirements; ● economic weakness, including inflation, or political instability in particular foreign economies and markets; ● compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; ● foreign taxes, including withholding of payroll taxes; ● foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; ● workforce uncertainty in countries where labor unrest is more common than in the United States; ● complex data privacy requirements; ● international regulators and third-party payers may require additional clinical studies prior to approving or allowing reimbursement for our products; ● disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the U.S.
If we expand internationally, we would be subject to additional risks related to entering into international markets, including: ● difficulty obtaining approvals under foreign regulatory requirements, such as more stringent requirements for regulatory clearance of products; ● difficulty successfully training patients and physicians on using our products; ● difficulty hiring a qualified direct-sales force or finding and entering into commercially acceptable agreements with suitable third-parties to market our products; ● reduced protection for intellectual property rights; ● increased or different tariffs, trade barriers and regulatory requirements; ● economic weakness, including inflation, or political instability in particular foreign economies and markets; ● compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; ● foreign taxes, including withholding of payroll taxes; ● foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; ● workforce uncertainty in countries where labor unrest is more common than in the United States; ● complex data privacy requirements; ● international regulators and third-party payers may require additional clinical studies prior to approving or allowing reimbursement for our products; ● disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the U.S.
Any future funding requirements will depend on many factors, including: ● market acceptance of our products; ● the scope, rate of progress and cost of our clinical studies; ● the cost of our research and development activities; ● the cost of filing and prosecuting patent applications and defending and enforcing our patent or other intellectual property rights; ● the cost of defending, in litigation or otherwise, any claims that we infringe third-party patents or other intellectual property rights; 58 Table of Contents ● the cost and timing of additional regulatory clearances or approvals; ● the cost and timing of establishing additional sales, marketing and distribution capabilities; ● costs associated with any product recall that may occur; ● the effect of competing technological and market developments; ● the extent to which we acquire or invest in products, technologies and businesses; and ● the costs of operating as a public company.
Any future funding requirements will depend on many factors, including: ● market acceptance of our products; ● the scope, rate of progress and cost of our clinical studies; ● the cost of our research and development activities; ● the cost of filing and prosecuting patent applications and defending and enforcing our patent or other intellectual property rights; 57 Table of Contents ● the cost of defending, in litigation or otherwise, any claims that we infringe third-party patents or other intellectual property rights; ● the cost and timing of additional regulatory clearances or approvals; ● the cost and timing of establishing additional sales, marketing and distribution capabilities; ● costs associated with any product recall that may occur; ● the effect of competing technological and market developments; ● the extent to which we acquire or invest in products, technologies and businesses; and ● the costs of operating as a public company.
We utilize third-party, single-source suppliers for some components and materials used in our products, and the loss of any of these suppliers could have an adverse impact on our business. We rely on third-party manufacturers and suppliers to supply all components and materials used in our Flexitouch Plus, Entre Plus and AffloVest systems.
We utilize third-party, single-source suppliers for some components and materials used in our products, and the loss of any of these suppliers could have an adverse impact on our business. We rely on third-party manufacturers and suppliers to supply all components and materials used in our Flexitouch Plus, Entre Plus, Nimbl and AffloVest systems.
In addition, there are many federal and state regulations covering payments made to physicians. The ACA imposed new reporting and disclosure requirements on device and drug manufacturers for any "transfer of value" made or distributed to teaching hospitals and other qualified healthcare providers.
In addition, there are many federal and state regulations covering payments made to physicians. The ACA imposed reporting and disclosure requirements on device and drug manufacturers for any "transfer of value" made or distributed to teaching hospitals and other qualified healthcare providers.
The following examples are illustrative: ● others may be able to make products that are similar to our products but that are not covered by the claims of the patents that we own or license from others; ● others may independently develop similar or alternative technologies or otherwise circumvent any of our technologies without infringing our intellectual property rights; ● we might not have been the first to conceive and reduce to practice the inventions covered by the patents or patent applications that we own, license or will own or license; ● we might not have been the first to file patent applications covering certain subject matter of the patents or patent applications that we own or for which we have obtained a license, or will own or for which we will obtain a license; ● it is possible that our pending patent applications will not result in issued patents; ● issued patents that we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; 63 Table of Contents ● our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● ownership of our patents or patent applications may be challenged by third parties; and ● the patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business.
The following examples are illustrative: ● others may be able to make products that are similar to our products but that are not covered by the claims of the patents that we own or license from others; ● others may independently develop similar or alternative technologies or otherwise circumvent any of our technologies without infringing our intellectual property rights; ● we might not have been the first to conceive and reduce to practice the inventions covered by the patents or patent applications that we own, license or will own or license; ● we might not have been the first to file patent applications covering certain subject matter of the patents or patent applications that we own or for which we have obtained a license, or will own or for which we will obtain a license; ● it is possible that our pending patent applications will not result in issued patents; ● issued patents that we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; ● our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● ownership of our patents or patent applications may be challenged by third parties; and ● the patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business.
We also cannot assure you that any data that may be collected will be compelling to the medical community because the data may not be scientifically meaningful or may not demonstrate that our products are attractive alternatives to traditional treatments.
We also cannot assure you that any data that may be collected will be compelling to the medical community because the data may not be scientifically meaningful or may not demonstrate that our products are attractive alternatives to traditional or other treatments.
As a healthcare provider participating in governmental healthcare programs, we are subject to complex laws and regulations directed at preventing fraud and abuse, which subject our marketing, billing, documentation and other practices to government scrutiny.
As a healthcare provider participating in governmental healthcare programs, we are subject to complex laws and regulations directed at preventing fraud and abuse, which subject our sales, marketing, billing, documentation and other practices to government scrutiny.
In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements with our directors and officers provide that we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law; Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe such person's conduct was unlawful and that we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements with our directors and officers provide that we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises 66 Table of Contents at our request, to the fullest extent permitted by Delaware law; Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe such person's conduct was unlawful and that we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
Acquisitions involve significant risks and uncertainties, including: ● incurring significantly higher than anticipated capital expenditures and operating expenses; ● failing to assimilate the operations, customers and personnel of the acquired company or business; ● disrupting our ongoing business; ● dissipating our management resources; ● dilution to existing stockholders from the issuance of equity securities; ● liabilities or other problems associated with the acquired business; ● failing to achieve the anticipated benefits of the acquisition; ● incurring debt on terms unfavorable to us or that we are unable to repay; ● becoming subject to adverse tax consequences, substantial depreciation or deferred compensation charges; ● improper compliance with laws and regulations; ● failing to maintain uniform standards, controls and policies; and ● impairing relationships with employees and business partners as a result of changes in management.
Acquisitions involve significant risks and uncertainties, including: ● incurring significantly higher than anticipated capital expenditures and operating expenses; ● failing to assimilate the operations, customers and personnel of the acquired company or business; ● disrupting our ongoing business; ● dissipating our management resources; ● dilution to existing stockholders from the issuance of equity securities; ● liabilities or other problems associated with the acquired business; ● failing to achieve the anticipated benefits of the acquisition; ● incurring debt on terms unfavorable to us or that we are unable to repay; 40 Table of Contents ● becoming subject to adverse tax consequences, substantial depreciation or deferred compensation charges; ● improper compliance with laws and regulations; ● failing to maintain uniform standards, controls and policies; and ● impairing relationships with employees and business partners as a result of changes in management.
We believe our cash, cash equivalents and cash flows from operations will be sufficient to meet our working capital, capital expenditure and debt repayment and related interest payment requirements for at least the next twelve months.
We believe our cash and cash flows from operations will be sufficient to meet our working capital, capital expenditure and debt repayment and related interest payment requirements for at least the next twelve months.
Other factors that may cause fluctuation in our quarterly results or variations from our forecasts include: ● physician adoption of our products; ● timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; ● unanticipated pricing pressure; ● the hiring, retention and continued productivity of our sales representatives; ● our ability to expand the geographic reach of our distribution, sales and marketing efforts; ● our ability to obtain regulatory clearance or approval for our products in development or for our current products outside the United States; ● the impact of results from clinical research and trials on our existing products and products in development; ● delays in receipt of anticipated purchase orders; ● delays in, or failure of, component deliveries from our suppliers; and ● positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry.
Other factors that may cause fluctuation in our quarterly results or variations from our forecasts include: ● physician adoption of our products; ● timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; ● unanticipated pricing pressure; ● the hiring, retention and continued productivity of our sales representatives; 37 Table of Contents ● our ability to expand the geographic reach of our distribution, sales and marketing efforts; ● our ability to obtain regulatory clearance or approval for our products in development or for our current products outside the United States; ● the impact of results from clinical research and trials on our existing products and products in development; ● delays in receipt of anticipated purchase orders; ● delays in, or failure of, component deliveries from our suppliers; and ● positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry.
Healthcare fraud and abuse and health information privacy and security laws potentially applicable to our operations include: ● the federal Anti-Kickback Statute, which applies to our marketing practices, educational programs, pricing policies and any relationships with healthcare providers, by prohibiting, among other things, soliciting, receiving, offering or providing remuneration, whether directly or indirectly and overtly or covertly, intended to induce the referral of an individual for (i) the furnishing or the arranging for the furnishing of items or services reimbursable under a federal healthcare program, such as Medicare or Medicaid; or (ii) the purchase, lease or order of, or the arrangement or recommendation of the purchasing, leasing or ordering of, of an item or service reimbursable under a federal healthcare program.
Healthcare fraud and abuse and health information privacy and security laws potentially applicable to our operations include: ● the federal Anti-Kickback Statute, which applies to our marketing practices, educational programs, pricing policies and any relationships with healthcare providers, by prohibiting, among other things, soliciting, receiving, offering or providing remuneration, whether directly or indirectly and overtly or covertly, intended to induce the referral of an individual for (i) the furnishing or the arranging for the 51 Table of Contents furnishing of items or services reimbursable under a federal healthcare program, such as Medicare or Medicaid; or (ii) the purchase, lease or order of, or the arrangement or recommendation of the purchasing, leasing or ordering of, of an item or service reimbursable under a federal healthcare program.
If a third-party claims that we infringe on their intellectual property or technology, we could face a number of issues, including: ● infringement and other intellectual property claims which, with or without merit, can be expensive and time-consuming to litigate and can divert management's attention from our core business; ● substantial damages for past infringement, which we may have to pay if a court decides that our product infringes on a competitor's patent; ● a court prohibiting us from selling or licensing our product, unless the patent holder licenses the patent to us; ● if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and ● redesigning our products and processes so they do not infringe, which may not be possible or could require substantial funds and time.
If a third-party claims that we infringe on their intellectual property or technology, we could face a number of issues, including: ● infringement and other intellectual property claims which, with or without merit, can be expensive and time-consuming to litigate and can divert management's attention from our core business; ● substantial damages for past infringement, which we may have to pay if a court decides that our product infringes on a competitor's patent; ● a court prohibiting us from selling or licensing our product, unless the patent holder licenses the patent to us; 60 Table of Contents ● if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and ● redesigning our products and processes so they do not infringe, which may not be possible or could require substantial funds and time.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: ● for non-premarket approval devices, failure of the applicant to demonstrate to the FDA's satisfaction that its products meet the definition of "substantial equivalence" or meet the standard for the FDA to grant a petition for De Novo classification; 44 Table of Contents ● failure of the applicant to demonstrate that there is reasonable assurance that the medical device is safe or effective under the conditions of use prescribed, recommended or suggested in the proposed labeling; ● insufficient data from the pre-clinical studies and clinical trials; and/or ● the manufacturing processes, methods, controls or facilities used for the manufacture, processing, packing or installation of the device do not meet applicable requirements.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: ● for non-premarket approval devices, failure of the applicant to demonstrate to the FDA's satisfaction that its products meet the definition of "substantial equivalence" or meet the standard for the FDA to grant a petition for De Novo classification; ● failure of the applicant to demonstrate that there is reasonable assurance that the medical device is safe or effective under the conditions of use prescribed, recommended or suggested in the proposed labeling; ● insufficient data from the pre-clinical studies and clinical trials; and/or ● the manufacturing processes, methods, controls or facilities used for the manufacture, processing, packing or installation of the device do not meet applicable requirements.
These factors include: ● increased sales and marketing costs to increase awareness of our products; ● costs to develop new and enhanced features for current products and research and development costs for new products; ● the time, resources and expense required to develop and conduct clinical trials and seek additional regulatory clearances and approvals for additional treatment indications for our products and for any additional products we develop or acquire; ● the costs of preparing, filing, prosecuting, defending and enforcing patent claims and other patent related costs, including litigation costs and the results of such litigation; ● any product liability or other lawsuits related to our products and the costs associated with defending them or the costs related to the results of such lawsuits; ● the costs to attract and retain personnel with the skills required for effective operations; ● the costs associated with being a public company; and ● costs associated with entering and maintaining international markets.
These factors include: ● increased sales and marketing costs to increase awareness of our products; ● costs to develop new and enhanced features for current products and research and development costs for new products; ● the time, resources and expense required to develop and conduct clinical trials and seek additional regulatory clearances and approvals for additional treatment indications for our products and for any additional products we develop or acquire; ● the costs of preparing, filing, prosecuting, defending and enforcing patent claims and other patent related costs, including litigation costs and the results of such litigation; 35 Table of Contents ● any product liability or other lawsuits related to our products and the costs associated with defending them or the costs related to the results of such lawsuits; ● the costs to attract and retain personnel with the skills required for effective operations; ● the costs associated with being a public company; and ● costs associated with entering and maintaining international markets.
In addition, as part of the payment processing process, we transmit our patients' and clinicians' credit and debit card information to our third-party payment processor.
In addition, as part of the payment processing process, we transmit our patients' credit and debit card information to our third-party payment processor.
Some of the companies developing or marketing competing products enjoy several competitive advantages, including: ● significantly greater name recognition; 36 Table of Contents ● established relations with healthcare professionals, customers and third-party payers; ● established distribution networks; ● additional lines of products, and the ability to offer rebates or bundle products to offer higher discounts or other incentives to gain a competitive advantage; ● greater history in conducting research and development, manufacturing, marketing and obtaining regulatory approval for homecare devices; and ● greater financial and human resources for product development, sales and marketing, patent litigation and customer financing.
Some of the companies developing or marketing competing products enjoy several competitive advantages, including: ● significantly greater name recognition; ● established relations with healthcare professionals, customers and third-party payers; ● established distribution networks; ● additional lines of products, and the ability to offer rebates or bundle products to offer higher discounts or other incentives to gain a competitive advantage; ● greater history in conducting research and development, manufacturing, marketing and obtaining regulatory approval for homecare devices; and ● greater financial and human resources for product development, sales and marketing, patent litigation and customer financing.
Furthermore, the FDA's ongoing review of the 510(k) program may make it more difficult for us to make modifications to our previously cleared products, either by imposing more strict requirements on when a manufacturer must submit a new 510(k) for a modification to a previously cleared product, or by applying more onerous review criteria to such submissions.
Furthermore, the FDA's ongoing review of the 510(k) program may make it more difficult for us to make modifications to our previously cleared products, either by imposing more strict requirements as to when a manufacturer must submit a new 510(k) for a modification to a previously cleared product, or by applying more onerous review criteria to such submissions.
Physicians and payers may require additional clinical studies prior to prescribing our products or prior to providing or maintaining coverage and reimbursement for our products. Any subsequent clinical studies that are conducted and published may not be positive or consistent with our existing data, which would adversely affect the rate of adoption of our products.
Physicians and payers may require additional clinical studies prior to prescribing our products or prior to providing or maintaining coverage and reimbursement for our products. Any subsequent clinical studies that are conducted and published may not be positive or consistent with our existing data, which could adversely affect the rate of adoption of our products.
The FDA and other U.S. and foreign governmental agencies regulate, among other things, with respect to medical devices: ● design, development and manufacturing; ● establishment registration and product listing; ● testing, labeling, content and language of instructions for use, storage and servicing; ● clinical trials; ● product safety; ● marketing, sales and distribution; ● unique device identifiers; ● premarket clearance and approval; ● record keeping procedures; ● advertising and promotion; ● recalls and field safety corrective actions; ● post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; ● post-market approval studies; and ● product import and export.
The FDA and other U.S. and foreign governmental agencies regulate, among other things, with respect to medical devices: ● design, development and manufacturing; ● establishment registration and product listing; ● testing, labeling, content and language of instructions for use, storage and servicing; ● clinical trials; ● product safety; 42 Table of Contents ● marketing, sales and distribution; ● unique device identifiers; ● premarket clearance and approval; ● record keeping procedures; ● advertising and promotion; ● recalls and field safety corrective actions; ● post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; ● post-market approval studies; and ● product and component import and export.
If our manufacturing facilities or those of any of our component manufacturers or suppliers are found to be in violation of applicable laws and regulations, or we or our manufacturers or suppliers fail to take satisfactory corrective action in response to an adverse inspection, the FDA could take enforcement action, including one or more of the following non-exclusive sanctions: ● untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; ● customer notifications or repair, replacement, refunds, recall, detention or seizure of our products; ● operating restrictions or partial suspension or total shutdown of production; ● refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products; ● withdrawing 510(k) clearances or premarket approvals that have already been granted; ● refusal to grant export approval for our products; or ● criminal prosecution.
If our manufacturing facilities or those of any of our component manufacturers or suppliers are found to be in violation of applicable laws and regulations, or we or our manufacturers or suppliers fail to take satisfactory corrective action in response to an adverse inspection, the FDA could take enforcement action, including one or more of the following non-exclusive sanctions: ● untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; 49 Table of Contents ● customer notifications or repair, replacement, refunds, recall, detention or seizure of our products; ● operating restrictions or partial suspension or total shutdown of production; ● refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products; ● withdrawing 510(k) clearances or premarket approvals that have already been granted; ● refusal to grant import of our products or components; ● refusal to grant export approval for our products; or ● criminal prosecution.
The majority of states also have statutes or regulations similar to the Federal Anti-Kickback Statute and Federal False Claims Act, which apply to items or services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of payer.
The majority of states also have statutes or regulations similar to the Federal Anti-Kickback Statute and Federal False Claims Act that apply to items or services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of payer.
These laws and regulations may be more restrictive and not preempted by U.S. federal laws. For example, several U.S. territories and all 50 states now 54 Table of Contents have data breach laws that require timely notification to individual victims, and at times regulators, if a company has experienced the unauthorized access or acquisition of sensitive personal data.
These laws and regulations may be more restrictive and not preempted by U.S. federal laws. For example, several U.S. territories and all 50 states now have data breach laws that require timely notification to individual victims, and at times regulators, if a company has experienced the unauthorized access or acquisition of sensitive personal data.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties, 62 Table of Contents redesign our infringing products and processes or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties, redesign our infringing products and processes or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
In particular, payers and physicians may see limitations in the design and results of the studies because certain studies were not specifically based on our products, involved a limited number of total subjects or subjects outside the control group and made "quality of life" conclusions based upon criteria contained in patient questionnaires that required subjective conclusions.
In particular, payers and physicians may see limitations in the design and results of the studies for a number of reasons, including because certain studies were not specifically based on our products, involved a limited number of total subjects or subjects outside the control group and made "quality of life" conclusions based upon criteria contained in patient questionnaires that required subjective conclusions.
In the event of a natural disaster, including a major earthquake, blizzard or hurricane, or a catastrophic event such as a fire, 40 Table of Contents power loss, or telecommunications failure, we may be unable to continue our operations for a period of time in the affected area, which could have an adverse effect on our future operating results.
In the event of a natural disaster, including a major earthquake, blizzard or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, we may be unable to continue our operations for a period of time in the affected area, which could have an adverse effect on our future operating results.
As a result, we are subject to a number of risks related to credit and debit card payments, including that we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our products or experience an increase in our costs and expenses.
As a result, we are subject to a number of risks related to credit and debit card payments, including that we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our products or experience an increase in 32 Table of Contents our costs and expenses.
Foreign Corrupt Practices Act, regulations of the U.S. Office of Foreign Assets Controls and U.S. anti-money laundering regulations, as well as exposure of our foreign operations to liability under these regulatory regimes; and ● business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
Foreign Corrupt Practices Act, regulations of the U.S. Office of Foreign Assets Controls and U.S. anti-money laundering regulations, as well as exposure of our foreign operations to liability under these regulatory regimes; and 41 Table of Contents ● business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
Litigation may be necessary to defend against these and other claims challenging our right to and use of confidential and proprietary information. If we fail in defending any such claims, in addition to paying monetary damages, we may lose our rights therein. Such an outcome could have a material adverse effect on our 64 Table of Contents business.
Litigation may be necessary to defend against these and other claims challenging our right to and use of confidential and proprietary information. If we fail in defending any such claims, in addition to paying monetary damages, we may lose our rights therein. Such an outcome could have a material adverse effect on our business.
Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. 46 Table of Contents Federal false claims laws prohibit, in part, any person from knowingly presenting or causing to be presented a false claim for payment to the federal government, or knowingly making or causing to be made a false statement to obtain payment.
Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. Federal false claims laws prohibit, in part, any person from knowingly presenting or causing to be presented a false claim for payment to the federal government, or knowingly making or causing to be made a false statement to obtain payment.
At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. Further, there could be potential trade name or trademark infringement claims brought by 65 Table of Contents owners of other trademarks or trade names that incorporate variations of our trademarks or trade names.
At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. Further, there could be potential trade name or trademark infringement claims brought by owners of other trademarks or trade names that incorporate variations of our trademarks or trade names.
We may also choose to voluntarily recall a product if any material deficiency is found. A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling 49 Table of Contents defects or other deficiencies and issues.
We may also choose to voluntarily recall a product if any material deficiency is found. A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling defects or other deficiencies and issues.
However, trade secrets and/or confidential know-how can be difficult to maintain as confidential. To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractors and advisors to enter into confidentiality agreements with us.
However, trade secrets and/or confidential know-how can be difficult to maintain as confidential. 62 Table of Contents To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractors and advisors to enter into confidentiality agreements with us.
Our failure to comply with applicable regulatory requirements could lead governmental authorities or a court to take action against us, including, but not limited to: ● issuing untitled (notice of violation) letters or public warning letters to us; ● imposing fines and penalties on us; ● obtaining an injunction or administrative detention preventing us from manufacturing or selling our products; ● seizing products to prevent sale or transport or export; ● bringing civil or criminal charges against us; ● recalling our products or mandating a product correction; ● detaining our products at U.S.
Our failure to comply with applicable regulatory requirements could lead governmental authorities or a court to take action against us, including, but not limited to: ● issuing untitled (notice of violation) letters or public warning letters to us; ● imposing fines and penalties on us; ● obtaining an injunction or administrative detention preventing us from manufacturing or selling our products; ● seizing products to prevent sale or transport or export; ● bringing civil or criminal charges against us; 44 Table of Contents ● recalling our products or mandating a product correction; ● detaining our products or their components at U.S.
We may incorrectly determine that our products are not covered by a third-party patent. Many patents may cover a marketed product, including but not limited to patents covering the product or portions thereof, methods of use or methods relating to the product, and production processes of or for the 60 Table of Contents product.
We may incorrectly determine that our products are not covered by a third-party patent. Many patents may cover a marketed product, including but not limited to patents covering the product or portions thereof, methods of use or methods relating to the product, and production processes of or for the product.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products. As is the case with other medical device companies, our success is heavily dependent on intellectual property, particularly on obtaining and enforcing patents.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products. As is the case with other medical device companies, our success may be dependent on intellectual property, particularly on obtaining and enforcing patents.
Losing any license could subject us to financial penalties and/or prohibit us from selling our current or future products to patients in a particular state and our business, financial condition and results of operations could be adversely affected as a result of any such prohibition.
Losing any license could subject us to financial penalties and/or prohibit us from selling our current 47 Table of Contents or future products to patients in a particular state and our business, financial condition and results of operations could be adversely affected as a result of any such prohibition.
Failure to submit required information may result in significant civil monetary penalties for "knowing failures", for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an 52 Table of Contents annual submission.
Failure to submit required information may result in significant civil monetary penalties for "knowing failures", for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission.
Responding to any action or threat of action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business.
Responding to any action or threat of action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and 52 Table of Contents divert our management's attention from the operation of our business.
In connection with our and our independent registered public accounting firm’s evaluations of our internal control over financial reporting, we may need to upgrade our systems, including information technology; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff.
In connection with our and our independent registered public accounting firm’s evaluations of our internal control over financial reporting, we may need to upgrade our systems, including 56 Table of Contents information technology; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff.
Further, because we fully rely on DME providers related to sales of our AffloVest product, any disruption affecting those DMEs could adversely impact our results, such as the large DME provider that experienced slowed placements of AffloVest due to eligibility requirement changes that led to the decrease in our airway clearance product line revenue in 2023.
Further, because we fully rely on DME providers related to sales of our AffloVest product, any disruption affecting those DMEs could adversely impact our results, such as the large DME provider that experienced slowed placements of AffloVest due to eligibility requirement changes that led to the decrease in our airway clearance product line revenue in 2023 and the first half of 2024.
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. Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
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. 63 Table of Contents Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may 55 Table of Contents be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result.
We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on any issued patent and/or pending patent applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of a patent or patent application.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on any issued patent and/or pending patent applications are due to be paid to 59 Table of Contents the USPTO and foreign patent agencies in several stages over the lifetime of a patent or patent application.
In addition, the stock market has recently experienced significant volatility with respect to medical device and other life sciences company stocks. The volatility of medical device and other medical technology 66 Table of Contents company stocks often does not relate to the operating performance of the companies represented by the stock.
In addition, the stock market has recently experienced significant volatility with respect to medical device and other life sciences company stocks. The volatility of medical device and other medical technology company stocks often does not relate to the operating performance of the companies represented by the stock.
It is not always possible to identify and deter employee and other third-party misconduct, and the steps we take to detect, prevent and remedy any such activity may not protect us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.
It is not always possible to identify and deter employee and other third-party misconduct, and the steps we take to detect, prevent and remedy any such activity may 55 Table of Contents not protect us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.
During an audit, insurers typically expect to find explicit documentation in the medical record to support a claim. Physicians and other clinicians, who are responsible for prescribing our products for patients, are expected to create and maintain the medical records that form the basis for the claims we submit to 38 Table of Contents Medicare and other insurers.
During an audit, insurers typically expect to find explicit documentation in the medical record to support a claim. Physicians and other clinicians, who are responsible for prescribing our products for patients, are expected to create and maintain the medical records that form the basis for the claims we submit to Medicare and other insurers.
The advantage of the De Novo process is that it generally requires less data than a premarket approval. The disadvantage is that it may require more data than a 510(k) and most often will include human clinical data.
The advantage of the De Novo process is that it generally requires less data than a premarket approval. The 43 Table of Contents disadvantage is that it may require more data than a 510(k) and most often will include human clinical data.
If we are unable to expand coverage of our products by additional commercial payers, or if third-party payers that currently cover or reimburse for our products reverse or limit their coverage or reimbursement levels in the future, our business and results of operations could be adversely affected.
If we are unable to expand coverage of our products by additional commercial payers, or if third-party payers that currently cover or reimburse for our products reverse 30 Table of Contents or limit their coverage or reimbursement in the future, our business and results of operations could be adversely affected.
For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA published new guidance on the 510(k) regulatory pathway in 2014, and again in 2023 through draft guidance, which altered and clarified the manner in which the 510(k) regulatory pathway is administered and interpreted.
For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA published a draft guidance on the 510(k) regulatory pathway in 2014, finalized in 2019, and again in 2023 through draft guidance, which altered and clarified the manner in which the 510(k) regulatory pathway is administered and interpreted.
Product liability claims may be brought against us by patients, clinicians or others selling or otherwise coming into contact with our products, among others. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities and reputational harm.
Product liability claims may be brought against us by patients, clinicians or 54 Table of Contents others selling or otherwise coming into contact with our products, among others. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities and reputational harm.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and further, competitors may export otherwise infringing products to territories where we have patent protection but enforcement rights are not as strong as those in the United States.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and further, competitors may export otherwise infringing products to territories where we have patent protection, but enforcement rights are not as strong as those in 58 Table of Contents the United States.
For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States may remain confidential until issued as patents. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of approximately 18 months after the earliest filing.
For example, certain applications filed in the United States that will not be filed outside the United States may remain confidential until issued as patents. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of approximately 18 months after the earliest filing.
If we are unsuccessful in developing and commercializing new products, our ability to increase our revenue may be impaired. 37 Table of Contents It is difficult to forecast future performance and our financial results may vary from forecasts and may fluctuate from quarter to quarter.
If we are unsuccessful in developing and commercializing new products, our ability to increase our revenue may be impaired. It is difficult to forecast future performance and our financial results may vary from forecasts and may fluctuate from quarter to quarter.
If the quality of our products does not meet the expectations of physicians or patients, then our brand and reputation could suffer and our business could be adversely impacted.
If the quality of our products does 39 Table of Contents not meet the expectations of physicians or patients, then our brand and reputation could suffer and our business could be adversely impacted.
Changes to the level of Medicare coverage or coverage criteria for our products could have an adverse effect on our business and results of operations.
Risks Related to Our Business, Operations and Strategy Changes to the level of Medicare coverage or coverage criteria for our products could have an adverse effect on our business and results of operations.
Our lymphedema products accounted for 88% and 86% of our revenue for the years ended December 31, 2023 and 2022, respectively. We expect that sales of our lymphedema products will continue to account for a majority of our revenue going forward.
Our lymphedema products accounted for 89% and 88% of our revenue for the years ended December 31, 2024 and 2023, respectively. We expect that sales of our lymphedema products will continue to account for a majority of our revenue going forward.
Reimbursement rates are established by fee schedules mandated by private payers, Medicare, the Veterans Administration, and certain Medicaid programs. Although Medicare and certain private payers index their reimbursement rate off of a subset of cost of living, the Veterans Administration, certain Medicaid programs and other private payers are more likely to remain constant or slightly decrease their reimbursement rates.
Although Medicare and certain private payers index their reimbursement rate off of a subset of cost of living, the Veterans Administration, certain Medicaid programs and other private payers are more likely to remain constant or slightly decrease their reimbursement rates.
Such a device is commonly known as a ‘‘predicate device.’’ In 2019, the FDA released an optional Safety and 43 Table of Contents Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device.
Such a device is commonly known as a ‘‘predicate device.’’ In 2019, the FDA released a final guidance for industry regarding an optional Safety and Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device.
If our third-party suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of our products, the supply of our products to customers and the development of any future products would be delayed, limited or prevented, which could have an adverse impact on our business. 31 Table of Contents Our revenue is primarily generated from our lymphedema products and we are therefore highly dependent on these products.
If our third-party suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers 31 Table of Contents capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of our products, the supply of our products to customers and the development of any future products would be delayed, limited or prevented, which could have an adverse impact on our business.
Our Entre Plus system is available for purchase by the Department of Veterans Affairs off contract. If we were to lose eligibility for reimbursement by the Department of Veterans Affairs, our business, financial condition and results of operations could be adversely affected.
Our Entre Plus and Nimbl systems are available for purchase by the Department of Veterans Affairs off contract. If we were to lose eligibility for reimbursement by the Department of Veterans Affairs, our business, financial condition and results of operations could be adversely affected.
Determinations of which products or services will be reimbursed under Medicare can be developed at the national level through a National Coverage Determination, or NCD, by CMS, or at the local level through a Local Coverage Determination, or LCD, by the four regional Medicare Administrative Contractors, which are private contractors that process and pay claims on behalf of CMS for different regions.
Determinations of which products or services will be reimbursed under Medicare can be developed at the national level through a National Coverage Determination, or NCD, by CMS, or at the local level through a Local Coverage Determination, or LCD, by the two regional Durable Medical Equipment (DME) Medicare Administrative Contractors (MACs), which are private contractors that process and pay claims on behalf of CMS for different regions.
If we fail to maintain or protect our information systems and data integrity effectively, we could: ● lose existing customers; ● have difficulty attracting new customers; ● have problems in determining product cost estimates and establishing appropriate pricing; ● suffer outages or disruptions in our operations or supply chain; ● have difficulty preventing, detecting, and controlling fraud; ● have disputes with customers, physicians, and other healthcare professionals; ● have regulatory sanctions or penalties imposed; ● incur increased operating expenses; ● be subject to issues with product functionality that may result in a loss of data, risk to patient safety, field actions and/or product recalls; ● incur expenses or lose revenue as a result of a data privacy breach; or ● suffer other adverse consequences. 32 Table of Contents We cannot assure you that cyber-attacks or data breaches will not occur or that systems issues will not arise in the future.
If we fail to maintain or protect our information systems and data integrity effectively, we could: ● lose existing customers; ● have difficulty attracting new customers; ● have problems in determining product cost estimates and establishing appropriate pricing; ● suffer outages or disruptions in our operations or supply chain; ● have difficulty preventing, detecting, and controlling fraud; ● have disputes with customers, physicians, and other healthcare professionals; ● have regulatory sanctions or penalties imposed; ● incur increased operating expenses; ● be subject to issues with product functionality that may result in a loss of data, risk to patient safety, field actions and/or product recalls; ● incur expenses or lose revenue as a result of a data privacy breach; or ● suffer other adverse consequences.
Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies have the potential to adversely impact demand for our products, our costs, our customers, our suppliers and the United States economy, which in turn could adversely impact our business, financial condition and results of operations. 35 Table of Contents Increases in our operating costs could have an adverse effect on our financial condition and results of operations.
The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies have the potential to adversely impact demand for our products, our costs, our customers, our suppliers and the United States economy, which in turn could adversely impact our business, financial condition and results of operations.
Failure to comply with these rules or requirements may result in fines and higher transaction fees, or we may lose the ability to accept credit and debit card payments from our patients, and there may be an adverse impact on our business.
Failure to comply with these rules or requirements may result in fines and higher transaction fees, or we may lose the ability to accept credit and debit card payments from our patients, and there may be an adverse impact on our business. Our long-term growth depends on awareness and adoption of our products.
General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.
Current or worsening economic conditions, including inflation, rising interest rates or a recession, could adversely affect our business and financial condition. 33 Table of Contents General global economic downturns and macroeconomic trends, including inflation, capital market volatility, interest rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.
Our operations use or generate small volumes of hazardous or toxic materials. We are therefore subject to a variety of federal, state and local regulations relating to the use, handling, storage, disposal and human exposure to hazardous and toxic materials.
We are therefore subject to a variety of federal, state and local regulations relating to the use, handling, storage, disposal and human exposure to hazardous and toxic materials.
If the actual number of patients who would benefit from our products and the total addressable market for our products is smaller than we have estimated, our future growth could be adversely impacted. We may be unable to manage our growth effectively. Our past growth has provided, and our future growth may create, challenges to our organization.
If the actual number of patients who would benefit from our products and the total 38 Table of Contents addressable market for our products is smaller than we have estimated, our future growth could be adversely impacted. We may be unable to manage our growth effectively.
Clinicians may not adopt our solutions as the standard of care for lymphedema, chronic venous insufficiency and chronic respiratory conditions or may not prescribe our products for a number of reasons, including: ● our inability to educate a sufficient number of clinicians on these diseases or our products; ● the unavailability or inadequacy of insurance coverage or reimbursement for our products; ● failure of evidence supporting clinical benefits or cost-effectiveness of our products over existing alternatives to convince clinicians to change their treatment methods; and ● resistance from clinicians to replace traditional treatments with our solutions. 33 Table of Contents We believe recommendations and support of our products by key opinion leaders can influence market acceptance and adoption.
Clinicians may not adopt our solutions as the standard of care for lymphedema, chronic venous insufficiency and chronic respiratory conditions or may not prescribe our products for a number of reasons, including: ● our inability to educate a sufficient number of clinicians on these diseases or our products; ● the unavailability or inadequacy of insurance coverage or reimbursement for our products; ● failure of evidence supporting clinical benefits or cost-effectiveness of our products over existing alternatives to convince clinicians to change their treatment methods; and ● resistance from clinicians to replace traditional treatments with our solutions.
These NCDs and LCDs may be subject to review and revision from time to time, which revisions may not be favorable for coverage of our products. Additional NCDs or LCDs, or changes in NCDs or LCDs for our products, could have adverse effects on our business.
The remaining NCDs may be subject to review and revision from time to time, and a new LCD may be developed, which may not be favorable for coverage of our products. Additional NCDs or LCDs, or changes in NCDs or LCDs for our products, could have adverse effects on our business.
Further, the extent to which the COVID-19 pandemic, including any resurgence or variant strains of the virus, or other health epidemics and disease outbreaks, will impact our business, financial condition and results of operations in the future will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration, spread, severity, and impact the effects on our clinician customers and their patients, our suppliers and our payers, and the remedial actions, any vaccine mandates and stimulus measures adopted by governmental authorities.
The extent to which health epidemics and disease outbreaks could impact our business, financial condition and results of operations depends on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration, spread, severity, and impact the effects on our clinician customers and their patients, our suppliers and our payers, and the remedial actions, any vaccine mandates and stimulus measures adopted by governmental authorities.
HIPAA and the HITECH Act also include standards for common healthcare electronic transactions and code sets, such as claims information, plan eligibility, payment information and the use of electronic signatures, and privacy and electronic security of individually identifiable health information.
HIPAA and the HITECH Act also include standards for common healthcare electronic transactions and code sets, such as claims information, plan eligibility, payment information and the use of electronic signatures, and privacy and electronic security of individually identifiable health information. Covered entities, such as healthcare providers, are required to conform to such transaction set standards pursuant to HIPAA.
Other U.S. states, such as Virginia, Utah, Connecticut, and Colorado, have passed consumer privacy laws that become effective in 2023. We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.
Other U.S. states have passed, or are considering passing, consumer privacy laws. We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.
Responding to any action or threat of action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from operation of our business.
Responding to any action or threat of action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove costly.
We will likely need to conduct additional clinical studies in the future to support new indications for our products or for clearances or approvals of new product lines, or for the approval of the use of our products in some foreign countries. Clinical testing can take many years, can be expensive and carries uncertain outcomes.
We will likely need to conduct additional clinical studies in the future to support new indications for our products or for clearances or approvals of new product lines, or for the approval of the use of our products in some foreign countries.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeUsing standards developed by Disaster Recovery Institute International (DRII), we regularly conduct a business impact analysis to determine risk level, assess impact severity and prioritize business processes based on company needs. 68 Table of Contents As part of our monitoring process, we perform tabletop exercises at least annually to test our current plans.
Biggest changeUsing standards developed by Disaster Recovery Institute International (DRII), we regularly conduct a business impact analysis to determine risk level, assess impact severity and prioritize business processes based on company needs. As part of our monitoring process, we perform tabletop exercises at least annually to test our current plans.
However, we are subject to ongoing risks from cybersecurity threats that could materially affect us, including our business strategy, results of operations, or financial condition, as further described in Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K.
However, we are subject to ongoing risks from 67 Table of Contents cybersecurity threats that could materially affect us, including our business strategy, results of operations, or financial condition, as further described in Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K.
Our Director of Information Security has 24 years of technology leadership experience, including 18 years directly overseeing cybersecurity programs in the healthcare device manufacturing industry, and holds the Certified Information Systems Security Professional (CISSP) certification.
Our Director of Information Security has 25 years of technology leadership experience, including 19 years directly overseeing cybersecurity programs in the healthcare device manufacturing industry, and holds the Certified Information Systems Security Professional (CISSP) certification.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeStockholder returns over the indicated periods should not be considered indicative of future stockholder returns. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Index ​ ​ ​ ​ 12/31/2018 ​ ​ 12/31/2019 ​ ​ 12/31/2020 ​ ​ 12/31/2021 ​ ​ 12/31/2022 ​ ​ 12/31/2023 Tactile Systems Technology, Inc. ​ $ 100 $ 148 ​ $ 99 $ 42 ​ $ 25 ​ $ 31 Nasdaq Composite Index ​ ​ ​ ​ 100 ​ ​ 135 ​ ​ 194 ​ ​ 236 ​ ​ 158 ​ ​ 226 Russell 2000 Index ​ ​ ​ ​ 100 ​ ​ 124 ​ ​ 146 ​ ​ 166 ​ ​ 131 ​ ​ 150 S&P Healthcare Equipment Select Industry Index ​ ​ ​ ​ 100 ​ ​ 122 ​ ​ 163 ​ ​ 168 ​ ​ 128 ​ ​ 121 ​ ​ ​ 71 Table of Contents Item 6. [Reserved .] ​
Biggest changeStockholder returns over the indicated periods should not be considered indicative of future stockholder returns. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Index ​ ​ ​ ​ 12/31/2019 ​ ​ 12/31/2020 ​ ​ 12/31/2021 ​ ​ 12/31/2022 ​ ​ 12/31/2023 ​ ​ 12/31/2024 Tactile Systems Technology, Inc. ​ $ 100 $ 67 ​ $ 28 $ 17 ​ $ 21 ​ $ 25 Nasdaq Composite Index ​ ​ ​ ​ 100 ​ ​ 144 ​ ​ 174 ​ ​ 117 ​ ​ 167 ​ ​ 215 Russell 2000 Index ​ ​ ​ ​ 100 ​ ​ 118 ​ ​ 135 ​ ​ 106 ​ ​ 121 ​ ​ 134 S&P Healthcare Equipment Select Industry Index ​ ​ ​ ​ 100 ​ ​ 133 ​ ​ 137 ​ ​ 105 ​ ​ 99 ​ ​ 104 ​ ​ ​ ​ ​ 70 Table of Contents Item 6. [Reserved .] ​
Item 4. Mine Safety Disclosures. Not Applicable. 69 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock has been listed on The Nasdaq Stock Market LLC under the symbol "TCMD" since July 28, 2016.
Item 4. Mine Safety Disclosures. Not Applicable. 68 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock has been listed on The Nasdaq Stock Market LLC under the symbol "TCMD" since July 28, 2016.
Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, outstanding indebtedness and plans for expansion and restrictions imposed by lenders, if any. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, outstanding indebtedness and plans for expansion and restrictions imposed by lenders, if any. Recent Sales of Unregistered Securities None.
The graph assumes that $100 was invested on December 31, 2018, in our common stock and each of the indices and that all dividends, if any, were reinvested. No cash dividends have been declared on our common stock.
The graph assumes that $100 was invested on December 31, 2019, in our common stock and each of the indices and that all dividends, if any, were reinvested. No cash dividends have been declared on our common stock.
Holders As of February 16, 2024, there were approximately 26 holders of record of our common stock. The actual number of holders of common stock is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and nominees.
Holders As of February 14, 2025, there were approximately 23 holders of record of our common stock. The actual number of holders of common stock is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and nominees.
Equity Compensation Plan Information The information required by this Item concerning equity compensation plans is incorporated herein by reference from Part III, Item 12 of this report. ​ 70 Table of Contents Stock Performance Graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total stockholder returns on the Nasdaq Composite Index, Russell 2000 Index and S&P Healthcare Equipment Select Industry Index for the periods indicated.
The share repurchase program became effective on October 30, 2024 and expires on October 31, 2026. ​ Equity Compensation Plan Information The information required by this Item concerning equity compensation plans is incorporated herein by reference from Part III, Item 12 of this report. ​ 69 Table of Contents Stock Performance Graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total stockholder returns on the Nasdaq Composite Index, Russell 2000 Index and S&P Healthcare Equipment Select Industry Index for the periods indicated.
Added
Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number ​ Approximate ​ ​ ​ ​ ​ ​ ​ ​ ​ of Shares ​ Dollar Value of ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchased as ​ Shares that ​ ​ ​ ​ ​ ​ ​ ​ ​ Part of Publicly ​ May Yet Be ​ ​ Total Number ​ Average ​ Announced ​ Purchased ​ ​ of Shares ​ Price Paid ​ Plans or ​ Under the Plans or Period ​ Purchased ​ Per Share (1) ​ Programs ​ Programs (2) October 2024 ​ — ​ ​ $ — ​ ​ — ​ $ — November 2024 ​ — ​ ​ ​ — ​ ​ — ​ ​ — December 2024 ​ 195,518 ​ ​ ​ 17.94 ​ ​ 195,518 ​ ​ 26,491,776 Total ​ 195,518 ​ ​ $ 17.94 ​ ​ 195,518 ​ $ 26,491,776 ​ (1) Amount includes commissions paid.
Added
(2) On November 4, 2024, we announced that our board of directors authorized a program to repurchase shares of our common stock in an aggregate amount not to exceed $30.0 million.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. ​ Selected Financial Data ​ 72 Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 72 Item 7A. ​ Quantitative and Qualitative Disclosures About Market Risk ​ 84 Item 8. ​ Financial Statements and Supplementary Data ​ 86
Biggest changeItem 6. ​ Selected Financial Data ​ 71 Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 71 Item 7A. ​ Quantitative and Qualitative Disclosures About Market Risk ​ 82 Item 8. ​ Financial Statements and Supplementary Data ​ 84

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe will continue to use significant judgment in evaluating the expected term, volatility and forfeiture rate related to our stock-based compensation. 77 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table presents our results of operations for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (In thousands) ​ 2023 ​ 2022 ​ $ ​ % Consolidated Statement ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ ​ ​ ​ ​ of Operations Data: ​ ​ ​ ​ revenue ​ ​ ​ ​ revenue ​ ​ ​ ​ ​ ​ Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales revenue ​ $ 239,493 ​ 87 % ​ $ 211,345 ​ 86 % ​ $ 28,148 ​ 13 % Rental revenue ​ ​ 34,930 ​ 13 % ​ ​ 35,440 ​ 14 % ​ ​ (510) ​ (1) % Total revenue ​ ​ 274,423 ​ 100 % ​ ​ 246,785 ​ 100 % ​ ​ 27,638 ​ 11 % Cost of revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales revenue ​ ​ 66,713 ​ 24 % ​ ​ 59,619 ​ 24 % ​ ​ 7,094 ​ 12 % Cost of rental revenue ​ ​ 12,577 ​ 5 % ​ ​ 11,190 ​ 5 % ​ ​ 1,387 ​ 12 % Total cost of revenue ​ ​ 79,290 ​ 29 % ​ ​ 70,809 ​ 29 % ​ ​ 8,481 ​ 12 % Gross profit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit - sales revenue ​ ​ 172,780 ​ 63 % ​ ​ 151,726 ​ 62 % ​ ​ 21,054 ​ 14 % Gross profit - rental revenue ​ ​ 22,353 ​ 8 % ​ ​ 24,250 ​ 9 % ​ ​ (1,897) ​ (8) % Gross profit ​ ​ 195,133 ​ 71 % ​ ​ 175,976 ​ 71 % ​ ​ 19,157 ​ 11 % Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing ​ ​ 107,119 ​ 39 % ​ ​ 106,418 ​ 43 % ​ ​ 701 ​ 1 % Research and development ​ ​ 7,823 ​ 3 % ​ ​ 7,088 ​ 3 % ​ ​ 735 ​ 10 % Reimbursement, general and administrative ​ ​ 62,074 ​ 22 % ​ ​ 60,796 ​ 25 % ​ ​ 1,278 ​ 2 % Intangible asset amortization and earn-out ​ ​ 76 ​ — % ​ ​ 14,432 ​ 5 % ​ ​ (14,356) ​ (99) % Total operating expenses ​ ​ 177,092 ​ 64 % ​ ​ 188,734 ​ 76 % ​ ​ (11,642) ​ (6) % Income (loss) from operations ​ ​ 18,041 ​ 7 % ​ ​ (12,758) ​ (5) % ​ ​ 30,799 ​ 241 % Other expense ​ ​ (2,271) ​ (1) % ​ ​ (2,715) ​ (1) % ​ ​ 444 ​ (16) % Income (loss) before income taxes ​ ​ 15,770 ​ 6 % ​ ​ (15,473) ​ (6) % ​ ​ 31,243 ​ 202 % Income tax (benefit) expense ​ ​ (12,745) ​ (5) % ​ ​ 2,393 ​ 1 % ​ ​ (15,138) ​ N.M. % Net income (loss) ​ $ 28,515 ​ 11 % ​ $ (17,866) ​ (7) % ​ $ 46,381 ​ 260 % ​ “N.M.” Not Meaningful ​ Revenue Revenue increased $27.6 million, or 11%, to $274.4 million in the year ended December 31, 2023, compared to $246.8 million in the year ended December 31, 2022.
Biggest changeChanges in contractual pricing, payment trends and rebate structures would impact, either positively or negatively, our sales and rental revenue. 75 Table of Contents ​ Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table presents our results of operations for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (In thousands) ​ 2024 ​ 2023 ​ $ ​ % Condensed Consolidated Statement ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ ​ ​ ​ ​ of Operations Data: ​ ​ ​ ​ revenue ​ ​ ​ ​ revenue ​ ​ ​ ​ ​ ​ Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales revenue ​ $ 256,012 ​ 87 % ​ $ 239,493 ​ 87 % ​ $ 16,519 ​ 7 % Rental revenue ​ ​ 36,972 ​ 13 % ​ ​ 34,930 ​ 13 % ​ ​ 2,042 ​ 6 % Total revenue ​ ​ 292,984 ​ 100 % ​ ​ 274,423 ​ 100 % ​ ​ 18,561 ​ 7 % Cost of revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales revenue ​ ​ 64,815 ​ 22 % ​ ​ 66,713 ​ 24 % ​ ​ (1,898) ​ (3) % Cost of rental revenue ​ ​ 11,481 ​ 4 % ​ ​ 12,577 ​ 5 % ​ ​ (1,096) ​ (9) % Total cost of revenue ​ ​ 76,296 ​ 26 % ​ ​ 79,290 ​ 29 % ​ ​ (2,994) ​ (4) % Gross profit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit - sales revenue ​ ​ 191,197 ​ 65 % ​ ​ 172,780 ​ 63 % ​ ​ 18,417 ​ 11 % Gross profit - rental revenue ​ ​ 25,491 ​ 9 % ​ ​ 22,353 ​ 8 % ​ ​ 3,138 ​ 14 % Gross profit ​ ​ 216,688 ​ 74 % ​ ​ 195,133 ​ 71 % ​ ​ 21,555 ​ 11 % Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing ​ ​ 112,009 ​ 38 % ​ ​ 107,119 ​ 39 % ​ ​ 4,890 ​ 5 % Research and development ​ ​ 8,832 ​ 3 % ​ ​ 7,823 ​ 3 % ​ ​ 1,009 ​ 13 % Reimbursement, general and administrative ​ ​ 71,135 ​ 24 % ​ ​ 62,074 ​ 22 % ​ ​ 9,061 ​ 15 % Intangible asset amortization and earn-out ​ ​ 2,531 ​ 1 % ​ ​ 76 ​ — % ​ ​ 2,455 ​ N.M. % Total operating expenses ​ ​ 194,507 ​ 66 % ​ ​ 177,092 ​ 64 % ​ ​ 17,415 ​ 10 % Income from operations ​ ​ 22,181 ​ 8 % ​ ​ 18,041 ​ 7 % ​ ​ 4,140 ​ (23) % Interest income ​ ​ 3,384 ​ 1 % ​ ​ 1,874 ​ 1 % ​ ​ 1,510 ​ 81 % Interest expense ​ ​ (2,085) ​ (1) % ​ ​ (4,147) ​ (2) % ​ ​ 2,062 ​ 50 % Other income ​ ​ 9 ​ — % ​ ​ 2 ​ — % ​ ​ 7 ​ N.M. % Income before income taxes ​ ​ 23,489 ​ 8 % ​ ​ 15,770 ​ 6 % ​ ​ 7,719 ​ (49) % Income tax expense (benefit) ​ ​ 6,529 ​ 2 % ​ ​ (12,745) ​ (5) % ​ ​ 19,274 ​ (151) % Net income ​ $ 16,960 ​ 6 % ​ $ 28,515 ​ 11 % ​ $ (11,555) ​ 41 % ​ “N.M.” Not Meaningful ​ Revenue Revenue increased $18.6 million, or 7%, to $293.0 million in the year ended December 31, 2024, compared to $274.4 million in the year ended December 31, 2023.
Our current lymphedema products are the Flexitouch Plus and Entre Plus systems and our airway clearance product is the AffloVest. A predecessor to our Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in July 2002, and we introduced the system to address the many limitations of self-administered home-based manual lymphatic drainage therapy.
Our current lymphedema products are the Flexitouch Plus, Entre Plus and Nimbl systems and our airway clearance product is the AffloVest. A predecessor to our Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in July 2002, and we introduced the system to address the many limitations of self-administered home-based manual lymphatic drainage therapy.
We recognize revenue when control of the product has been transferred to our customer, in the amount of the expected consideration to be received for the product. Expected consideration is estimated as follows: ● Flexitouch Plus and Entre Plus systems. Expected consideration to be received is estimated based on a detailed review of historical pricing adjustments and collections.
We recognize revenue when control of the product has been transferred to our customer, in the amount of the expected consideration to be received for the product. Expected consideration is estimated as follows: ● Flexitouch Plus, Entre Plus and Nimbl systems. Expected consideration to be received is estimated based on a detailed review of historical pricing adjustments and collections.
The Credit Agreement provides that, subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed $25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $80.0 million. ​ On September 8, 2021, in connection with the closing of the acquisition of the AffloVest business, we borrowed the $30.0 million term loan and utilized that borrowing, together with a draw of $25.0 million under the revolving credit facility and cash on hand, to fund the purchase price. ​ On February 22, 2022, we entered into a Second Amendment Agreement (the “Second Amendment”), which further amends the Credit Agreement.
The Credit Agreement provides that, subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed $25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $80.0 million. ​ On September 8, 2021, in connection with the closing of the acquisition of the AffloVest business, we borrowed the $30.0 million term loan and utilized that borrowing, together with a draw of $25.0 million under the revolving credit facility and cash on hand, to fund the purchase price. ​ On February 22, 2022, we entered into a Second Amendment Agreement (the “Second Amendment”), which further amended the Credit Agreement.
We believe our cash, cash equivalents and cash flows from operations will be sufficient to meet our working capital, capital expenditure, debt repayment and related interest, and other cash requirements for at least the next twelve months.
We believe our cash and cash flows from operations will be sufficient to meet our working capital, capital expenditure, debt repayment and related interest, and other cash requirements for at least the next twelve months.
To the extent our revenue grows, we expect sales and marketing expenses to decrease as a percentage of revenue over time. 74 Table of Contents Research and Development Expenses Research and development, or R&D, expenses consist primarily of personnel-related expenses, third-party product development costs, laboratory supplies, consulting fees and related costs, clinical research expenses, expenses related to clinical and regulatory affairs, patent amortization costs, stock-based compensation and patent legal fees, including defense costs, and testing costs for new product launches.
To the extent our revenue grows, we expect sales and marketing expenses to decrease as a percentage of revenue over time. 73 Table of Contents Research and Development Expenses Research and development, or R&D, expenses consist primarily of personnel-related expenses, third-party product development costs, laboratory supplies, consulting fees and related costs, clinical research expenses, expenses related to clinical and regulatory affairs, patent amortization costs, stock-based compensation and patent legal fees, including defense costs, and testing costs for new product launches.
The AffloVest device is sold through respiratory durable medical equipment providers throughout the United States that service patients and bill third-party payers for the product. We also employ a small group of respiratory specialists, who educate DME representatives, provide product demonstrations for targeted clinicians and support technical 72 Table of Contents questions related to the AffloVest.
The AffloVest device is sold through respiratory durable medical equipment providers throughout the United States that service patients and bill third-party payers for the product. We also employ a small group of respiratory specialists, who educate DME representatives, provide product demonstrations for targeted 71 Table of Contents clinicians and support technical questions related to the AffloVest.
Components of our Results of Operations Revenue We derive revenue from sales and rentals of our Flexitouch Plus and Entre Plus systems to patients in the United States.
Components of our Results of Operations Revenue We derive revenue from sales and rentals of our Flexitouch Plus, Entre Plus and Nimbl systems to patients in the United States.
Inflation and changing prices did not have a material effect on our business during the year ended December 31, 2023, and we do not expect that inflation or changing prices will materially affect our business for at least the next twelve months.
Inflation and changing prices did not have a material effect on our business during the year ended December 31, 2024, and we do not expect that inflation or changing prices will materially affect our business for at least the next twelve months.
All tenors of term SOFR are subject to a credit spread adjustment of 0.10% (“Adjusted Term SOFR”). ​ On August 1, 2023, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”), which further amends the Credit Agreement.
All tenors of term SOFR are subject to a credit spread adjustment of 0.10% (“Adjusted Term SOFR”). ​ On August 1, 2023, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”), which further amended the Credit Agreement.
However, any reversal in these recent trends could have a negative impact on our future revenue. We sell or rent our Flexitouch Plus and Entre Plus systems either directly to patients or to the Veterans Administration on behalf of patients, who are referred to us by physicians, therapists or nurses.
However, any reversal in these recent trends could have a negative impact on our future revenue. We sell or rent our Flexitouch Plus, Entre Plus and Nimbl systems either directly to patients or to the Veterans Administration on behalf of patients, who are referred to us by physicians, clinical lymphatic therapists or nurses.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and related disclosure of contingent 75 Table of Contents assets and liabilities, revenue and expenses at the date of the financial statements.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and related disclosure of contingent 74 Table of Contents assets and liabilities, revenue and expenses at the date of the financial statements.
In addition, the Fourth Amendment provided for an additional term loan in the amount of $8.25 million, which we used for a paydown of the revolving 82 Table of Contents credit facility.
In addition, the Fourth Amendment provided for an additional term loan in the amount of $8.25 million, which we used for a paydown 80 Table of Contents of the revolving credit facility.
Therefore, we consider an understanding of the variability and judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results. Revenue Recognition We derive revenue from the sales and rentals of our proprietary line of Flexitouch Plus and Entre Plus systems, and from sales of our AffloVest product.
Therefore, we consider an understanding of the variability and judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results. Revenue Recognition We derive lymphedema product revenue from the sales and rentals of our proprietary line of Flexitouch Plus, Entre Plus and Nimbl systems.
Discussion of 2021 results and year-over-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 21, 2023.
Discussion of 2022 results and year-over-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024.
AffloVest is a portable, wearable vest that provides airway clearance to treat patients with chronic respiratory conditions such as bronchiectasis or conditions resulting from neuromuscular disorders. For the years ended December 31, 2023 and 2022, sales of AffloVest represented 12% and 14% of our revenue, respectively.
AffloVest is a portable, wearable vest that provides airway clearance to treat patients with chronic respiratory conditions such as bronchiectasis or conditions resulting from neuromuscular disorders. For the years ended December 31, 2024 and 2023, sales of AffloVest represented 11% and 12% of our revenue, respectively.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations focuses on discussion of year-over-year comparisons between 2023 and 2022.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations focuses on discussion of year-over-year comparisons between 2024 and 2023.
We rely on third-party contract manufacturers for the sourcing of parts, the assembly of our controllers and the manufacturing of the garments used with our systems. We conduct final assembly of the garments used with our products, perform quality assurance and ship our products from our facility in Minnesota.
We rely on third-party contract manufacturers for the sourcing of parts, the assembly of our controllers and the manufacturing of the garments used with our systems. We conduct final assembly of the garments used with our products, perform quality assurance and ship our products from our facility in Minnesota. We manufacture and ship the AffloVest device from our Minnesota-based facility.
In July 2022, we launched Kylee™, a free mobile application that allows for patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources. ​ For the year ended December 31, 2023, we generated revenue of $274.4 million and had net income of $28.5 million, compared to revenue of $246.8 million and a net loss of $17.9 million for the year ended December 31, 2022, and revenue of $208.1 million and a net loss of $11.8 million for the year ended December 31, 2021.
In July 2022, we launched Kylee™, a free mobile application that allows for patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources. ​ For the year ended December 31, 2024, we generated revenue of $293.0 million and had net income of $17.0 million, compared to revenue of $274.4 million and net income of $28.5 million for the year ended December 31, 2023, and revenue of $246.8 million and a net loss of $17.9 million for the year ended December 31, 2022.
To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of our direct sales force, training resources, reimbursement capabilities and clinical expertise. We market our lymphedema products in the United States using a direct-to-patient and -provider model.
To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of our direct sales force, DME sales team, patient education team, reimbursement capabilities and clinical expertise. We market our lymphedema products in the United States using a direct-to-patient and -provider model.
This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products. 80 Table of Contents Liquidity and Capital Resources Overview As of December 31, 2023, we had cash and cash equivalents of $61.0 million and net accounts receivable of $54.1 million compared to cash and cash equivalents of $21.9 million and net accounts receivable of $77.9 million as of December 31, 2022.
This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products. 78 Table of Contents Liquidity and Capital Resources Overview As of December 31, 2024, we had cash of $94.4 million and net accounts receivable of $44.9 million compared to cash of $61.0 million and net accounts receivable of $54.1 million as of December 31, 2023.
Net Cash Used in Investing Activities Net cash used in investing activities during the year ended December 31, 2023, was $2.5 million, primarily consisting of $2.3 million in purchases of property and equipment primarily related to production tooling and office equipment and $0.2 million related to the acquisition of patents and other intangible assets.
Net Cash Used in Investing Activities Net cash used in investing activities during the year ended December 31, 2024, was $2.5 million, primarily consisting of $2.4 million in purchases of property and equipment primarily related to tenant improvements, production tooling and office equipment and $0.1 million related to the acquisition of patents and other intangible assets.
We bill payers, such as private insurers, Medicare, or Medicaid, on behalf of our patients and bill patients directly for their cost-sharing amounts, including any portion of an unsatisfied deductible and any copayments or co-insurance.
We bill payers, such as private insurers, Medicare, or Medicaid, on behalf of our patients and bill patients directly for their cost-sharing amounts, including any portion of an unsatisfied deductible and any copayments or co-insurance. We bill the Veterans Administration directly for the purchase or lease of our product on behalf of the patient.
Adequacy of Resources Our future cash requirements may vary significantly from those now planned and will depend on many factors, including: ● the impact of inflation, rising interest rates or a recession on our business; ● sales and marketing resources needed to further penetrate our market; ● expansion of our operations; ● response of competitors to our solutions and applications; ● costs associated with clinical research activities; ● increases in interest rates; 83 Table of Contents ● labor shortages and wage inflation; ● component price inflation; ● costs to develop and implement new products; and ● use of capital for acquisitions or licenses, if any.
(4) Interest payment amounts on long-term debt are calculated using outstanding balances and interest rates in effect on December 31, 2024. 81 Table of Contents Adequacy of Resources Our future cash requirements may vary significantly from those now planned and will depend on many factors, including: ● the impact of inflation, rising interest rates or a recession on our business; ● sales and marketing resources needed to further penetrate our market; ● expansion of our operations; ● IT investments to scale our business; ● response of competitors to our solutions and applications; ● costs associated with clinical research activities; ● increases in interest rates; ● labor shortages and wage inflation; ● component price inflation; ● costs to develop and implement new products; and ● use of capital for acquisitions or licenses, if any.
We update our assessment of collectability on a quarterly basis, with any adjustments for Flexitouch Plus and Entre Plus systems being reflected as sales and rental revenue and AffloVest products being reflected as bad debt expense within reimbursement, general and administrative expenses in the Consolidated Statements of Operations in the period of adjustment.
We update our assessment of collectability on a quarterly basis, with any adjustments for Flexitouch Plus, Entre Plus and Nimbl systems being reflected as sales and rental revenue in the Consolidated Statements of Operations in the period of adjustment.
Sales and Marketing Expenses Sales and marketing expenses increased $0.7 million, or 1%, to $107.1 million during the year ended December 31, 2023, compared to $106.4 million during the year ended December 31, 2022.
Sales and Marketing Expenses Sales and marketing expenses increased $4.9 million, or 5%, to $112.0 million during the year ended December 31, 2024, compared to $107.1 million during the year ended December 31, 2023.
The increase was primarily attributable to a: ● $1.6 million increase in personnel-related compensation expense as a result of increased headcount in our reimbursement operations, payer relations and corporate functions; ● $0.9 million increase in IT related expenses; and ● $0.2 million increase in travel and entertainment expenses.
The increase was primarily attributable to a: ● $5.0 million increase in personnel-related compensation expense as a result of increased headcount in our reimbursement operations, payer relations and corporate functions; ● $2.8 million increase in IT related expenses; and ● $1.3 million increase occupancy costs, depreciation expense and professional fees.
Net cash used in investing activities during the year ended December 31, 2022, was $1.9 million, primarily consisting of $1.8 million in purchases of property and equipment primarily related to office equipment, production tooling and tenant improvements and $0.1 million related to the acquisition of patents and other intangible assets. 81 Table of Contents Net Cash Provided by (Used in) Financing Activities Net cash provided by financing activities during the year ended December 31, 2023, was $5.7 million, primarily consisting of net proceeds from the offering of our common stock of $34.6 million, $8.3 million in borrowings under our term loan, and $1.5 million in proceeds from the issuance of common stock under the ESPP, partially offset by payments of $25.0 million on the revolving credit facility, $10.6 million on the AffloVest earn-out, and $3.0 million on our term loan.
Net cash provided by financing activities during the year ended December 31, 2023, was $5.7 million, primarily consisting of net proceeds from the offering of our common stock of $34.6 million, $8.3 million in borrowings under our term loan, and $1.5 million in proceeds from the issuance of common stock under the ESPP, partially offset by payments of $25.0 million on the revolving credit facility, $10.6 million on the AffloVest earn-out, and $3.0 million on our term loan.
Net cash provided by operating activities during the year ended December 31, 2022, was $5.2 million, resulting from a net loss of $17.9 million and non-cash net income adjustments of $27.7 million, which were offset by a change in net operating assets and liabilities of $4.6 million.
Net cash provided by operating activities during the year ended December 31, 2023, was $35.9 million, resulting from net income of $28.5 million and a change in operating assets and liabilities of $15.1 million, which were partially offset by non-cash net income adjustments of $7.8 million.
Sales and rentals of our lymphedema products represented 88% and 86% of our revenue in the years ended December 31, 2023 and 2022, respectively. On September 8, 2021, we acquired the assets of the AffloVest airway clearance product line from International Biophysics Corporation (“IBC”), a privately-held company which developed and manufactured AffloVest.
Sales and rentals of our lymphedema products represented 89% and 88% of our revenue in the years ended December 31, 2024 and 2023, respectively. On September 8, 2021, we acquired the assets of the AffloVest airway clearance product line.
Future Cash Requirements Our material estimated future cash requirements under our contractual obligations and commercial commitments as of December 31, 2023, in total and disaggregated into current (payable in 2024) and long-term (payable after 2024) obligations, are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due By Period ​ ​ Less Than ​ ​ More Than (In thousands) Total 1 Year 1-3 Years 3-5 Years 5 Years Purchase commitments (1) ​ $ 24,291 ​ $ 24,291 ​ $ — ​ $ — ​ $ — Operating lease obligations (2) ​ ​ 24,232 ​ ​ 3,539 ​ ​ 7,359 ​ ​ 6,395 ​ ​ 6,939 Note payable payments (3) ​ ​ 29,250 ​ ​ 3,000 ​ ​ 26,250 ​ ​ — ​ ​ — Interest payments (4) ​ ​ 5,160 ​ ​ 2,189 ​ ​ 2,971 ​ ​ — ​ ​ — Total ​ $ 82,933 ​ $ 33,019 ​ $ 36,580 ​ $ 6,395 ​ $ 6,939 (1) We issued purchase orders in 2023 totaling $24.3 million for goods that we expect to receive and pay for in 2024.
Future Cash Requirements Our material estimated future cash requirements under our contractual obligations and commercial commitments as of December 31, 2024, in total and disaggregated into current (payable in 2025) and long-term (payable after 2025) obligations, are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due By Period ​ ​ Less Than ​ ​ More Than (In thousands) Total 1 Year 1-3 Years 3-5 Years 5 Years Purchase commitments (1) ​ $ 22,752 ​ $ 22,752 ​ $ — ​ $ — ​ $ — Operating lease obligations (2) ​ ​ 21,131 ​ ​ 3,736 ​ ​ 7,119 ​ ​ 6,584 ​ ​ 3,692 Note payable payments (3) ​ ​ 26,250 ​ ​ 3,000 ​ ​ 23,250 ​ ​ — ​ ​ — Interest payments (4) ​ ​ 2,477 ​ ​ 1,622 ​ ​ 855 ​ ​ — ​ ​ — Total ​ $ 72,610 ​ $ 31,110 ​ $ 31,224 ​ $ 6,584 ​ $ 3,692 (1) We issued purchase orders in 2024 totaling $22.8 million for goods that we expect to receive and pay for in 2025.
Cash Flows The following table summarizes our cash flows for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2023 2022 Net cash provided by (used in): ​ ​ ​ ​ ​ ​ Operating activities $ 35,855 ​ $ 5,209 Investing activities ​ ​ (2,481) ​ ​ (1,909) Financing activities ​ ​ 5,730 ​ ​ (9,600) Net increase (decrease) in cash and cash equivalents $ 39,104 ​ $ (6,300) ​ Net Cash Provided by Operating Activities Net cash provided by operating activities during the year ended December 31, 2023, was $35.9 million, resulting from net income of $28.5 million and a change in operating assets and liabilities of $15.1 million, which were partially offset by non-cash net income adjustments of $7.8 million.
Cash Flows The following table summarizes our cash flows for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2024 2023 Net cash provided by (used in): ​ ​ ​ ​ ​ ​ Operating activities $ 40,655 ​ $ 35,855 Investing activities ​ ​ (2,497) ​ ​ (2,481) Financing activities ​ ​ (4,824) ​ ​ 5,730 Net increase in cash $ 33,334 ​ $ 39,104 ​ Net Cash Provided by Operating Activities Net cash provided by operating activities during the year ended December 31, 2024, was $40.7 million, resulting from net income of $17.0 million, non-cash net income adjustments of $16.0 million and a change in operating assets and liabilities of $7.7 million.
Specifically, payment history of the applicable payer, as well as historical patient collections, serve as primary sources of information in estimating expected consideration. ● AffloVest product. Expected consideration to be received is based on agreements in place with DME providers.
Specifically, payment history of the applicable payer, as well as historical patient collections, serve as primary sources of information in estimating expected consideration.
As of December 31, 2023, we employed 254 field sales representatives for our lymphedema products and a team of 16 supporting our airway clearance products. This compares to 241 field sales representatives (excluding 9 key account managers) for our lymphedema products and a team of 10 specialists supporting our airway clearance products as of December 31, 2022.
As of December 31, 2024, we employed 169 account managers and 111 specialists for our lymphedema products and a team of 18 specialists supporting our airway clearance products. This compares to 150 account managers and 104 specialists for our lymphedema products and a team of 16 specialists supporting our airway clearance products as of December 31, 2023.
Research and Development Expenses Research and development (“R&D”) expenses increased $0.7 million, or 10%, to $7.8 million during the year ended December 31, 2023, compared to $7.1 million during the year ended December 31, 2022, which was primarily attributable to an increase in personnel-related expenses. ​ 79 Table of Contents Reimbursement, General and Administrative Expenses Reimbursement, general and administrative expenses increased $1.3 million, or 2%, to $62.1 million during the year ended December 31, 2023, compared to $60.8 million during the year ended December 31, 2022.
Research and Development Expenses Research and development (“R&D”) expenses increased $1.0 million, or 13%, to $8.8 million during the year ended December 31, 2024, compared to $7.8 million during the year ended December 31, 2023, which was primarily attributable to a $0.6 million increase in professional fees and a $0.5 million increase in personnel-related expenses.
Revenue from Medicare represented 24% and 19% of total revenue for the years ended December 31, 2023 and 2022, respectively. 78 Table of Contents ​ The following table summarizes our revenue by product line for the years ended December 31, 2023 and 2022, both in dollars and percentage of total revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (In thousands) 2023 ​ 2022 ​ $ ​ % Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lymphedema products ​ $ 241,721 ​ $ 212,266 ​ $ 29,455 ​ 14% Airway clearance products ​ ​ 32,702 ​ ​ 34,519 ​ ​ (1,817) ​ (5)% Total ​ $ 274,423 ​ $ 246,785 ​ $ 27,638 ​ 11% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of total revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lymphedema products ​ 88% ​ 86% ​ ​ ​ ​ Airway clearance products ​ ​ 12% ​ ​ 14% ​ ​ ​ ​ ​ Total ​ 100% ​ 100% ​ ​ ​ ​ ​ Cost of Revenue and Gross Margin Cost of revenue increased $8.5 million, or 12%, to $79.3 million during the year ended December 31, 2023, compared to $70.8 million during the year ended December 31, 2022.
Revenue from Medicare represented 18% and 24% of total revenue for the years ended December 31, 2024 and 2023, respectively. ​ The following table summarizes our revenue by product line for the years ended December 31, 2024 and 2023, both in dollars and percentage of total revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (In thousands) 2024 ​ 2023 ​ $ ​ % Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lymphedema products ​ $ 259,361 ​ $ 241,721 ​ $ 17,640 ​ 7% Airway clearance products ​ ​ 33,623 ​ ​ 32,702 ​ ​ 921 ​ 3% Total ​ $ 292,984 ​ $ 274,423 ​ $ 18,561 ​ 7% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of total revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lymphedema products ​ 89% ​ 88% ​ ​ ​ ​ Airway clearance products ​ ​ 11% ​ ​ 12% ​ ​ ​ ​ ​ Total ​ 100% ​ 100% ​ ​ ​ ​ ​ Cost of Revenue and Gross Margin Cost of revenue decreased $3.0 million, or 4%, to $76.3 million during the year ended December 31, 2024, compared to $79.3 million during the year ended December 31, 2023.
(3) Reflects principal payment obligations under our term loan. Refer to Note 11 ‘‘Credit Agreement’’ to our consolidated financial statements included in this report for additional information regarding the maturities of debt principal. (4) Interest payment amounts on long-term debt are calculated using outstanding balances and interest rates in effect on December 31, 2023.
Furthermore, we lease office equipment from time-to-time based on our needs and these commitments are classified as operating leases. (3) Reflects principal payment obligations under our term loan. Refer to Note 11 ‘‘Credit Agreement’’ to our consolidated financial statements included in this report for additional information regarding the maturities of debt principal.
The increase in cost of revenue was primarily attributable to the increase in sales and rentals of the lymphedema product line. Gross margin was 71% in each of the years ended December 31, 2023 and 2022.
The decrease in cost of revenue was primarily attributable to lower manufacturing and warranty costs. Gross margin was 74% and 71% in the years ended December 31, 2024 and 2023, respectively.
The Fourth Amendment also extended the maturity date of the term loans and revolving credit facility under the Credit Agreement from September 8, 2024 to August 1, 2026. ​ On December 21, 2023, we made a payment of $16.8 million to repay in full the outstanding balance on the revolving credit facility. ​ As of December 31, 2023, we had outstanding borrowings of $29.3 million under the Credit Agreement, comprised entirely of the term loan.
The Fifth Amendment permits the Company to make payments to repurchase shares of its common stock, as long as the Company is not in default before and after giving effect to such repurchases, and as long as such repurchases do not exceed $30.0 million. ​ On December 21, 2023, we made a payment of $16.8 million to repay in full the outstanding balance on the revolving credit facility. ​ As of December 31, 2024, we had outstanding borrowings of $26.3 million under the Credit Agreement, comprised entirely of the term loan.
Income Tax Expense We recorded an income tax benefit of $12.7 million and an income tax expense of $2.4 million for the years ended December 31, 2023 and 2022, respectively. The current year tax benefit was primarily driven by the release of the valuation allowance related to the future realization of deferred tax assets.
Income Tax Expense We recorded an income tax expense of $6.5 million and an income tax benefit of $12.7 million for the years ended December 31, 2024 and 2023, respectively.
These increases were partially offset by a $0.3 million decrease in travel and entertainment expenses and a $0.3 million decrease related to sales meetings and tradeshows.
The increase was primarily attributable to a: ● $2.5 million increase in personnel-related compensation expense; ● $1.6 million increase in travel and entertainment expenses; ● $0.6 million increase in expenses related to meetings and tradeshows ; and ● $0.4 million increase in general office and printing expenses. These increases were partially offset by a $0.2 million decrease in educational grants.
We bill the Veterans Administration directly for the purchase or lease of our product on behalf of the patient. 73 Table of Contents Approximately 10% of our revenue in each of 2023 and 2022 came from the Veterans Administration. Approximately 24% of our revenue in 2023 and 19% of our revenue in 2022 came from Medicare patients.
Approximately 11% of our revenue in 2024 and 10% of our revenue in 2023 72 Table of Contents came from the Veterans Administration. Approximately 18% of our revenue in 2024 and 24% of our revenue in 2023 came from Medicare patients.
These increases were partially offset by a $1.4 million decrease in occupancy costs, depreciation expense and professional fees. Intangible Asset Amortization and Earn-out Intangible asset amortization and earn-out expenses decreased $14.4 million to $0.1 million during the year ended December 31, 2023, compared to $14.4 million during the year ended December 31, 2022.
Intangible Asset Amortization and Earn-out Intangible asset amortization and earn-out expense increased $2.4 million to $2.5 million during the year ended December 31, 2024, compared to $0.1 million during the year ended December 31, 2023.
Net cash used in financing activities during the year ended December 31, 2022, was $9.6 million, primarily consisting of payments of $6.0 million on our term loan and a payment of $5.0 million on the AffloVest earn-out, partially offset by $1.4 million in proceeds from exercises of common stock options and the issuance of common stock under the ESPP.
Net cash used in investing activities during the year ended December 31, 2023, was $2.5 million, primarily consisting of $2.3 million in purchases of property and equipment primarily related to production tooling and office equipment and $0.2 million related to the acquisition of patents and other intangible assets. 79 Table of Contents Net Cash (Used in) Provided by Financing Activities Net cash used in financing activities during the year ended December 31, 2024, was $4.8 million, primarily consisting of payments of $3.5 million for the repurchase of our common stock and payments of $3.0 million on our term loan, partially offset by $1.7 million in proceeds from the issuance of common stock under our Employee Stock Purchase Plan (the “ESPP”).
The increase in revenue was attributable to an increase of $29.5 million, or 14%, in sales and rentals of the lymphedema product line, partially offset by a decrease of $1.8 million, or 5%, in sales of the airway clearance product line in the year ended December 31, 2023, compared to the year ended December 31, 2022. ​ The increase in the lymphedema product line revenue in the year ended December 31, 2023, was attributable to increasing productivity of our field sales team and enhancing our portfolio through the development and introduction of new products.
The increase in revenue was attributable to an increase of $17.6 million, or 7%, in sales and rentals of the lymphedema product line and an increase of $0.9 million, or 3%, in sales of the airway clearance product line in the year ended December 31, 2024, compared to the year ended December 31, 2023. ​ The increase in the lymphedema product line revenue in the year ended December 31, 2024, was attributable to the growth of our field sales team and ongoing technology and workflow initiatives.
The non-cash net income adjustments primarily consisted of $11.9 million change in fair value of earn-out liability, $9.6 million of stock-based compensation expense, and $6.3 million of depreciation and amortization expense.
The positive non-cash net income adjustments consisted primarily of $7.8 million of stock-based compensation expense, $6.8 million of depreciation and amortization expense, $1.1 million of deferred income taxes and $0.3 million of loss on disposal of property and equipment and intangibles.
The decrease in the airway clearance product line revenue in the year ended December 31, 2023, was attributable to one large DME provider experiencing slowed placements of our AffloVest system due to the expiration of the COVID-19 Public Health Emergency (PHE) waiver and a return to “pre-public health emergency” eligibility requirements. ​ Revenue from the Veterans Administration represented 10% of total revenue for each of the years ended December 31, 2023 and 2022.
The increase in the airway clearance product line revenue was primarily attributable to the onboarding of a new DME partner in 2024. ​ 76 Table of Contents Revenue from the Veterans Administration represented 11% and 10% of total revenue for the years ended December 31, 2024 and 2023, respectively.
The decrease was due to a benefit of $2.5 million being recorded for the fair value of the earn-out for the twelve months ended December 31, 2023, as actual revenues for the second year earn-out calculation were lower than the estimated 2023 revenues that were used in forecasting the earn-out liability at December 31, 2022.
The increase was related to there being no earn-out expense in the twelve months ended December 31, 2024, as final payment under the AffloVest acquisition earn-out arrangement was made on November 28, 2023, and therefore there was no change in fair value of an earn-out expense recorded in the twelve months ended December 31, 2024, compared to a decrease in the fair value of the earn-out expense of $2.5 million for the twelve months ended December 31, 2023, due to the lower than expected airway clearance product revenue.
Based on this evaluation, as of December 31, 2023, we reduced the valuation allowance related to the future realization of deferred tax assets, in part because in the current year we achieved three years of cumulative pretax income in the U.S. federal tax jurisdiction, and therefore management determined that there was sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $19.4 million are realizable.
The primary driver of the change was the fact that we did not have a release of a valuation allowance on our deferred tax assets for 2024, while in 2023 there was a release of a valuation allowance to recognize the full value of our deferred tax assets because there was sufficient positive evidence to conclude that it was more likely than not that additional deferred taxes were realizable.
Removed
The AffloVest device continued to be manufactured and shipped by IBC on our behalf pursuant to a Transition Services Agreement through April 30, 2022. On May 1, 2022, we began manufacturing and shipping the AffloVest device from our Minnesota-based facility.
Added
Nimbl, our next-generation pneumatic compression platform, received 510(k) clearance in June 2024 and, beginning in October 2024, is commercially available throughout the United States for the treatment of upper extremity lymphedema with planned expansion to lower extremity in 2025.
Removed
Changes in contractual pricing, payment trends and rebate structures would impact, either positively or negatively, our sales and rental revenue. Stock-Based Compensation The fair value of stock options is estimated at the date of grant, using the Black-Scholes option-pricing model.
Added
These increases were partially offset by a $0.1 million decrease in clinical studies. ​ 77 Table of Contents Reimbursement, General and Administrative Expenses Reimbursement, general and administrative expenses increased $9.1 million, or 15%, to $71.1 million during the year ended December 31, 2024, compared to $62.1 million during the year ended December 31, 2023.
Removed
We recognize the fair value of each award as an expense on a straight-line basis over the requisite service period, which is generally the vesting period of the equity grant.
Added
Interest Income and Interest Expense Interest income increased $1.5 million, or 81%, to $3.4 million during the year ended December 31, 2024, compared to $1.9 million during the year ended December 31, 2023, primarily due to a higher cash balance and the movement of cash into a higher yielding Institutional Insured Liquid Deposit demand account in August 2023.
Removed
The Black-Scholes valuation model requires the input of highly subjective assumptions, including the expected term of the option, the expected volatility of the price of our common stock, the risk-free interest rate and the expected dividend yield. These estimates involve inherent uncertainties and the significant application of management's judgment.
Added
Interest expense decreased $2.1 million, or 50%, to $2.1 million during the year ended December 31, 2024, compared to $4.1 million during the year ended December 31, 2023, primarily due to the decrease in the outstanding balance of our term loan.
Removed
If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. We determined weighted-average valuation assumptions as follows: ● Expected term . We use the "simplified method" to determine the expected term of the stock option. 76 Table of Contents ● Expected volatility .
Added
Cash provided relating to the change in operating assets and liabilities primarily consisted of a decrease in accounts receivable of $9.2 million, a decrease in inventories of $3.9 million and an increase in accrued payroll and related taxes of $1.1 million, partially offset by an increase in prepaid expenses and other assets of $3.9 million, a decrease in income taxes payable of $1.4 million and a decrease in accounts payable of $1.1 million.
Removed
Expected volatility for grants issued in and prior to the first fiscal quarter of 2021 was estimated using the average historical volatility of public companies of similar size and industry over a similar period as the expected term assumption used for our options.
Added
The Fourth Amendment also extended the maturity date of the term loans and revolving credit facility under the Credit Agreement from September 8, 2024 to August 1, 2026. ​ On November 1, 2024, we entered into a Fifth Amendment Agreement (the “Fifth Amendment”), which further amended the Credit Agreement.
Removed
Beginning in the second fiscal quarter of 2021, we had sufficient historical data to transition to utilizing our average historical volatility over a similar period as the expected term assumption used for our options as the expected volatility. ● Risk-free interest rate . The risk-free interest rate is based on the yields of U.S.
Added
Share Repurchase Program On October 30, 2024, our Board of Directors authorized a program to repurchase up to $30.0 million of common stock. Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both.
Removed
Treasury securities with maturities similar to the expected term of the options for each option group. ● Expected dividend yield . We have never declared or paid any cash dividends on our common stock and do not presently plan to pay cash dividends on our common stock in the foreseeable future. Consequently, we use an expected dividend yield of zero.
Added
The timing and number of shares to be purchased will be based on the price of our common stock, general business and market conditions and other investment considerations and factors. The share repurchase program expires on October 31, 2026.
Removed
If in the future we determine that another method is more reasonable, or if another method for calculating these input assumptions is prescribed by authoritative guidance, the fair value calculated for our stock options could change significantly. Higher volatility and longer expected lives would result in an increase to stock-based compensation expense determined at the date of grant.
Added
The program does not obligate us to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice. During the three months ended December 31, 2024, we repurchased 195,518 shares for approximately $3.5 million. We used cash on hand to fund these repurchases.
Removed
Stock-based compensation expense affects our cost of revenue, sales and marketing expenses, research and development expenses, and reimbursement, general and administrative expenses. We estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior and other factors.
Added
As of December 31, 2024, approximately $26.5 million remained authorized under the stock repurchase program.
Removed
Quarterly changes in the estimated forfeiture rate can have a significant effect on reported stock-based compensation expense, as the cumulative effect of adjusting the rate for all expense amortization is recognized in the period the forfeiture estimate is changed.
Removed
If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the consolidated financial statements.
Removed
If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the consolidated financial statements. The effect of forfeiture adjustments was insignificant for the years ended December 31, 2023, 2022 and 2021.
Removed
The increase was primarily attributable to a: ● $0.5 million increase in IT & service fees; ● $0.4 million increase in expenses for new product introductions; ● $0.2 million increase in personnel-related compensation expense; and ● $0.2 million increase in educational grants.
Removed
This compares to an earn-out expense of $11.9 million for the twelve months ended December 31, 2022. Other Expense, Net Other expense, net was $2.3 million for the year ended December 31, 2023, compared to $2.7 million for the year ended December 31, 2022. The decrease was primarily attributable to an increase in interest income.
Removed
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.
Removed
Changes in operating assets and liabilities were unfavorably impacted by increasing accounts receivable, net investment in leases and continued investment in inventory designed to meet future projected demand, partially offset by an increase in current liabilities.
Removed
We entered into a fleet vehicle program for certain members of our field sales organization in 2016. At December 31, 2023, we did not have any vehicles under this program with current lease commitments. Furthermore, we lease office equipment from time-to-time based on our needs and these commitments are classified as operating leases.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−1 removed2 unchanged
Biggest changeWe perform periodic evaluations of the relative credit standing of this financial 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. We have not experienced any losses on our cash or cash equivalents to date.
Biggest changeCredit Risk As of December 31, 2024 and 2023, our cash was maintained with one financial institution in the United States. We perform periodic evaluations of the relative credit standing of this financial 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.
As we begin building relationships to commercialize our products internationally, our results of operations and cash flows may become increasingly subject to changes in foreign exchange rates. 85 Table of Contents
As we begin building relationships to commercialize our products internationally, our results of operations and cash flows may become increasingly subject to changes in foreign exchange rates. 83 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We are exposed to market risk from changes in interest rates, primarily related to our investments and our borrowings. The principal objectives of our investment activities are to preserve principal, provide liquidity and maximize income consistent with minimizing risk of material loss.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We are exposed to market risk from changes in interest rates, primarily related to our investments and our borrowings. The principal objectives of our investment activities are to preserve principal, provide liquidity 82 Table of Contents and maximize income consistent with minimizing risk of material loss.
Although we do not believe that inflation has had a material impact on our financial condition or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain and increase our gross margin, and on our sales and marketing and reimbursement expenses as a percentage of our revenue if the prices for our products do not increase as much or more than these increased costs. 84 Table of Contents Credit Risk As of December 31, 2023 and 2022, our cash and cash equivalents were maintained with one financial institution in the United States.
Although we do not believe that inflation has had a material impact on our financial condition or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain and increase our gross margin, and on our sales and marketing and reimbursement expenses as a percentage of our revenue if the prices for our products do not increase as much or more than these increased costs.
We had accounts receivable from two insurers representing approximately 45% and 21% of accounts receivable as of December 31, 2022. The credit risks associated with customers which for these purposes are insurers considers aggregation for entities that are known to be under common control. Foreign Currency Risk Our business is conducted in U.S. dollars and international transactions have been nominal.
The credit risks associated with customers, which for these purposes are insurers, considers aggregation for entities that are known to be under common control. Foreign Currency Risk Our business is conducted in U.S. dollars and international transactions have been nominal.
Based on the nature of our short-term investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.
Our interest income is sensitive to changes in the general level of interest rates in the United States, particularly since our investments are generally short-term in nature. Based on the nature of our short-term investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.
Our accounts receivable primarily relate to revenue from the sale of our products to patients in the United States. As of December 31, 2023 and 2022, our accounts receivable were $54.1 million and $77.9 million, respectively. We had accounts receivable from two insurers representing approximately 36% and 15% of accounts receivable as of December 31, 2023.
We have not experienced any losses on our cash to date. Our accounts receivable primarily relate to revenue from the sale of our products to patients in the United States. As of December 31, 2024 and 2023, our accounts receivable were $44.9 million and $54.1 million, respectively.
Removed
The recorded carrying amounts of cash and cash equivalents approximate fair value due to their short maturities. Our interest income is sensitive to changes in the general level of interest rates in the United States, particularly since our investments are generally short-term in nature.
Added
We had accounts receivable from two insurers representing approximately 23% and 12% of accounts receivable as of December 31, 2024. We had accounts receivable from two insurers representing approximately 36% and 15% of accounts receivable as of December 31, 2023.

Other TCMD 10-K year-over-year comparisons