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

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Paragraph-level year-over-year comparison of LENSAR, 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.

+465 added−448 removedSource: 10-K (2025-02-27) vs 10-K (2024-03-04)

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

465 paragraphs added · 448 removed · 351 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

116 edited+28 added−16 removed171 unchanged
Biggest changeUnder this system, serious incidents must be reported to the relevant authorities of the EU member states, and manufacturers are required to take Field Safety Corrective Actions, or FSCAs, to reduce a risk of death or serious deterioration in the state of health associated with the use of a medical device that is already placed on the market.
Biggest changeAll manufacturers placing medical devices into the market in the EU must comply with the EU Medical Device Vigilance System which has been reinforced by the EU Medical Devices Regulation. Under this system, serious incidents and Field Safety Corrective Actions, or FSCAs, must be reported to the relevant authorities of the EU member states.
However, since the advantages of these advanced refractive cataract procedures are not deemed medically necessary, patients seeking either or both of these alternatives must pay the difference between the reimbursed amount and the cost of the advanced procedure that includes implantation of a premium IOL.
However, since the advantages of these advanced refractive cataract procedures are not deemed medically necessary, patients seeking either or both alternatives must pay the difference between the reimbursed amount and the cost of the advanced procedure that includes implantation of a premium IOL.
A serious incident is any malfunction or deterioration in the characteristics and/or performance of a device on the market (e.g., inadequacy in supplied by the manufacturer, undesirable side-effect), which, directly or indirectly, might lead to either the death or serious deterioration of the health of a patient or user or other persons or to a serious public health threat.
A serious incident is any malfunction or deterioration in the characteristics and/or performance of a device on the market (e.g., inadequacy in supplied by the manufacturer, undesirable side-effect), which, directly or indirectly, might lead to either the death or serious deterioration of the health of a patient, user, or other persons, or to a serious public health threat.
Other Healthcare Laws Although none of the procedures performed using our products are currently covered by any government or commercial third-party payors, applicable agencies and regulators may nonetheless interpret that we are subject to 22 numerous state and federal healthcare fraud and abuse laws, including anti-kickback, false claims and transparency laws with respect to payments and other transfers of value made to physicians and other licensed healthcare professionals, that are intended to reduce waste, fraud and abuse in the health care industry and analogous state laws that may apply to healthcare items and services by any payors including private insurers and self-pay patients.
Other Healthcare Laws Although none of the procedures performed using our products are currently covered by any government or commercial third-party payors, applicable agencies and regulators may nonetheless interpret that we are subject to numerous state and federal healthcare fraud and abuse laws, including anti-kickback, false claims and transparency laws with respect to payments and other transfers of value made to physicians and other licensed healthcare professionals, that are intended to reduce waste, fraud and abuse in the health care industry and analogous state laws that may apply to healthcare items and services by any payors including private insurers and self-pay patients.
We do not directly bill any third-party payors; instead, we receive payment from the physician practice, hospital or other facility that uses our 23 devices. Cataract surgery, including the implantation of a basic, single focus IOL, is reimbursed by Medicare but at a relatively low level and that level of reimbursement further declined in recent years.
We do not directly bill any third-party payors; instead, we receive payment from the physician practice, hospital or other facility that uses our devices. Cataract surgery, including the implantation of a basic, single focus IOL, is reimbursed by Medicare but at a relatively low level and that level of reimbursement further declined in recent years.
As a result, we believe a significant opportunity exists for a laser system that can improve surgeon precision and assist in achieving targeted visual outcomes in patients with astigmatism. 9 Our Products We believe the inability to achieve the targeted visual outcome is largely due to a failure to appropriately address corneal astigmatism even when using competing laser systems.
As a result, we believe a significant opportunity exists for laser systems that can improve surgeon precision and assist in achieving targeted visual outcomes in patients with astigmatism. 9 Our Products We believe the inability to achieve the targeted visual outcome is largely due to a failure to appropriately address corneal astigmatism even when using competing laser systems.
The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market via voluntary or mandatory device recalls.
The overall cost of the ALLY System, may, however, increase due to, among other factors, pricing increases in component parts for our systems resulting from inflationary pressures and macroeconomic conditions. Our Strengths We attribute our current and anticipated future success to the following factors: • Disruptive technology platform providing improved visual outcomes.
The overall cost of the ALLY System, may, however, increase due to, among other factors, pricing increases in component parts for our systems resulting from inflationary pressures and macroeconomic conditions. 11 Our Strengths We attribute our current and anticipated future success to the following factors: • Disruptive technology platform providing improved visual outcomes.
Unless otherwise exempted, manufacturers of certain radiation emitting devices must submit certain reports to FDA, including for new and modified products, for product defects, and annual reports, and comply with recordkeeping requirements. FDA regulations also provide specific certification and labeling requirements, and the labels for these products must contain certain information, such as warnings, declarations, and instructions for use.
Unless otherwise exempted, manufacturers of certain radiation emitting devices must submit certain reports to FDA, including for new and modified products, for product defects, and annual reports, and comply with recordkeeping requirements. 20 FDA regulations also provide specific certification and labeling requirements, and the labels for these products must contain certain information, such as warnings, declarations, and instructions for use.
The ACA, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot 24 program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
The ACA, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to 25 complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing. Human Capital We are committed to revolutionizing refractive eye surgery.
Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing. Human Capital We are committed to revolutionizing refractive eye surgery.
We believe the clinical data supporting the effectiveness of our laser system in assisting surgeons to achieve desired outcomes will motivate additional patients to seek, and additional surgeons to offer, these more advanced procedures that include implantation of a premium IOL. 12 • Focus on innovation to facilitate surgeon adoption.
We believe the clinical data supporting the effectiveness of our laser system in assisting surgeons to achieve desired outcomes will motivate additional patients to seek, and additional surgeons to offer, these more advanced procedures that include implantation of a premium IOL. • Focus on innovation to facilitate surgeon adoption.
In addition 11 to improving visual outcomes, our systems are designed to improve the efficiency and simplify the procedure for surgeons by including pre-programmable surgeon preferences, wireless integration with pre-operative diagnostic data, cataract density imaging, and accurate laser incision planning.
In addition to improving visual outcomes, our systems are designed to improve the efficiency and simplify the procedure for surgeons by including pre-programmable surgeon preferences, wireless integration with pre-operative diagnostic data, cataract density imaging, and accurate laser incision planning.
This not only increases efficiency in removal of the cataract when the surgeon gets to the phacoemulsification, but also provides the surgeon choices in pre-programmed treatment algorithms or their own customized preferences in the energy and fragmentation parameters based on their surgical technique.
This not only increases efficiency in removal of the cataract when the surgeon gets to the phacoemulsification, but also provides the surgeon choices in pre-programmed treatment algorithms or their own customized preferences in the energy 14 and fragmentation parameters based on their surgical technique.
Item 1. Bu siness We are a commercial-stage medical device company focused on designing, developing and marketing advanced femtosecond laser systems for the treatment of cataracts and the management of pre-existing or surgically induced corneal astigmatism.
Item 1. Bu siness We are a commercial-stage medical device company focused on designing, developing and marketing advanced laser systems for the treatment of cataracts and the management of pre-existing or surgically induced corneal astigmatism.
Sales and Distribution We have built and are continuing to grow our commercial organization, which includes a direct sales force in the United States and third-party distributors in China, South Korea, Germany, and other targeted international markets.
Sales and Distribution We have built and are continuing to grow our commercial organization, which includes a direct sales force in the United States and third-party distributors in China, South Korea, Germany, India, and other targeted international markets.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the general safety and performance requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, certain foreign laws govern the privacy and security of personal data, including health-related data.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information. 26 In addition, certain foreign laws govern the privacy and security of personal data, including health-related data.
The IDE application must be supported by appropriate data, such as animal and laboratory testing 18 results, showing that it is safe to test the device in humans and that the investigational protocol is scientifically sound.
The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the investigational protocol is scientifically sound.
We believe this incentivizes the entire employee base in relation to the successful achievement of the Company’s goals. o Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process. 26 o All full-time employees are eligible for health insurance, paid and unpaid leaves, a retirement plan with company match and immediate vesting, and disability insurance.
We believe this incentivizes the entire employee base in relation to the successful achievement of the Company’s goals. 27 o Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process. o All full-time employees are eligible for health insurance, paid and unpaid leaves, a retirement plan with company match and immediate vesting, and disability insurance.
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation. Medical Devices Directive In the EU, there is currently no premarket government review of medical devices.
Pursuing marketing of medical devices in the EU will notably require that our devices be certified under the new regime set forth in the EU Medical Devices Regulation. In the EU, there is currently no premarket government review of medical devices.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
Our intellectual property portfolio further secures a premier technology position for the development and commercialization of devices that incorporate both a phacoemulsification system and a femtosecond laser, such as our ALLY System.
Our intellectual property portfolio further secures a premier technology position for the development and commercialization of devices that incorporate both a phacoemulsification system and a laser, such as our ALLY System.
More recently, in September 2019, the FDA finalized the aforementioned guidance to describe an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway, by demonstrating that such device meets objective safety and performance criteria established by the FDA, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.
In September 2019, the FDA finalized the aforementioned guidance to describe an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway, by demonstrating that such device meets objective safety and performance criteria established by the FDA, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.
In 2023, Market Scope referenced data from a clinical study of 6,000 patients performed by Warren Hill, MD that estimates that approximately 70 – 90% of cataract patients present with addressable astigmatism prior to cataract surgery. To reduce the need for prescription distance or reading glasses following cataract surgery, it is important that little or no astigmatism remain.
In 2024, Market Scope referenced data from a clinical study of 6,000 patients performed by Warren Hill, MD that estimates that approximately 70 – 90% of cataract patients present with addressable astigmatism prior to cataract surgery. To reduce the need for prescription distance or reading glasses following cataract surgery, it is important that little or no astigmatism remain.
We believe the cumulative effect of these technologies are advanced laser systems that can be quickly integrated into a surgeon’s existing practice and is easy to use. The LENSAR Laser System and ALLY System provide surgeons the ability to deliver improved outcomes when addressing astigmatism in connection with cataract removal and to perform the surgery with enhanced precision and reproducibility.
We believe the cumulative effect of these technologies are advanced laser systems that can be quickly integrated into a surgeon’s existing practice and is easy to use. The Systems System provide surgeons the ability to deliver improved outcomes when addressing astigmatism in connection with cataract removal and to perform the surgery with enhanced precision and reproducibility.
We believe this improves the efficiency and reproducibility of the procedure for surgeons. • Wireless Transfer of Pre-Operative Data : Pre-operative diagnostic data can be transferred wirelessly from many preoperative corneal topographers and diagnostic devices to our system, which can guide more precise astigmatism planning and reduce or eliminate risks associated with transcription errors and manually marking the eye. 13 • Pre-Operative Data Analysis : With the assistance of our clinical applications and clinical outcomes groups, practices’ individualized astigmatism treatment protocols can be refined and customized based on site specific pre-, intra-, and post-operative data, with the objective to help surgeons to deliver incrementally better patient outcomes over time as compared to earlier generations. • Cataract Density Imaging : Another unique aspect of our Augmented Reality imaging system is the ability of the system to grade and compare the cataract density and tissue specific areas to treat within the lens nucleus.
We believe this improves the efficiency and reproducibility of the procedure for surgeons. • Wireless Transfer of Pre-Operative Data : Pre-operative diagnostic data can be transferred wirelessly from many preoperative corneal topographers and diagnostic devices to our system, which can guide more precise astigmatism planning and reduce or eliminate risks associated with transcription errors and manually marking the eye. • Pre-Operative Data Analysis : With the assistance of our clinical applications and clinical outcomes groups, practices’ individualized astigmatism treatment protocols can be refined and customized based on site specific pre-, intra-, and post-operative data, with the objective to help surgeons to deliver incrementally better patient outcomes over time as compared to earlier generations. • Cataract Density Imaging : Another unique aspect of our AI imaging system is the ability of the system to grade and compare the cataract density and tissue specific areas to treat within the lens nucleus.
As a global leader in next generation femtosecond laser for cataract surgery, our success depends on talented and motivated individuals who share our passion for making a difference in patients’ lives. We pride ourselves on having a highly collaborative, innovative environment where initiatives and teamwork are valued, and individual efforts are recognized. Together, we are one team, one vision.
As a global leader in next generation, robotic laser for cataract surgery, our success depends on talented and motivated individuals who share our passion for making a difference in patients’ lives. We pride ourselves on having a highly collaborative, innovative environment where initiatives and teamwork are valued, and individual efforts are recognized. Together, we are one team, one vision.
In accordance with its recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the EU Medical Devices Regulation transitional provisions may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled.
In accordance with the EU Medical Devices Regulation’s recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the EU Medical Devices Regulation transitional provisions may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled.
The Company also offers a generous holiday schedule and a Company-wide shut down during the December holidays. Seasonality We have historically experienced seasonal variations in the sales and leases of our products, with our fourth quarter typically being the strongest and the first or third quarter being the slowest. We believe these seasonal variations are consistent across our industry.
The Company also offers a generous holiday schedule and a Company-wide shut down during the December holidays. Seasonality We have historically experienced seasonal variations in the sales and leases of our products, with our fourth quarter typically being the strongest and the first quarter being the slowest. We believe these seasonal variations are consistent across our industry.
In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by under the Investor Email Alerts option on the Investor Relations page of our website at www.lensar.com . Our website and the information available through our website are not incorporated into this Annual Report. 27
In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by under the Investor Email Alerts option on the Investor Relations page of our website at www.lensar.com . Our website and the information available through our website are not incorporated into this Annual Report. 28
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and 20 that any claims made about the performance and safety of the device are supported by suitable evidence.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are 21 supported by suitable evidence.
We have designed the ALLY System to be a compact cataract treatment system to operate in an operating room or in-office surgical suite and allow the surgeon to switch seamlessly and quickly between femtosecond laser and phacoemulsification without moving patients from room-to-room.
We have designed the ALLY System to be a compact robotic laser cataract treatment system to operate in an operating room or in-office surgical suite and allow the surgeon to switch seamlessly and quickly between laser and phacoemulsification without moving patients from room-to-room.
Our ALLY System currently is cleared for marketing in the United States, India, and the Philippines, and our growth, market presence and ability to sell the ALLY System will depend on, among other factors, whether the ALLY System receives regulatory clearance in other regions outside the United States and the timing of these clearances or certifications.
Our ALLY System currently is cleared for marketing in the United States and other countries, and our growth, market presence and ability to sell the ALLY System will depend on, among other factors, whether the ALLY System receives regulatory clearance in other regions outside the United States and the timing of these clearances or certifications.
For example, in November 2018, FDA officials announced forthcoming steps that the FDA intends to take to modernize the premarket notification pathway under Section 510(k) of the FDCA. Among other things, the FDA announced that it planned to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates.
For example, in November 2018, FDA officials announced steps to modernize the premarket notification pathway under Section 510(k) of the FDCA. Among other things, the FDA announced that it planned to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates.
Brexit Since January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or MHRA, has become the sovereign regulatory authority responsible for the Great Britain (i.e., England, Wales, and Scotland) medical device market and the EU regulatory regime no longer applies in Great Britain.
Brexit and the UK Regulatory Framework Since January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or MHRA, has become the sovereign regulatory authority responsible for the Great Britain (i.e., England, Wales, and Scotland) medical device market and the EU regulatory regime for medical devices no longer applies in Great Britain.
The system has multiple features specifically designed to enable precise placement and centration of the IOL in patients in a consistent and reproducible manner that is not possible in manual cataract surgery or using competing laser systems.
The system has multiple robotic features specifically designed to enable precise placement and centration of the IOL in patients in a consistent and reproducible manner that is not possible in manual cataract surgery or using competing laser systems. • Efficient design .
Technology Our LENSAR Laser System and ALLY System have been built specifically for refractive cataract surgery, and at the core of our commitment to continuous technological innovation is our focus on providing cataract surgeons the tools to deliver their patients improved outcomes.
Technology Our LLS and ALLY System have been built specifically for refractive cataract surgery, and at the core of our commitment to continuous technological innovation is our focus on providing cataract surgeons the tools to deliver their patients improved outcomes.
Surgeons typically offer the option of an advanced IOL to patients explaining that it is not covered by Medicare and will be an out-of-pocket expense. Use of our LENSAR Laser System and ALLY System is often accompanied by the implantation of an advanced IOL.
Surgeons typically offer the option of an advanced IOL to patients explaining that it is not covered by Medicare and will be an out-of-pocket expense. Use of our LLS and ALLY System is often accompanied by the implantation of an advanced IOL.
The FDA also announced that it intends to finalize guidance to establish a premarket review pathway for “manufacturers of certain well-understood device types” as an alternative to the 510(k) clearance pathway and that such premarket review pathway would allow manufacturers to rely on objective safety and performance criteria recognized by the FDA to demonstrate substantial equivalence, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.
The FDA also announced its intent to finalize guidance to establish a premarket review pathway for “manufacturers of certain well-understood device types” as an alternative to the 510(k) clearance pathway and that such premarket review pathway would allow manufacturers to rely on objective safety and performance criteria recognized by the FDA to demonstrate 18 substantial equivalence, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.
However, based on the 2023 Market Scope IOL Market Report, approximately 83% of global patients receiving a standard cataract procedure do not have significant astigmatism addressed surgically and must rely on glasses for distance or near vision. Moreover, surgeon reimbursement for these standard procedures continues to decline.
However, based on the 2024 Market Scope IOL Market Report, approximately 79% of global patients receiving a standard cataract procedure do not have significant astigmatism addressed surgically and must rely on glasses for distance or near vision. Moreover, surgeon reimbursement for these standard procedures continues to decline.
As of December 31, 2023, we had approximately 130 employees that support our manufacturing, research and development, commercial and administrative functions. Primarily all of our workforce is based at our corporate headquarters in Orlando, Florida except for our commercial organization, which is spread throughout the United States based upon geographic responsibility.
As of December 31, 2024, we had approximately 140 employees that support our manufacturing, research and development, commercial and administrative functions. Primarily all of our workforce is based at our corporate headquarters in Orlando, Florida except for our commercial organization, which is spread throughout the United States based upon geographic responsibility.
In the United States, we sell our products through a direct sales organization that, as of December 31, 2023, consisted of approximately 60 commercial team professionals, including regional sales managers, clinical applications and outcomes specialists, field service, marketing, technical and customer support personnel.
In the United States, we sell our products through a direct sales organization that, as of December 31, 2024, consisted of approximately 65 commercial team professionals, including regional sales managers, clinical applications and outcomes specialists, field service, marketing, technical and customer support personnel.
Our business plan includes aggressively pursuing additional patent rights related to ALLY, and we expect to continue to add to our current portfolio.
Our business plan includes aggressively pursuing additional patent rights related to the ALLY System, and we expect to continue to add to our current portfolio.
We strive to have a diverse and inclusive workforce, and ultimately the respective hiring team’s goal is to choose the best candidate for each role. • Retention and Stability : We take pride in the stability and dedication of our workforce.
We strive to have an inclusive workforce, and ultimately the respective hiring team’s goal is to choose the best candidate for each role. • Retention and Stability : We take pride in the stability and dedication of our workforce.
Nearly 40% of employees have been with the Company five or more years, and over 20% have been with the Company 10 or more years. In 2023, we experienced a full-time employee turnover rate of approximately 10%. • Culture : We value our employees and the individual and collective contributions employees make to the Company.
Nearly 35% of employees have been with the Company five or more years, and over 20% have been with the Company 10 or more years. In 2024, we experienced a full-time employee turnover rate of approximately 20%. • Culture : We value our employees and the individual and collective contributions employees make to the Company.
The system then uses a process called wave-tracing to take a series of two-dimensional images derived from the imaging and scanning and, through precision processing of this biometric data, reconstruct a three-dimensional model of each individual patient’s eye.
The system then uses a process called wave-tracing to take a series of two-dimensional images derived from the imaging and scanning and, through precision processing of this biometric data using AI, reconstructs a three-dimensional model of each individual patient’s eye.
Our systems were built specifically for laser refractive cataract surgery. Central to our systems is our Augmented Reality technology, which begins by using Scheimpflug imaging to scan the anterior segment of the eye, collecting a broad spectrum of biometric data.
Our systems were built specifically for laser refractive cataract surgery. Central to our systems is our propriety robotic imaging technology, which begins by using Scheimpflug imaging to scan the anterior segment of the eye, collecting a broad spectrum of biometric data.
Oertli Collaboration In January 2020, we entered into a development agreement with Oertli Instrumente AG, or the Development Agreement, pursuant to which we are collaborating on developing the phacoemulsification component of a combined femtosecond laser and phacoemulsification device in our ALLY System.
Oertli Collaboration In January 2020, we entered into a development agreement with Oertli Instrumente AG, or the Development Agreement, pursuant to which we were collaborating on developing the phacoemulsification component of a combined cataract laser and phacoemulsification device in our ALLY System.
These devices also lack a cataract density imaging system, which allows the surgeon to customize the fragmentation and energy settings based on each individual patient’s cataract. We developed our LENSAR Laser System and ALLY System to provide an alternative laser cataract treatment tool that allows the surgeon to better address astigmatism and improve visual outcomes.
Competing devices also lack a cataract density imaging system, which allows the surgeon to customize the fragmentation and energy settings based on each individual patient’s cataract. We developed our Systems to provide an alternative laser cataract treatment tool that allows the surgeon to better address astigmatism and improve visual outcomes.
Our current systems, the LENSAR Laser System and ALLY ® Adaptive Cataract Treatment System, or ALLY System, incorporate a range of proprietary technologies designed to assist the surgeon in obtaining better visual outcomes, efficiency and reproducibility by providing advanced imaging, simplified procedure planning, efficient design and precision.
Our current systems, the LENSAR Laser System, or LLS, and ALLY Robotic Cataract Laser System™, or ALLY System, or collectively, the Systems, incorporate a range of proprietary technologies designed to assist the surgeon in obtaining better visual outcomes, efficiency and reproducibility by providing advanced imaging, simplified procedure planning, efficient design and precision.
The following chart shows procedure volume per year from 2015 to 2023: Procedures per Year Source: Management. • Improved visual outcomes that drive more advanced, patient-pay procedures. Standard cataract procedures are generally covered by Medicare and other third-party payors, including commercial health plans.
The following chart shows procedure volume per year from 2020 to 2024: 12 Procedures per Year Source: Management. • Improved visual outcomes that drive more advanced, patient-pay procedures. Standard cataract procedures are generally covered by Medicare and other third-party payors, including commercial health plans.
With respect to our LENSAR Laser System and ALLY System, surgeons typically charge the patient a separate out-of-pocket fee for procedures using our device.
With respect to our LLS and ALLY System, surgeons typically charge the patient a separate out-of-pocket fee for procedures using our device.
We designed the ergonomics of the system and its wireless capabilities to enable the system to integrate seamlessly into a surgeon’s existing surgical environment. According to Market Scope’s 2023 annual survey, over 80% of U.S. cataract surgeons, indicated the importance of data transfer between diagnostic devices as ‘required’ to ‘nice to have’. • Precision and reproducibility .
We designed the ergonomics of the system and its wireless capabilities to enable the system to integrate seamlessly into a surgeon’s existing surgical environment. According to Market Scope’s 2024 annual survey, over 78% of U.S. cataract surgeons, indicated the importance of data transfer between diagnostic devices as ‘required’ to ‘nice to have’.
As of December 31, 2023, we had a total of approximately 305 systems installed in a total of 16 countries, with approximately 45% of those systems in the United States where we have a direct sales relationship with our customers, and with China, South Korea, and Germany representing our largest markets outside the United States, where we sell our products through distributor relationships.
As of December 31, 2024, we had a total of approximately 385 systems installed in a total of 16 countries, with approximately 50% of those systems in the United States where we have a direct sales relationship with our customers, and with China, South Korea, and Germany representing our largest markets outside the United States, where we sell our products through distributor relationships.
The ALLY System’s enhanced features include the ability to perform laser procedures much faster, as well as enabling broader applications due to it being the only commercial femtosecond laser incorporating a dual-pulse laser.
The ALLY System’s enhanced features include the ability to perform laser procedures much faster, as well as enabling broader applications due to it being the only commercial robotic laser incorporating a dual-modality laser.
For example, we have approximately 14 pending US patent applications, 11 issued US patents, 53 pending foreign and PCT applications, and 17 issued foreign patents related to integrated systems. • Proven management team and board of directors. Our senior management team and board of directors consist of seasoned medical device professionals with deep industry experience.
For example, we have approximately 12 pending US patent applications, 14 issued US patents, 60 pending foreign and PCT applications, and 26 issued foreign patents related to integrated systems. • Proven management team and board of directors. Our senior management team and board of directors consist of seasoned medical device professionals with deep industry experience.
If satisfied that the relevant product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the European Conformity, or CE, mark to the device, which allows the device to be placed on the market throughout the EU.
If satisfied that the relevant product conforms to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.
We have 154 issued foreign patents in a total of 15 countries and regions, including China, Macau, Taiwan, Germany, France, United Kingdom, Italy, Australia, Canada and the European Patent Office.
We have 183 issued foreign patents in a total of 15 countries and regions, including China, Macau, Taiwan, Germany, France, Spain, United Kingdom, Italy, Australia, European Unitary Patent and the European Patent Office.
Certain countries also mandate implementation of commercial compliance programs. The aforementioned EU rules are generally applicable in the EEA. Coverage and Reimbursement In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs.
The aforementioned EU rules are generally applicable in the EEA. 24 Coverage and Reimbursement In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs.
The benefit of this is the surgeon can customize the treatment and deliver only the energy and fragmentation patterns necessary to optimally treat the cataract.
The benefit of this is the surgeon can customize the treatment and deliver only the energy and fragmentation patterns necessary to optimally treat the cataract based on the System’s recommendation.
FDA PMA Approval Process Although unlikely for the types of medical devices marketed by us, the FDA may classify devices, or the particular use of a device, into Class III, and the device sponsor must then fulfill more rigorous PMA requirements.
FDA PMA Approval Process Although unlikely for the types of medical devices that we market, the FDA may classify devices, or the particular use of a device, into Class III, and the device sponsor must then fulfill more rigorous PMA requirements.
Additionally, when looking at the average procedures per installed device, each of our systems averaged 445 procedures in 2023 compared to the estimated industry average of 382 procedures per year per installed device, based on a 2023 Cataract Surgical Equipment Market Report.
Additionally, when looking at the average procedures per installed device, each of our systems averaged 437 procedures in 2024 compared to the estimated industry average of 385 procedures per year per installed device, based on a 2024 Cataract Surgical Equipment Market Report.
In addition to patent applications we have filed related to our System, we have pursued and consummated agreements with third parties to acquire patent rights, such as those described below, which provide important exclusivity with respect to our development and commercialization of our ALLY system.
In addition to patent applications we have filed related to our Systems, we have pursued and consummated agreements with third parties to acquire patent rights, which provide important exclusivity with respect to our development and commercialization of our ALLY System.
Early data suggests performing a sterile femtosecond-laser-assisted cataract surgery, or FLACS, procedure using the ALLY System resulted in approximately 8-minute time savings for the surgeon, 19-minute time savings for the surgical staff, and 51-minute savings for the patient, allowing surgeons to shorten their surgery day or treat more patients.
Early data suggests performing a sterile robotic laser-assisted cataract surgery, or LACS, procedure using the ALLY System resulted in up to 17-minute time savings for the surgeon, up to 19-minute time savings for the surgical staff, and up to 51-minute savings for the patient, allowing surgeons to shorten their surgery day or treat more patients.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export approvals for our products; or • criminal prosecution. 19 Requirements for Surgical Lasers as Radiation Emitting Products In addition to the requirements that apply to medical devices, our devices must also comply with an independent set of requirements that apply to radiation emitting electronic products, which includes lasers.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export approvals for our products; or • criminal prosecution.
Our ALLY System received clearance from the FDA in June 2022, and we executed a controlled and targeted initial launch of the ALLY System beginning in August 2022. The ALLY System is available to all U.S. cataract surgeons and has also received regulatory clearance in India and the Philippines.
Our ALLY System received clearance from the FDA in June 2022, and we executed a controlled and targeted initial launch of the ALLY System beginning in August 2022. The ALLY System is available to all U.S. and EU cataract surgeons and has also received regulatory clearance in India, Taiwan, as well as certain other countries.
In providing surgical solutions for cataract patients, our primary competitors are Alcon Inc.; Bausch + Lomb, a division of Bausch Health Companies Inc.; and AMO, a division of Johnson & Johnson, each of which has its own femtosecond lasers and phacoemulsification devices.
In providing surgical solutions for cataract patients, our primary competitors are Alcon Inc.; Bausch + Lomb, a division of Bausch Health Companies Inc.; and AMO, a division of Johnson & Johnson; and Ziemer Ophthalmic Systems AG, each of which has its own cataract lasers.
According to the 2023 Cataract Surgical Equipment Market Report, global estimated cataract surgery and refractive lens exchange surgical procedures (cataract surgery) are expected to grow from 30.8 million in 2023 to 37.2 million in 2028. In the United States, cataract surgery is expected to increase from almost 4.9 million procedures in 2023 to approximately 5.8 million in 2028.
According to the 2024 Cataract Surgical Equipment Market Report, global estimated cataract surgery and refractive lens exchange surgical procedures (cataract surgery) are expected to grow from 31.9 million in 2024 to 37.8 million in 2029. In the United States, cataract surgery is expected to increase from almost 4.9 million procedures in 2024 to approximately 5.7 million in 2029.
We believe there is significant opportunity for us to expand our presence in these countries and other countries where we have no or only a limited number of installed systems. For the year ended December 31, 2023, one customer accounted for 13% of our revenue and no customers accounted for more than 10% of our accounts receivable, net.
We believe there is significant opportunity for us to expand our presence in these countries and other countries where we have no or only a limited number of installed systems. For the year ended December 31, 2024, one customer accounted for approximately 14% of our revenue and one customer accounted for approximately 12% of our accounts receivable, net.
The key technological features of our system include: • IntelliAxis Refractive Capsulorhexis : Designed to improve precision and accuracy in outcome-based astigmatic cataract procedures, this proprietary technology enables a surgeon to precisely mark by producing small tabs in the capsulorhexis on the steep axis using advanced iris registration to guide toric IOL placement and alignment, both during and after the surgical procedure. • Augmented Reality : Our patented augmented reality technology provides a surgeon with a sophisticated, three-dimensional view of a patient’s eye.
The key technological features of our system include: • IntelliAxis Refractive Capsulorhexis : Designed to improve precision and accuracy in outcome-based astigmatic cataract procedures, this proprietary technology enables precise marks to be placed on the capsulorhexis on the steep axis using advanced iris registration to guide toric IOL placement and alignment, both during and after the surgical procedure. • Proprietary Robotic Imaging : Our patented robotic imaging technology provides a surgeon with a sophisticated, three-dimensional view of a patient’s eye.
As of December 31, 2023, we owned approximately 212 issued patents and 112 pending patent applications globally. This portfolio covers key aspects of our technology, including the augmented reality imaging and processing, iris registration and patient interface features of our system. We have also filed and acquired significant patent rights relating to our next generation cataract treatment system.
As of December 31, 2024, we owned approximately 247 issued patents and 114 pending patent applications globally. This portfolio 13 covers key aspects of our technology, including the proprietary robotic imaging and processing, iris registration and patient interface features of our system. We have also filed and acquired significant patent rights relating to our next generation cataract treatment system.
Throughout the term of the certificate of conformity, the manufacturer will be subject to periodic surveillance audits to verify continued compliance with the applicable requirements. In particular, there will be a new audit by the notified body before it will renew the relevant certificate(s). Medical Devices Regulation The regulatory landscape related to medical devices in the EU recently evolved.
Throughout the term of the certificate of conformity, the manufacturer will be subject to periodic surveillance audits to verify continued compliance with the applicable requirements. In particular, there will be a new audit by the notified body before it will renew the relevant certificate(s).
The ALLY System combines all of the features from our LENSAR Laser System with a dual-pulse laser, integrated in a small, compact cataract treatment system that is designed to allow surgeons to perform a femtosecond laser assisted cataract procedure in a single operating room.
The ALLY System combines all of the features from our LLS with a dual-modality laser, integrated in a small, compact cataract treatment system that is designed to allow surgeons to perform sterile laser-assisted cataract surgery in a single operating room.
As of December 31, 2023, we owned approximately 58 U.S. patents, 33 pending U.S. patent applications, 154 issued foreign patents, and 79 pending foreign and Patent Cooperation Treaty applications. Our patents are expected to expire between 2026 and 2040, with some design patents expiring in 2046.
As of December 31, 2024, we owned approximately 64 U.S. patents, 31 pending U.S. patent applications, 183 issued foreign patents, and 83 pending foreign and Patent Cooperation Treaty applications. Our patents are expected to expire between 2026 and 2040, with some design patents expiring in 2046.
Our Augmented Reality™ imaging and processing technology collects a broad spectrum of biometric data and then reconstructs and presents a precise, three-dimensional model of each individual patient’s eye that is used to develop and implement the surgeon’s procedure plan. • Simplified procedures .
Our robotic imaging and processing technology collects a broad spectrum of biometric data and then reconstructs and presents a precise, three-dimensional model based on AI of each individual patient’s eye that is used to develop and implement the surgeon’s procedure plan. ▪ Robotic treatment planning .
Manufacturers are required to take FSCAs, which are defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market.
Until Eudamed is fully functional, the corresponding provisions of the EU Medical Devices Directive continue to apply. Manufacturers are required to take FSCAs, which are defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market.
By contrast, worldwide laser-assisted cataract surgery is expected to grow from just over 1 million procedures in 2023 to an estimated 1.4 million procedures in 2028. There are approximately 110,000 ophthalmic surgeons in the United States focused on performing cataract procedures.
By contrast, worldwide laser-assisted cataract surgery is expected to grow from just over 1 million procedures in 2024 to an estimated 1.2 million procedures in 2029. There are approximately 8,818 ophthalmic surgeons in the United States focused on performing cataract procedures.
According to the 2023 Cataract Surgical Equipment Market Report, there were an estimated 2,664 femtosecond laser systems installed at the end of 2023, of which 2,448 were in markets that we service. The number of total femtosecond laser systems installed is expected to grow to over 3,613 devices by 2028.
According to the 2024 Cataract Surgical Equipment Market Report, there were an estimated 2,611 cataract laser systems installed at the end of 2024, of which 2,479 were in markets that we service. The number of total cataract laser systems installed is expected to grow to over 3,215 devices by 2029.
Our material registered and unregistered trademarks include: LENSAR, ALLY Adaptive Cataract Treatment System, INTELLIAXIS, INTELLIAXIS-C, INTELLIAXIS-L, INTELLIAXIS REFRACTIVE CAPSULORHEXIS, STREAMLINE, LENSAR CATARACT LASER WITH AUGMENTED REALITY AND DESIGN, ALLY Adaptive Cataract Treatment System, ALLY Adaptive Cataract Treatment System logo, and LENSDOCTOR SOFTWARE.
Our material registered and unregistered trademarks include: LENSAR, ALLY Robotic Cataract Laser Treatment System, INTELLIAXIS, INTELLIAXIS-C, INTELLIAXIS-L, INTELLIAXIS REFRACTIVE CAPSULORHEXIS, STREAMLINE, ALLY Robotic Cataract Laser Treatment System, ALLY Robotic Cataract Laser Treatment System logo, Robotic Laser Cataract Surgery, the Robotic Laser Cataract Surgery logo, and LENSDOCTOR SOFTWARE.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, market conditions impacting financial institutions could impact our ability to access some or all of our cash, cash equivalents and marketable securities, and we may be unable to obtain alternative funding when and as needed and on acceptable terms, if at all. 31 As of the date of this Annual Report, we expect our current cash and cash equivalents, together with cash generated from the future sale and lease of our products, to be sufficient to operate our business for at least one year from the date of issuance of the financial statements included in this Annual Report.
Biggest changeIn addition, market conditions impacting financial institutions could impact our ability to access some or all of our cash, cash equivalents and marketable securities, and we may be unable to obtain alternative funding when and as needed and on acceptable terms, if at all.
We may not receive, or may be delayed in receiving, the necessary clearances, certifications or approvals for our future products, or modifications to our current products, and failure to timely obtain necessary additional clearances, certifications or approvals for our ALLY System and future products or modifications to our current products would adversely affect our ability to grow our business.
We may not receive, or may be delayed in receiving, the necessary clearances, certifications or approvals for our future products, or modifications to our current products, and failure to timely obtain additional clearances, certifications or approvals for our ALLY System and future products or modifications to our current products would adversely affect our ability to grow our business.
Subject to the transitional provisions and in order to sell our products in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces the Medical Devices Directive.
Subject to the transitional provisions and in order to sell our products in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces the EU Medical Devices Directive.
The defense of these matters can be time consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to incur significant expenses or make substantial payments.
The defense of these matters can be time consuming and costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to incur significant expenses or make substantial payments.
The Series A Redeemable Convertible Preferred Stock ranks senior to the common stock as to distributions and payments upon the liquidation, dissolution and winding up of the Company, and holders of Series A Redeemable Convertible Preferred Stock will participate with the holders of the common stock on an as-converted basis to the extent any dividends are declared on common stock.
The Series A Redeemable Convertible Preferred Stock ranks senior to the common stock as to distributions and payments upon the liquidation, dissolution and winding up of the Company, and holders of Series A Redeemable Convertible Preferred Stock will participate with the holders of the common stock on an as-converted basis to the extent any dividends are declared on common stock.
Holders of Series A Redeemable Convertible preferred stock are also entitled to redemption rights under certain circumstances.
Holders of Series A Redeemable Convertible preferred stock are also entitled to redemption rights under certain circumstances.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • the Physician Payments Sunshine Act and its implementing regulations, which require certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician providers such as physician assistants and nurse practitioners, and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; • analogous state and foreign laws and regulations, including state anti-kickback and false claims laws, which apply to items and services reimbursed by any third-party payor, including private insurers and self-pay patients; state laws that require device manufacturers to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and regulations that require manufacturers to track gifts and other remuneration and items of value provided to healthcare professionals and entities; and • EU and other foreign law equivalents of each of the laws, including reporting requirements detailing interactions with and payments to healthcare providers.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; 56 • the Physician Payments Sunshine Act and its implementing regulations, which require certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician providers such as physician assistants and nurse practitioners, and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; • analogous state and foreign laws and regulations, including state anti-kickback and false claims laws, which apply to items and services reimbursed by any third-party payor, including private insurers and self-pay patients; state laws that require device manufacturers to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and regulations that require manufacturers to track gifts and other remuneration and items of value provided to healthcare professionals and entities; and • EU and other foreign law equivalents of each of the laws, including reporting requirements detailing interactions with and payments to healthcare providers.
Our capital requirements will depend on many factors, including, but not limited to: • the revenue generated by the sale, lease or use of our systems; • the costs associated with expanding our sales and marketing efforts; • the expenses we incur in procuring, manufacturing and selling our systems, including increased costs, uncertainties, and delays associated with global supply chain disruptions and inflationary pressures; • the costs of commercializing the ALLY System, including increased costs associated with supply chain disruptions and inflationary pressures or other new products or technologies; • the scope, rate of progress and cost of our clinical studies that we are currently conducting or may conduct in the future; • the cost and timing of obtaining and maintaining regulatory approval, certification or clearance of our products and planned or future products; • costs associated with any product recall that may occur; • the costs associated with complying with state, federal and foreign laws and regulations; • the cost of filing and prosecuting patent applications and defending and enforcing our patent and other intellectual property rights; • the cost of defending, in litigation or otherwise, any claims that we infringe third-party patent or other intellectual property rights; • the cost of enforcing or defending against non-competition claims; • the number and timing of acquisitions and other strategic transactions; • the costs associated with increased capital expenditures; • anticipated and unanticipated general and administrative expenses, including expenses related to operating as a public company and insurance expenses; and • costs associated with any adverse market conditions or other macroeconomic factors.
Our capital requirements will depend on many factors, including, but not limited to: • the revenue generated by the sale, lease or use of our Systems; • the costs associated with expanding our sales and marketing efforts; • the expenses we incur in procuring, manufacturing and selling our Systems, including increased costs, uncertainties, and delays associated with global supply chain disruptions and inflationary pressures; 32 • the costs of commercializing the ALLY System, including increased costs associated with supply chain disruptions and inflationary pressures or other new products or technologies; • the scope, rate of progress and cost of our clinical studies that we are currently conducting or may conduct in the future; • the cost and timing of obtaining and maintaining regulatory approval, certification or clearance of our products and planned or future products; • costs associated with any product recall that may occur; • the costs associated with complying with state, federal and foreign laws and regulations; • the cost of filing and prosecuting patent applications and defending and enforcing our patent and other intellectual property rights; • the cost of defending, in litigation or otherwise, any claims that we infringe third-party patent or other intellectual property rights; • the cost of enforcing or defending against non-competition claims; • the number and timing of acquisitions and other strategic transactions; • the costs associated with increased capital expenditures; • anticipated and unanticipated general and administrative expenses, including expenses related to operating as a public company and insurance expenses; and • costs associated with any adverse market conditions or other macroeconomic factors.
Our international business operations are subject to a number of risks, including: • difficulties in staffing and managing our international operations; • increased competition as a result of more products and procedures receiving regulatory approval, certification or clearance or otherwise becoming free to market in international markets; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • reduced or varied protection for intellectual property rights in some countries; • export restrictions, trade regulations, and foreign tax laws; • fluctuations in currency exchange rates; • foreign certification and regulatory clearance or approval requirements; • difficulties in developing effective marketing campaigns in unfamiliar international markets; • customs clearance and shipping delays; • political, social, and economic instability abroad, including the ongoing war between Russia and Ukraine, conflicts in the Middle East, potential conflict between China and Taiwan, terrorist attacks, and security concerns in general; • preference for locally produced products; • potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • the burdens of complying with a wide variety of foreign laws and different legal standards; and • increased financial accounting and reporting burdens and complexities.
Our international business operations are subject to a number of risks, including: • difficulties in staffing and managing our international operations; • increased competition as a result of more products and procedures receiving regulatory approval, certification or clearance or otherwise becoming free to market in international markets; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • reduced or varied protection for intellectual property rights in some countries; • export restrictions, trade regulations, and foreign tax laws; 35 • fluctuations in currency exchange rates; • foreign certification and regulatory clearance or approval requirements; • difficulties in developing effective marketing campaigns in unfamiliar international markets; • customs clearance and shipping delays; • political, social, and economic instability abroad, including the ongoing war between Russia and Ukraine, conflicts in the Middle East, potential conflict between China and Taiwan, terrorist attacks, and security concerns in general; • preference for locally produced products; • potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • the burdens of complying with a wide variety of foreign laws and different legal standards; and • increased financial accounting and reporting burdens and complexities.
We may experience delays in our ongoing clinical trials for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical trials, including related to the following: • we may be required to submit an Investigational Device Exemption, or IDE, application to FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and FDA may reject our IDE application and notify us that we may not begin clinical trials, and similar risks may apply in foreign jurisdictions; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators, Institutional Review Boards, or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; • we may not reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • clinical trials may produce negative or inconclusive results, and we may decide, or regulators or notified bodies may require us, to conduct additional clinical trials or abandon product development programs; • the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors, including those manufacturing products or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; 51 • we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB (or other reviewing bodies), regulatory authorities, or both, for re-examination; • regulators, IRBs, other reviewing bodies, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical trials may be greater than we anticipate; • clinical sites may not adhere to the clinical protocol or may drop out of a clinical trial; • we may be unable to recruit a sufficient number of clinical trial sites; • regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval or certification policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for certification or approval; and • our current or future products may have undesirable side effects or other unexpected characteristics.
We may experience delays in our ongoing clinical trials for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical trials, including related to the following: • we may be required to submit an Investigational Device Exemption, or IDE, application to FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and FDA may reject our IDE application and notify us that we may not begin clinical trials, and similar risks may apply in foreign jurisdictions; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators, Institutional Review Boards, or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; • we may not reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • clinical trials may produce negative or inconclusive results, and we may decide, or regulators or notified bodies may require us, to conduct additional clinical trials or abandon product development programs; • the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors, including those manufacturing products or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; • we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB (or other reviewing bodies), regulatory authorities, or both, for re-examination; • regulators, IRBs, other reviewing bodies, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical trials may be greater than we anticipate; • clinical sites may not adhere to the clinical protocol or may drop out of a clinical trial; • we may be unable to recruit a sufficient number of clinical trial sites; • regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval or certification policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for certification or approval; and 52 • our current or future products may have undesirable side effects or other unexpected characteristics.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities or notified bodies, which may include any of the following sanctions: • untitled letters or warning letters; • fines, injunctions, consent decrees and civil penalties; • recalls, termination of distribution, administrative detention, or seizure of our products; • customer notifications or repair, replacement or refunds; • operating restrictions or partial suspension or total shutdown of production; • delays in or refusal to grant our requests for future clearances, certifications or approvals (including foreign regulatory approvals) of new products, new intended uses, or modifications to existing products; • withdrawals or suspensions of our current 510(k) clearances or certifications, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities or notified bodies, which may include any of the following sanctions: • untitled letters or warning letters; • fines, injunctions, consent decrees and civil penalties; • recalls, termination of distribution, administrative detention, or seizure of our products; • customer notifications or repair, replacement or refunds; • operating restrictions or partial suspension or total shutdown of production; 48 • delays in or refusal to grant our requests for future clearances, certifications or approvals (including foreign regulatory approvals) of new products, new intended uses, or modifications to existing products; • withdrawals or suspensions of our current 510(k) clearances or certifications, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products; • any of our pending patent applications will issue as patents; • we will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • others will not develop similar or alternative technologies that do not infringe our patents; • any of our patents will be found to ultimately be valid and enforceable; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products; • any of our pending patent applications will issue as patents; • we will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • others will not develop similar or alternative technologies that do not infringe our patents; • any of our patents will be found to ultimately be valid and enforceable; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; • we will develop additional proprietary technologies or products that are separately patentable; or 59 • our commercial activities or products will not infringe upon the patents of others.
So long as NR-GRI and its affiliates collectively beneficially own at least twenty percent of the securities issued pursuant to the SPA, including the Series A Redeemable Convertible Preferred Stock, we may not, without the consent of NR-GRI, liquidate, 32 dissolve, or wind up our affairs or effect a merger or sale of the Company or other Fundamental Transaction (as defined in Note 12, Redeemable Convertible Preferred Stock , included elsewhere in this Annual Report); create, authorize, or issue shares of capital stock that are senior or pari passu to the Series A Redeemable Convertible Preferred Stock; complete an acquisition with consideration above $1.0 million; incur debt in excess of $1.0 million; change our line of business; or enter into certain related-party transactions.
So long as NR-GRI and its affiliates collectively beneficially own at least twenty percent of the securities issued pursuant to the SPA, including the Series A Redeemable Convertible Preferred Stock, we may not, without the consent of NR-GRI, liquidate, dissolve, or wind up our affairs or effect a merger or sale of the Company or other Fundamental Transaction (as defined in Note 12, Redeemable Convertible Preferred Stock , included elsewhere in this Annual Report); create, authorize, or issue shares of capital stock that are senior or pari passu to the Series A Redeemable Convertible Preferred Stock; complete an acquisition with consideration above $1.0 million; incur debt in excess of $1.0 million; change our line of business; or enter into certain related-party transactions.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop making, selling or using products or technologies that allegedly infringe the asserted intellectual property; • lose the opportunity to license our intellectual property to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses; • pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing; • pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; • redesign those products or technologies that contain the allegedly infringing intellectual property, which could be costly and disruptive, and may be infeasible; and • attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop making, selling or using products or technologies that allegedly infringe the asserted intellectual property; • lose the opportunity to license our intellectual property to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses; 61 • pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing; • pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; • redesign those products or technologies that contain the allegedly infringing intellectual property, which could be costly and disruptive, and may be infeasible; and • attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.
In addition, failure to comply with applicable FDA (or other regulatory authorities) requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; 48 suspension or withdrawal of approvals or certifications; seizures or recalls of our products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; the FDA’s (or foreign regulatory authorities’ or notified bodies’) refusal to grant pending or future clearances, certifications or approvals for our products; clinical holds; refusal to permit the import or export of our products; and criminal prosecution of us or our employees.
In addition, failure to comply with applicable FDA (or other regulatory authorities) requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; suspension or withdrawal of approvals or certifications; seizures or recalls of our products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; the FDA’s (or foreign regulatory authorities’ or notified bodies’) refusal to grant pending or future clearances, certifications or approvals for our products; clinical holds; refusal to permit the import or export of our products; and criminal prosecution of us or our employees.
Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, certifications or approvals; withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our products; and in the most serious cases, criminal penalties.
Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; 45 delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances, certifications or approvals; withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our products; and in the most serious cases, criminal penalties.
Any significant system failure, accident or security breach could cause interruptions in our operations, result in damage to our reputation, the loss or misappropriation of Confidential Information, result in key personnel being unable to perform duties or communicate throughout the organization, significant costs associated with the investigation, data restoration and remediation, and potential notification of the breach to third-parties, including counter-parties and data subjects, and have other adverse impacts on our business.
Any significant information technology system failure, accident or security breach could cause interruptions in our operations, result in damage to our reputation, the loss or misappropriation of Confidential Information, result in key personnel being unable to perform duties or communicate throughout the organization, significant costs associated with the investigation, data restoration and remediation, and potential notification of the breach to third-parties, including counter-parties and data subjects, and have other adverse impacts on our business.
The ability of the FDA, foreign regulatory agencies and notified bodies to review and clear, certify or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s, foreign regulatory agencies’ and notified bodies’ ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s, foreign regulatory agencies’ and notified bodies’ ability to perform routine functions.
The ability of the FDA, foreign regulatory agencies and notified bodies to review and clear, certify or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s, foreign regulatory agencies’ and notified bodies’ ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s, foreign 54 regulatory agencies’ and notified bodies’ ability to perform routine functions.
Seeking such clearances, certifications or approvals may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including warning letters from the FDA (or foreign regulatory authorities), product seizure, injunctions, administrative penalties or civil or criminal fines.
Seeking such clearances, certifications or approvals may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement 50 action, including warning letters from the FDA (or foreign regulatory authorities), product seizure, injunctions, administrative penalties or civil or criminal fines.
For example, the CCPA requires certain businesses that process personal information of California residents to, among other things: provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt-out of certain disclosures of their personal information; and enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf.
For example, the CCPA requires covered businesses that process personal information of California residents to, among other things: provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt-out of certain disclosures of their personal information; and enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf.
If the level of credit losses we experience in the future exceed our expectations, such losses could have a material adverse effect on our business, financial condition and results of operations or adversely affect our ability to sell such assets as part of our monetization strategy. We may be unable to accurately forecast customer demand and our inventory levels.
If the level of credit losses we experience in the future exceed our expectations, such losses could have a material adverse effect on our business, financial condition and results of operations or adversely affect our ability to sell such assets as part of our monetization strategy. 36 We may be unable to accurately forecast customer demand and our inventory levels.
For EU states, in December 2021, the EU Regulation No 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim.
For EU states, in December 2021, the EU Regulation No 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only 55 begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim.
The process of applying for and obtaining a patent is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patent applications at a reasonable cost, in a timely manner, or in all jurisdictions where protection may be commercially advantageous, or we may not be able to protect our proprietary rights at all.
The process of applying for and obtaining a patent is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patent applications at a reasonable cost, in a timely manner, or in all jurisdictions where protection may be commercially advantageous, or we may not be able to 58 protect our proprietary rights at all.
Furthermore, even if our patents or other intellectual property are found to be valid and infringed, a court may refuse to grant injunctive relief against the infringer and instead grant us monetary damages or ongoing royalties. Such monetary compensation may be insufficient to adequately offset the damage to our business caused by the infringer’s competition in the market.
Furthermore, even if our patents or other intellectual property are found to be valid and infringed, a court may refuse to grant injunctive relief against the infringer and instead grant us monetary damages or ongoing royalties. Such monetary compensation may be 62 insufficient to adequately offset the damage to our business caused by the infringer’s competition in the market.
Although none of the procedures using our products are currently covered by any state, federal or foreign government healthcare programs or other third-party payors, applicable agencies and regulators may interpret that our commercial, 55 research and other financial relationships with healthcare providers and institutions are nonetheless subject to various federal, state and foreign laws intended to prevent healthcare fraud and abuse, including the following: • the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs.
Although none of the procedures using our products are currently covered by any state, federal or foreign government healthcare programs or other third-party payors, applicable agencies and regulators may interpret that our commercial, research and other financial relationships with healthcare providers, institutions, and GPOs are nonetheless subject to various federal, state and foreign laws intended to prevent healthcare fraud and abuse, including the following: • the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs.
In order to generate future sales growth within the United States, we will need to expand the size and geographic scope of our U.S. direct sales organization. Accordingly, our future success will depend largely on our ability to train, retain and motivate skilled regional sales managers and direct sales representatives with significant technical knowledge of our systems.
In order to generate future sales growth within the United States, we will need to expand the size and geographic scope of our U.S. direct sales organization. Accordingly, our future success will depend largely on our ability to train, retain 31 and motivate skilled regional sales managers and direct sales representatives with significant technical knowledge of our Systems.
Our success will depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how and obtaining and maintaining other intellectual property rights. 57 We may not be able to obtain or maintain intellectual property or other proprietary rights necessary to our business or in a form that provides us with a competitive advantage.
Our success will depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how and obtaining and maintaining other intellectual property rights. We may not be able to obtain or maintain intellectual property or other proprietary rights necessary to our business or in a form that provides us with a competitive advantage.
Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require 62 costly efforts to protect our technology. To the extent our intellectual property or other proprietary information protection is incomplete, we are exposed to a greater risk of direct competition.
Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology. To the extent our intellectual property or other proprietary information protection is incomplete, we are exposed to a greater risk of direct competition.
In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that stockholders may believe are in their best interest. North Run and its affiliates may also determine to sell substantial amounts of our securities in one or more transactions, including to one or several private parties in negotiated transactions.
In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that stockholders may believe are in their best interest. North Run and its affiliates may also 69 determine to sell substantial amounts of our securities in one or more transactions, including to one or several private parties in negotiated transactions.
In particular, the FDA’s Quality System Regulation, or QSR, which includes FDA’s current Good Manufacturing Practice requirements, or cGMPs, covers the procedures and documentation of the design, testing, production, control, quality assurance, inspection, complaint handling, recordkeeping, management review, labeling, packaging, sterilization, storage and shipping of our device products.
In particular, the FDA’s Quality System Regulation, or QSR, which includes FDA’s 34 current Good Manufacturing Practice requirements, or cGMPs, covers the procedures and documentation of the design, testing, production, control, quality assurance, inspection, complaint handling, recordkeeping, management review, labeling, packaging, sterilization, storage and shipping of our device products.
If we fail to comply with our reporting obligations, the FDA (or similar foreign authorities) could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation 49 of our device clearance, certification or approval, seizure of our products or delay in clearance, certification or approval of future products.
If we fail to comply with our reporting obligations, the FDA (or similar foreign authorities) could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, certification or approval, seizure of our products or delay in clearance, certification or approval of future products.
These proposals included plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.
These proposals included plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices 53 that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.
Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations 57 intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
An inability to incorporate technologies or features that are important or essential to our products could have a material adverse effect on our business, financial condition and results of operations, and may prevent us from selling our products. In addition, we may lose valuable intellectual property rights or personnel.
An inability 64 to incorporate technologies or features that are important or essential to our products could have a material adverse effect on our business, financial condition and results of operations, and may prevent us from selling our products. In addition, we may lose valuable intellectual property rights or personnel.
Even in the absence of a takeover attempt, the existence of these 68 provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts. We are also subject to certain anti-takeover provisions under the Delaware General Corporation Law, or DGCL.
Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts. We are also subject to certain anti-takeover provisions under the Delaware General Corporation Law, or DGCL.
Failure to maintain or increase market acceptance would limit our ability to generate revenue and would have a material adverse effect on our business, financial condition and results of operations. 29 Our growth depends on our ability to gain regulatory clearances and certifications, as well as our ability to meet production goals for our ALLY System.
Failure to maintain or increase market acceptance would limit our ability to generate revenue and would have a material adverse effect on our business, financial condition and results of operations. Our growth depends on our ability to gain regulatory clearances and certifications, as well as our ability to meet production goals for our ALLY System.
In addition, the FDA or other regulatory agencies may change their policies, adopt additional regulations, revise existing regulations, or take other actions that may prevent or delay approval or clearance 44 of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis.
In addition, the FDA or other regulatory agencies may change their policies, adopt additional regulations, revise existing regulations, or take other actions that may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis.
If we are unable to enter into the necessary licenses on acceptable terms or at all, if any necessary licenses are subsequently terminated, if the licensors fail to abide by the terms of the licenses or fail to prevent infringement by third parties, or if the licensed patents or other rights are found to be invalid or unenforceable, our business may suffer.
If we are unable to enter into the necessary licenses on acceptable terms or at all, if any necessary licenses are subsequently terminated, if the licensors fail to abide by the terms of the licenses or fail to prevent infringement by third parties, or if the licensed patents or other rights are found to be invalid or 60 unenforceable, our business may suffer.
Any product liability claims brought against us, with or without merit, could divert management’s attention from our business, be expensive to defend, result in sizable damage awards against us, damage our reputation, increase our product liability insurance rates, prevent us from securing continuing 37 coverage, or prevent or interfere with commercialization of our products.
Any product liability claims brought against us, with or without merit, could divert management’s attention from our business, be expensive to defend, result in sizable damage awards against us, damage our reputation, increase our product liability insurance rates, prevent us from securing continuing coverage, or prevent or interfere with commercialization of our products.
Cybersecurity risks – any technology failures causing a material disruption to operational technology or cyber-attacks on our systems affecting our ability to protect the integrity and security of customer and employee information – could harm our reputation and/or could disrupt our operations and negatively impact our business. The efficient operation of our business depends on our information technology systems.
Cybersecurity risks – any technology failures causing a material disruption to operational technology or cyber-attacks on our systems affecting our ability to protect the integrity and security of confidential customer and employee information – could harm our reputation and/or could disrupt our operations and negatively impact our business. The efficient operation of our business depends on our information technology systems.
Our business processes health-related and other personal information. When conducting clinical studies, we face risks associated with collecting trial participants’ information, especially health information, in a manner consistent with applicable laws and regulations. We also face risks inherent in handling large volumes of information and in protecting the security of such information.
Our business processes health-related and other personal information. When conducting clinical studies, we face risks associated with collecting trial participants’ information, especially health information, in a manner consistent with applicable laws and regulations. We also face risks inherent in handling large volumes of Confidential Information and in protecting the security of such information.
Our clinical studies may produce negative or inconclusive results, and we may decide, or regulators or notified bodies may require us, to conduct additional clinical and non-clinical testing in addition to those we have planned. The initiation and completion of any of clinical studies may be prevented, delayed, or halted for numerous reasons.
Our clinical studies may produce negative or inconclusive results, and we may decide, or regulators or notified bodies may require us, to conduct additional clinical and non-clinical testing in addition to those we have planned. 51 The initiation and completion of any of clinical studies may be prevented, delayed, or halted for numerous reasons.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability. 53 In addition, the regulatory landscape related to medical devices in the EU recently evolved.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability. In addition, the regulatory landscape related to medical devices in the EU recently evolved.
In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, 58 including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable.
In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable.
Our future compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our operating subsidiaries. We cannot be certain that these measures will ensure that we design, implement and maintain adequate controls over our financial processes and reporting in the future.
Our future compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our 72 operating subsidiaries. We cannot be certain that these measures will ensure that we design, implement and maintain adequate controls over our financial processes and reporting in the future.
In that case, those buyers may subsequently be able to exert significant control over us. 67 We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment. We do not anticipate paying cash dividends in the foreseeable future.
In that case, those buyers may subsequently be able to exert significant control over us. We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment. We do not anticipate paying cash dividends in the foreseeable future.
The 33 long-term loss of these suppliers, or their long-term inability to provide us with an adequate supply of components or products, could potentially cause delay in the manufacture of our products, thereby impairing our ability to meet the demand of our customers and causing significant harm to our business.
The long-term loss of these suppliers, or their long-term inability to provide us with an adequate supply of components or products, could potentially cause delay in the manufacture of our products, thereby impairing our ability to meet the demand of our customers and causing significant harm to our business.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results, 70 cause us to fail to meet our financial reporting obligations, or cause us to suffer adverse regulatory consequences or violate applicable stock exchange listing rules.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results, cause us to fail to meet our financial reporting obligations, or cause us to suffer adverse regulatory consequences or violate applicable stock exchange listing rules.
Our systems are currently used in advanced cataract procedures for which surgeon reimbursement continues to decline and patients pay a significant portion of the cost of the procedure. We cannot predict the extent to which patients will continue to seek out these types of procedures.
Our systems 29 are currently used in advanced cataract procedures for which surgeon reimbursement continues to decline and patients pay a significant portion of the cost of the procedure. We cannot predict the extent to which patients will continue to seek out these types of procedures.
We have filed registration statements registering shares that we may issue under our equity compensation plan and 65 employee stock purchase plan. In addition, we have filed a resale registration statement registering shares of our common stock issuable upon conversion of our Series A Redeemable Convertible Preferred Stock and exercise of outstanding Warrants.
We have filed registration statements registering shares that we may issue under our equity compensation plan and employee stock purchase plan. In addition, we have filed a resale registration statement registering shares of our common stock issuable upon conversion of our Series A Redeemable Convertible Preferred Stock and exercise of outstanding Warrants.
In particular, no substantial change must be made to the device as such a modification would trigger the obligation to obtain a new certification under the EU Medical Devices Regulation and therefore to have a notified body conducting a new conformity assessment of the devices.
In 47 particular, no substantial change must be made to the device as such a modification would trigger the obligation to obtain a new certification under the EU Medical Devices Regulation and therefore to have a notified body conducting a new conformity assessment of the devices.
Third-party payors are imposing lower payment rates and negotiating reduced contract rates with hospitals, other healthcare facilities, surgeons and other healthcare providers and being increasingly selective about the products, technologies and procedures they chose to cover and provide reimbursement for.
Third-party payors are imposing lower payment rates and negotiating reduced contract rates with hospitals, other healthcare facilities, surgeons and 37 other healthcare providers and being increasingly selective about the products, technologies and procedures they chose to cover and provide reimbursement for.
In addition, clinical trials that are conducted in countries outside the United States may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory 52 requirements and the engagement of non-U.S.
In addition, clinical trials that are conducted in countries outside the United States may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement of non-U.S.
If we cannot rely on existing mechanisms for transferring personal data from the EEA, or other jurisdictions, we could be prevented from transferring personal data of individuals in those regions; we could suffer additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; we will have to implement revised SCCs for existing arrangements within required time frame; and/or it could otherwise adversely affect the manner in which we provide our services and thus materially affect our operations and financial results.
If we cannot rely on existing mechanisms for transferring personal data from the EEA, or other jurisdictions, we could be prevented from transferring personal data of individuals in those regions; we could suffer additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; we will have to implement revised SSCs for existing arrangements within required time frame; and/or it could otherwise adversely affect the manner in which we provide our services and thus materially affect our operations and financial results.
Specifically, any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires a 45 new 510(k) clearance or, possibly, approval of a PMA.
Specifically, any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires a new 510(k) clearance or, possibly, approval of a PMA.
In those countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to a third party, which could materially diminish the value of those patents. This could limit our potential revenue 63 opportunities.
In those countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities.
For example, manufacturing and product quality issues may arise as we increase production rates at our manufacturing facility or launch new products. Also, we may not manufacture the right product mix to meet 39 customer demand as we introduce new products.
For example, manufacturing and product quality issues may arise as we increase production rates at our manufacturing facility or launch new products. Also, we may not manufacture the right product mix to meet customer demand as we introduce new products.
Non-compliance events that could result in abandonment or lapse of a patent or patent application include 59 failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.
Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents.
However, a failure or delay in obtaining registration or regulatory clearance, certification or approval in one country may have a negative effect on the regulatory process in others. 50 The clinical trial process is lengthy and expensive with uncertain outcomes.
However, a failure or delay in obtaining registration or regulatory clearance, certification or approval in one country may have a negative effect on the regulatory process in others. The clinical trial process is lengthy and expensive with uncertain outcomes.
MACRA also introduced a Quality Payment Program for Medicare physicians, nurses and other “eligible clinicians” (as defined in 36 MACRA) that adjusts overall reimbursement under the PFS based on certain performance categories.
MACRA also introduced a Quality Payment Program for Medicare physicians, nurses and other “eligible clinicians” (as defined in MACRA) that adjusts overall reimbursement under the PFS based on certain performance categories.
We may 35 experience loss from a customer’s failure to make payments according to the contractual lease terms or some other material decrease in the practice revenues and surgical procedure volume.
We may experience loss from a customer’s failure to make payments according to the contractual lease terms or some other material decrease in the practice revenues and surgical procedure volume.
Despite the time, effort and cost, a device may not be approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory clearances or approvals could harm our business.
Despite the time, effort and cost, a device may not be approved or cleared by the FDA. Any delay or failure to obtain regulatory clearances or approvals could harm our business.
If we fail to obtain any required licenses or make any necessary changes to our 61 products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products.
If we fail to obtain any required licenses or make any necessary changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products.
More recently, in September 2019, the FDA issued revised final guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.
In September 2019, the FDA issued revised final guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.
In addition, we may commit to certain initiatives or goals and we may not ultimately be able to achieve such commitments or goals due to factors that are within or outside of our control.
In addition, we may commit to certain initiatives or goals and we may not ultimately be able to achieve such commitments or goals due to factors that are within or outside of our 73 control.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
Our ability to maintain and increase market acceptance of our products depends on a number of factors, including: • our ability to provide visual outcomes and economic data that show the safety, efficacy, cost effectiveness and other patient benefits from use of our LENSAR Laser System, ALLY System or other future products; • acceptance by cataract surgeons and others in the medical community of our LENSAR Laser System and ALLY System; • the potential and perceived advantages and disadvantages of our LENSAR Laser System and ALLY System as compared to competing products; • the willingness of patients to pay out-of-pocket for procedures in which our LENSAR Laser System, ALLY System or other future products is used but for which limited reimbursement by third-party payors, including government authorities, is available; • the effectiveness of our sales and marketing efforts, and of those of our international distributors; • the prevalence and severity of any complications associated with using our LENSAR Laser System or ALLY System; • the ease of use, reliability and convenience of our LENSAR Laser System and ALLY System relative to competing products; • competitive response and negative selling efforts from providers of competing products; • quality of outcomes for patients in procedures in which surgeons use our LENSAR Laser System and ALLY System; • the results of clinical trials and post-market clinical studies relating to the use of our LENSAR Laser System and ALLY System; • the technical leadership of our research and development teams; • the absence of third party blocking intellectual property; • our ability to introduce our products to the market with speed and on time with our projected timelines; • pricing pressure, including from larger, well-capitalized and product-diverse competitors, corporate-owned ASCs, group purchasing organizations, and government payors; and • the availability of coverage and adequate reimbursement for procedures using our LENSAR Laser System, ALLY System or other future products from third-party payors, including government authorities.
Our ability to maintain and increase market acceptance of our products depends on a number of factors, including: • our ability to provide visual outcomes and economic data that show the safety, efficacy, cost effectiveness and other patient benefits from use of our Systems or other future products; • acceptance by cataract surgeons and others in the medical community of our Systems; • the potential and perceived advantages and disadvantages of our Systems as compared to competing products; • the willingness of patients to pay out-of-pocket for procedures in which our Systems or other future products is used but for which limited reimbursement by third-party payors, including government authorities, is available; • the effectiveness of our sales and marketing efforts, and of those of our international distributors; • the prevalence and severity of any complications associated with using our Systems; • the ease of use, reliability and convenience of our Systems relative to competing products; • competitive response and negative selling efforts from providers of competing products; • quality of outcomes for patients in procedures in which surgeons use our Systems; • the results of clinical trials and post-market clinical studies relating to the use of our Systems; • the technical leadership of our research and development teams; • the absence of third party blocking intellectual property; • our ability to introduce our products to the market with speed and on time with our projected timelines; • pricing pressure, including from larger, well-capitalized and product-diverse competitors, corporate-owned ASCs, group purchasing organizations, and government payors; and • the availability of coverage and adequate reimbursement for procedures using our Systems or other future products from third-party payors, including government authorities.
Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technologies, and making decisions on pricing and reimbursement. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States, the EU or any other jurisdiction.
Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States, the EU or any other jurisdiction.
Other factors that may cause fluctuations in our quarterly and annual results include: • fluctuations in the demand for the more advanced, patient-pay procedures in which our systems are used; • adoption of our LENSAR Laser Systems and ALLY Systems; • our ability to establish and maintain an effective and dedicated sales organization in the United States and network of independent distributors outside the United States; • pricing pressure applicable to our products from competitor pricing; • results of clinical research and studies on our products or competitive products; • the mix of sales and leases of our systems; 38 • timing of delivery of systems, new product offerings, acquisitions, licenses or other significant events by us or our competitors; • decisions by surgeons, hospitals and ASCs to defer acquisitions of systems in anticipation of the introduction of new products or product enhancements by us or our competitors; • sampling by and additional training requirements for cataract surgeons upon the commercialization of a new product by us or one of our competitors; • regulatory approvals, clearances or certifications and legislative changes affecting the products we may offer or those of our competitors; • interruption in the manufacturing or distribution of our systems; • delays in, or failure of, component and raw material deliveries by our suppliers; • the ability of our suppliers to timely provide us with an adequate supply of components; • the effect of competing technological, industry and market developments; and • changes in our ability to obtain regulatory clearance, certification or approval for our product candidates.
Other factors that may cause fluctuations in our quarterly and annual results include: • fluctuations in the demand for the more advanced, patient-pay procedures in which our Systems are used; • adoption of our LLS and ALLY Systems; • our ability to establish and maintain an effective and dedicated sales organization in the United States and network of independent distributors outside the United States; • pricing pressure applicable to our products from competitor pricing; • results of clinical research and studies on our products or competitive products; • the mix of sales and leases of our Systems; • timing of delivery of Systems, new product offerings, acquisitions, licenses or other significant events by us or our competitors; • decisions by surgeons, hospitals and ASCs to defer acquisitions of Systems in anticipation of the introduction of new products or product enhancements by us or our competitors; • sampling by and additional training requirements for cataract surgeons upon the commercialization of a new product by us or one of our competitors; • regulatory approvals, clearances or certifications and legislative changes affecting the products we may offer or those of our competitors; • interruption in the manufacturing or distribution of our Systems; • delays in, or failure of, component and raw material deliveries by our suppliers; • the ability of our suppliers to timely provide us with an adequate supply of components; • the effect of competing technological, industry and market developments; and 39 • changes in our ability to obtain regulatory clearance, certification or approval for our product candidates.
We are also subject to the United Kingdom General Data Protection Regulation and Data Protection Act 2018, collectively, which imposes separate but similar obligations to those under the GDPR and comparable penalties, including fines of up to £17.5 million or 4% of a noncompliant undertaking’s global annual revenue for the preceding financial year, whichever is greater.
We are also subject to the United Kingdom General Data Protection Regulation and Data Protection Act 2018, which collectively impose separate but similar obligations to those under the GDPR and comparable penalties, including fines of up to £17.5 million or 4% of a noncompliant undertaking’s global annual revenue for the preceding financial year, whichever is greater.
Data breaches could result in a violation of applicable U.S. and international privacy, data protection and other laws, and subject us to individual or 41 consumer class action litigation and governmental investigations and proceedings by federal, state and local regulatory entities in the United States and by international regulatory entities, resulting in exposure to material civil or criminal liability, or both.
Data breaches could result in a violation of applicable U.S. and 42 international privacy, data protection and other laws, and subject us to individual or consumer class action litigation and governmental investigations and proceedings by federal, state and local regulatory entities in the United States and by international regulatory entities, resulting in exposure to material civil or criminal liability, or both.
Case law from the Court of Justice of the European Union, states that reliance on the standard contractual clauses, or SCCs - a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.
Case law from the Court of Justice of the European Union , states that reliance on the standard contractual clauses, or SSCs a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.
Further, we may not be able to obtain adequate remedies for any breach. We may not be able to protect our intellectual property rights throughout the world.
Further, we may not be able to obtain adequate remedies for any breach. 63 We may not be able to protect our intellectual property rights throughout the world.
In addition to the factors discussed in this “Risk Factors” section of this Annual Report, these factors include: • a shift in our investor base; • actual or anticipated fluctuations in our quarterly financial condition and operating performance; • the operating and stock price performance of similar companies; • introduction of new products by us or our competitors; • success or failure of our business strategy; • our ability to obtain financing as needed; • changes in accounting standards, policies, guidance, interpretations or principles; • the overall performance of the equity markets; • the number of shares of our common stock publicly owned and available for trading; • threatened or actual litigation or governmental investigations; 69 • changes in laws or regulations affecting our business, including tax legislation; • announcements by us or our competitors of significant acquisitions or dispositions; • any major change in our board of directors or management; • changes in earnings estimates by securities analysts or our ability to meet earnings guidance; • publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; • large volumes of sales of our shares of common stock by existing stockholders; • short sales of our common stock; • investor perception of us and our industry; and • changes in financial markets or general economic conditions, including the effects of recession or slow economic growth in the U.S. and abroad, interest rates, fuel prices, international currency fluctuations, corruption, political instability, acts of war, including the ongoing war between Russia and Ukraine and the conflicts in the Middle East, acts of terrorism, natural disasters and public health crises, such as a resurgence of COVID-19.
In addition to the factors discussed in this “Risk Factors” section of this Annual Report, these factors include: • a shift in our investor base; • actual or anticipated fluctuations in our quarterly financial condition and operating performance; • the operating and stock price performance of similar companies; • introduction of new products by us or our competitors; • success or failure of our business strategy; • our ability to obtain financing as needed; • changes in accounting standards, policies, guidance, interpretations or principles; 71 • the overall performance of the equity markets; • the number of shares of our common stock publicly owned and available for trading; • threatened or actual litigation or governmental investigations; • changes in laws or regulations affecting our business, including tax legislation; • announcements by us or our competitors of significant acquisitions or dispositions; • any major change in our board of directors or management; • changes in earnings estimates by securities analysts or our ability to meet earnings guidance; • publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; • large volumes of sales of our shares of common stock by existing stockholders; • short sales of our common stock; • investor perception of us and our industry; and • changes in financial markets or general economic conditions, including the effects of recession or slow economic growth in the U.S. and abroad, interest rates, fuel prices, international currency fluctuations, corruption, political instability, acts of war, including the ongoing war between Russia and Ukraine and the conflicts in the Middle East, acts of terrorism, natural disasters and public health crises or pandemics.
As a result, we may incur significant impairment charges if the fair value of the intangible assets would be less than their carrying value on our balance sheet at any point in time. We regularly review our long-lived intangible and tangible assets, including identifiable intangible assets, for impairment.
As a result, we have incurred and may incur significant impairment charges if the fair value of the intangible assets would be less than their carrying value on our balance sheet at any point in time. We regularly review our long-lived intangible and tangible assets, including identifiable intangible assets, for impairment.
The notified body would typically audit 46 and examine the technical file and the quality system for the manufacture, design and final inspection of our devices.
The notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices.
The European Commission adopted its 42 Adequacy Decision in relation to the new EU-U.S. Data Privacy Framework, or DPF, on July 10, 2023, rendering the DPF effective as a GDPR transfer mechanism to U.S. entities self-certified under the DPF.
The European 43 Commission adopted its Adequacy Decision in relation to the new EU-U.S. Data Privacy Framework, or DPF, on July 10, 2023, rendering the DPF effective as a GDPR transfer mechanism to U.S. entities self-certified under the DPF.
Adequate coverage and reimbursement from third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs, for certain procedures (e.g., phacoemulsification) using our ALLY System or other products we may develop in the future, if approved, is central to the acceptance and adoption of these products.
Adequate coverage and reimbursement from third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs, for certain procedures using our ALLY System or other products we may develop in the future, if approved, is central to the acceptance and adoption of these products.
The misuse or off-label use of our LENSAR Laser System or ALLY System, may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.
The misuse or off-label use of our LLS or ALLY System may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.
The future operation, success and growth of our business 40 depends on streamlined processes made available through our uninhibited access to information systems, global communications, internet activity and other network processes.
The future operation, success and growth of our business depends on streamlined processes made available through our uninhibited access to information technology systems, global communications, internet activity and other network processes.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Audit Committee oversees management’s implementation of our cybersecurity risk management program. The Audit Committee receives periodic reports from management on our cybersecurity risks. In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.
Biggest changeThe Audit Committee receives periodic reports from management on our cybersecurity risks. In addition, management updates the Audit Committee, where it deems appropriate, regarding any cybersecurity incidents it considers to be significant or potentially significant. The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity.
Cybersecurity risks – any technology failures causing a material disruption to operational technology or cyber-attacks on our systems affecting our ability to protect the integrity and security of customer and employee information – could harm our reputation and/or could disrupt our operations and negatively impact our business.” Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks.
Cybersecurity risks – any technology failures causing a material disruption to operational technology or cyber-attacks on our systems affecting our ability to protect the integrity and security of customer and employee information – could harm our reputation and/or could disrupt our operations and negatively impact our business.” Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity risks, including oversight of management’s implementation of our cybersecurity risk management program.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal information technology personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Our management team takes steps to stay informed about and monitors efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal information technology personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from management on our cyber risk management program. Board members receive 72 presentations on cybersecurity topics from internal information technology staff or external experts as part of the Board’s continuing education on topics that impact public companies.
The full Board also receives briefings from management on our cyber risk management program. Board members receive presentations on cybersecurity topics from internal information technology staff or external experts as part of the Board’s continuing education on topics that impact public companies.
Our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • an information technology team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training of our employees, incident response personnel, and senior management; and • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.
Key elements of our cybersecurity risk management program include but are not limited to the following: • risk assessments designed to help identify material risks from cybersecurity threats to our critical systems and information; 74 • an information technology team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers with subject matter expertise, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training of our employees, incident response personnel, and senior management; and • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeBolster filed a Verified Amended Class Action Complaint (“Amended Complaint”) against the Company and certain of its officers and members of the board of directors (“Defendants”) in the matter captioned Schaper v. LENSAR, Inc., et al., Case No. 1:23-cv-00692-GBW (D. Del.).
Biggest changeBolster filed a Verified Amended Class Action Complaint (“Amended Complaint”) against the Company and certain of its officers and members of the board of directors (“Defendants”) in the matter captioned Schaper v. LENSAR, Inc., et al., Case No. 1:23-cv-00692-JLH (D. Del.). On January 12, 2024, Lead Plaintiffs filed a Verified Second Amended Class Action Complaint, or the Second Amended Complaint.
Item 3. Legal Proceedings. From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including intellectual property, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. On August 14, 2023, stockholders Ryan Schaper and Christopher P.
From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including intellectual property, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. 75 On August 14, 2023, stockholders Ryan Schaper and Christopher P.
Removed
Plaintiffs allege that Defendants violated Sections 14(a) and 20(a) of the Exchange Act, as well as Rule 14d-9 promulgated thereunder, and assert claims challenging the adequacy of disclosures in the definitive proxy statement filed with the SEC on June 20, 2023, or the Proxy, in connection with the Private Placement.
Added
We as Defendants filed a motion to dismiss on February 26, 2024. On November 18, 2024, the court granted our motion to dismiss; the complaint was dismissed, and the case was closed during the three months ended December 31, 2024. Item 4. Mine Saf ety Disclosure. Not applicable. 76 Part II
Removed
On August 18, 2023, the parties filed a joint stipulation extending Defendants’ time to respond to the complaint. On December 12, 2023, the Court appointed Ryan Schaper and Christopher P. Bolster as Lead Plaintiffs.
Removed
On December 22, 2023, the parties filed a joint stipulation providing that Lead Plaintiffs will file a second amended complaint or designate the Amended Complaint as operative on or before January 12, 2024. On January 12, 2024, Lead Plaintiffs filed a Verified Second Amended Class Action Complaint, or the Second Amended Complaint.
Removed
The Second Amended Complaint alleges that the Proxy failed to disclose details about North Run, discussion with stockholders regarding possible financing alternatives, LENSAR’s internal budget, the basis for the Board’s recommendation on the vote, potential costs to LENSAR if shareholders voted against the proposal, and purported conflicts of interest. Defendants filed a motion to dismiss on February 26, 2024.
Removed
The parties will complete briefings in May 2024. The Company vigorously denies that the Proxy was deficient in any respect. The Company believes the allegations and claims asserted in the Schaper Action are without merit and that supplemental disclosures were not required or necessary under applicable laws.
Removed
At this time, the Company cannot predict the outcome, or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.
Removed
This matter may be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability or require us to change our business practices, even if we believe the claims asserted against us are without merit.
Removed
Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses.
Removed
Because litigation is inherently unpredictable, we cannot assure you that the results of any such actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows. 73 Item 4. Mine Saf ety Disclosure. Not applicable. 74 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on The Nasdaq Stock Market under the symbol “LNSR.” Stockholders As of February 29, 2024, there were approximately 82 holders of record of our common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on The Nasdaq Stock Market under the symbol “LNSR.” Stockholders As of January 31, 2025, there were approximately 80 holders of record of our common stock.
Equity Compensation Plans The information required by Item 5 of Form 10‑K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. Item 6. [Re served] 75
Equity Compensation Plans The information required by Item 5 of Form 10‑K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. Item 6. [Re served] 77

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe strive to maintain enough inventory of our various component parts to avoid the impact of potential disruptions in the supply chain; however, availability of these components can be outside of our control, especially with the impact of the global supply chain disruptions with respect to certain products, including increasing lead times required for the ordering of component parts to meet targeted production goals, unpredictability with respect to suppliers’ ability to fulfill orders in the requested quantities within the agreed timeframe, and the ability to find alternative component parts.
Biggest changeWe strive to maintain enough inventory of our various component parts to avoid the impact of potential disruptions in the supply chain; however, availability of these components can be outside of our control.
We derive product revenue from the sale of our laser systems and sales of our PIDs and procedure licenses to our surgeon customers and to our distributors outside the United States. A PID and procedure license, which may also be referred to as an application license, is required to perform each procedure using our laser system.
We derive product revenue from the sale of our Systems and sales of our PIDs and procedure licenses to our surgeon customers and to our distributors outside the United States. A PID and procedure license, which may also be referred to as an application license, is required to perform each procedure using our laser system.
The system requires both a PID and a procedure license to perform each procedure. We recognize Product revenue for PIDs when we transfer control of the PID. We recognize Product revenue for procedure licenses at the point in time when control of the procedure license is transferred to the customer.
PID and Procedure Licenses. The system requires both a PID and a procedure license to perform each procedure. We recognize Product revenue for PIDs when we transfer control of the PID. We recognize Product revenue for procedure licenses at the point in time when control of the procedure license is transferred to the customer.
Additionally, the extent and duration of the impact that global economic uncertainty may have on our stock price and on those of other companies in our industry is highly uncertain and may make us look less attractive to investors and, as a result, there may be a less active trading market for our common stock, our stock price may be more volatile, and our ability to raise capital could be impaired, which could in the future negatively affect our liquidity and financial position.
Additionally, the extent and duration of the impact that global economic uncertainty may have on our stock price and on those of other companies in our industry is highly uncertain and may make us look less attractive to investors and, 85 as a result, there may be a less active trading market for our common stock, our stock price may be more volatile, and our ability to raise capital could be impaired, which could in the future negatively affect our liquidity and financial position.
Our revenues and operating expenses are also difficult to predict and depend on several factors, including the level of ongoing research and development requirements necessary to further develop and/or obtain further regulatory clearance or certification of our ALLY System, the number of laser systems we manufacture, sell, and lease on an annual basis, the availability of capital and direction from regulatory agencies or notified bodies, which are difficult to predict.
Our revenues and operating expenses are also difficult to predict and depend on several factors, including the level of ongoing research and development requirements necessary to further develop and/or obtain further regulatory clearance or certification of our ALLY System, the number of Systems we manufacture, sell, and lease on an annual basis, the availability of capital and direction from regulatory agencies or notified bodies, which are difficult to predict.
We have elected to use this extended transition period for 87 complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
In addition, our future revenue and cash flows will depend on, among other factors, our installed base of systems and the timing of and applicable clearances for our ALLY System. We expect selling, general and administrative expenses to increase from current levels to support the expansion efforts in the U.S. and internationally for the ALLY System.
In addition, our future revenue and cash flows will depend on, among other factors, our installed base of Systems and the timing of and applicable clearances for our ALLY System. 84 We expect selling, general and administrative expenses to increase from current levels to support the expansion efforts in the U.S. and internationally for the ALLY System.
EBITDA is a non-GAAP financial measure. EBITDA is included in this filing because we believe that EBITDA provides meaningful supplemental information for investors regarding the performance of our 81 business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Adjusted EBITDA is also a non-GAAP financial measure.
EBITDA is a non-GAAP financial measure. EBITDA is included in this filing because we believe that EBITDA provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Adjusted EBITDA is also a non-GAAP financial measure.
In the future, we may need to raise additional capital through equity or debt financings, borrowings under credit facilities or from other sources to continue our operations. We may issue securities, including common stock, preferred stock, warrants, and/or debt securities through private placement transactions or registered public offerings in the 82 future.
In the future, we may need to raise additional capital through equity or debt financings, borrowings under credit facilities or from other sources to continue our operations. We may issue securities, including common stock, preferred stock, warrants, and/or debt securities through private placement transactions or registered public offerings in the future.
A procedure license represents a one-time right to utilize the system surgical application in connection with a surgery procedure. Service revenue is derived from the sale of extended warranties for our laser systems that provide additional maintenance and service beyond our standard limited warranty.
A procedure license represents a one-time right to utilize the system surgical application in connection with a surgery procedure. Service revenue is derived from the sale of extended warranties for our Systems that provide additional maintenance and service beyond our standard limited warranty.
We purchase custom and off-the-shelf components from a number of suppliers, including some single-source suppliers. We purchase the majority of our components and major assemblies through purchase orders with limited long-term supply agreements and generally do not maintain large volumes of finished goods.
We purchase custom and 78 off-the-shelf components from a number of suppliers, including some single-source suppliers. We purchase the majority of our components and major assemblies through purchase orders with limited long-term supply agreements and generally do not maintain large volumes of finished goods.
Depreciation expense associated with the leased equipment under operating lease arrangements is reflected in cost of lease in the statements of operations. Lessee leases Lessee operating leases are included in other current liabilities and long-term operating lease liabilities in our balance sheets. We do not have lessee finance leases.
Depreciation expense associated with the leased equipment under operating lease arrangements is reflected in cost of lease in the statements of operations. 88 Lessee leases Lessee operating leases are included in other current liabilities and long-term operating lease liabilities in our balance sheets. We do not have lessee finance leases.
We believe the cumulative effect of these technologies results in a laser system that can be quickly and efficiently integrated into a surgeon’s existing practice, is easy to use and provides surgeons the ability to deliver improved visual outcomes.
We believe the cumulative effect of these technologies results in a laser system that can be quickly and efficiently integrated into a surgeon’s existing practice, is easy to use and provides surgeons the ability to deliver improved visual outcomes more efficiently.
At contract inception we perform an evaluation to determine if a lease arrangement conveys the right to control the use of an identified asset. To the extent such rights 86 of control are conveyed, we further make an assessment as to the applicable lease classification.
At contract inception we perform an evaluation to determine if a lease arrangement conveys the right to control the use of an identified asset. To the extent such rights of control are conveyed, we further make an assessment as to the applicable lease classification.
We may be able to control the timing and level of research and development and selling, general and 77 administrative expenses, but many of these expenditures will occur irrespective of our actions due to contractually committed activities and payments.
We may be able to control the timing and level of research and development and selling, general and administrative expenses, but many of these expenditures will occur irrespective of our actions due to contractually committed activities and payments.
In May 2023, we entered into the SPA with NR-GRI Partners, LP, or NR-GRI, whereby we sold to NR-GRI, for an aggregate purchase price of $20.0 million, an aggregate of 20,000 shares of a newly established series of preferred stock designated as “Series A Convertible Preferred Stock, par value $0.01 per share”, which has a stated value of $1,000 per share and is convertible into shares of the Company’s common stock, and warrants, the Warrants, to purchase an aggregate of 4.4 million shares of our common stock, the Private Placement.
In May 2023, we entered into a Securities Purchase Agreement, or SPA, with NR-GRI Partners, LP, or NR-GRI, whereby we sold to NR-GRI, for an aggregate purchase price of $20.0 million, an aggregate of 20,000 shares of a newly established series of preferred stock designated as “Series A Convertible Preferred Stock, par value $0.01 per share”, which has a stated value of $1,000 per share and is convertible into shares of the Company’s common stock, and warrants, the Warrants, to purchase an aggregate of 4.4 million shares of our common stock, the Private Placement.
Our liquidity needs will be largely determined by our ability to successfully commercialize our products and the progression, additional regulatory clearances or certifications and launch of the ALLY System in additional jurisdictions in the future. In 2022, we transitioned from manufacturing and selling our LENSAR Laser System to focus on our ALLY System.
Our liquidity needs will be largely determined by our ability to successfully commercialize our products and the progression, additional regulatory clearances or certifications and launch of the ALLY System in additional jurisdictions in the future. In 2022, we transitioned from manufacturing and selling our LLS to focus on our ALLY System.
In the United States, we sell our products through a direct sales organization that, as of December 31, 2023, consisted of approximately 60 commercial professionals, including regional sales managers, clinical applications and outcomes specialists, field service, marketing, technical and 76 customer support personnel. We manufacture our systems at a facility in Orlando, Florida.
In the United States, we sell our products through a direct sales organization that, as of December 31, 2024, consisted of approximately 65 commercial professionals, including regional sales managers, clinical applications and outcomes specialists, field service, marketing, technical and customer support personnel. We manufacture our Systems at a facility in Orlando, Florida.
As of December 31, 2023, we expect our current cash and cash equivalents, together with cash generated from the future sale and lease of our products, to be sufficient to operate our business.
As of December 31, 2024, we expect our current cash, cash equivalents, and investments, together with cash generated from the future sale and lease of our products, to be sufficient to operate our business.
A discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021 has been reported previously in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 16, 2023, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview We are a commercial-stage medical device company focused on designing, developing and marketing an advanced femtosecond laser system for the treatment of cataracts and the management of pre-existing or surgically induced corneal astigmatism.
A discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022 has been reported previously in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 4, 2024, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview We are a commercial-stage medical device company focused on designing, developing and marketing advanced laser systems for the treatment of cataracts and the management of pre-existing or surgically induced corneal astigmatism.
Cost of lease revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $0.2 million, or 7.7%, primarily due to an increase in the number of newly leased systems between the years, which have a higher depreciation cost than older and some fully depreciated leased systems. Operating Expenses Selling, General and Administrative.
Cost of lease revenue for the year ended December 31, 2024 compared to the year ended December 31, 2023 increased by $0.8 million, or 40%, primarily due to an increase in the number of newly leased Systems between the years, which have a higher depreciation cost than older and some fully depreciated leased Systems. Operating Expenses Selling, General and Administrative.
The primary factors determining our cash needs are the funding of operations, which we expect to continue to expand as the business grows, and enhancing our product offerings through the commercialization of the ALLY System, our next generation cataract treatment system.
The primary factors determining our cash needs are the funding of operations, which we expect to continue to expand as the business grows, and enhancing our product offerings through the commercialization of the ALLY System.
Currently, our research and development expense primarily consists of costs associated with the continued development of our next generation system, the ALLY System, which combines all of the features from our LENSAR Laser System with a dual-pulse laser, integrated in a small, compact cataract treatment system that is designed to allow surgeons to perform a sterile femtosecond laser assisted cataract procedure in a single operating room or in-office surgical suite.
Currently, our research and development expense primarily consists of costs associated with the continued development of our next generation system, the ALLY System, which combines all of the features from our LLS with a dual-modality laser, integrated in a small, compact cataract treatment system that is designed to allow surgeons to perform a sterile laser-assisted cataract surgery in a single operating room or in-office surgical suite.
Our current product portfolio includes the LENSAR Laser System and ALLY ® Adaptive Cataract Treatment System, or ALLY System, and its associated consumable components. The consumable portion of the system consists of a disposable patient interface device kit, or PID kit, and the system also requires a procedure license.
Our current product portfolio includes the LENSAR Laser System, or LLS, and the ALLY Robotic Cataract Laser Treatment System™, or ALLY System, (collectively, the Systems) and its associated consumable components. The consumable portion of the system consists of a disposable patient interface device kit, or PID kit, and the system also requires a procedure license.
The change in fair value of warrant liabilities had a significant impact on net loss in the twelve months ended December 31, 2023, and it is difficult to predict how the fair value of warrant liabilities will impact our future results.
The change in fair value of warrant liabilities had a significant impact of $(21.4) million on net loss in the twelve months ended December 31, 2024, and it is difficult to predict how the fair value of warrant liabilities will impact our future results.
Acquired trademarks and acquired technology are amortized on a straight-line basis over their estimated useful lives of 15 to 20 years. Customer relationships are amortized on a straight-line basis or a double declining basis over their estimated useful lives up to 20 years, based on the method that better represents the economic benefits to be obtained.
Customer relationships are amortized on a straight-line basis or a double declining basis over their estimated useful lives up to 20 years, based on the method that better represents the economic benefits to be obtained.
Non-cash charges primarily consisted of depreciation, amortization, stock-based compensation, and change in fair value of warrant liabilities. Net operating assets decreased due to prepaid and other current assets, inventories, and accounts payable offset with accounts receivable, net.
Non-cash charges primarily consisted of depreciation, amortization, impairment of intangible assets, stock-based compensation, and change in fair value of warrant liabilities. Net operating assets decreased due to accounts receivable and inventories offset with accounts payable and accrued liabilities.
Our total installed base of LENSAR Laser Systems and ALLY Systems was approximately 305 as of December 31, 2023. Factors to Consider We operate in a highly competitive environment that involves a number of risks, some of which are beyond our control.
Our total installed base of LLS and ALLY Systems was approximately 385 as of December 31, 2024. Factors to Consider We operate in a highly competitive environment that involves a number of risks, some of which are beyond our control.
Our growth, market presence and ability to sell the ALLY System will depend on whether the ALLY System receives regulatory clearance in other regions outside the United States and the timing of these clearances or certifications, among other factors.
Our growth, market presence and ability to sell the ALLY System will depend on whether the ALLY System receives additional regulatory clearances or certifications and the timing of these clearance or certifications, among other factors.
We expect our revenue and expenses to increase in connection with our on-going activities, particularly as we continue to execute on our growth strategy, including expansion of our sales and customer support teams.
We expect our revenue and expenses to increase in connection with our on-going activities, particularly as we continue to execute on our growth strategy, including expansion of our sales and customer support teams, as well as increasing our fleet of equipment under lease.
This usually occurs after the customer signs a contract, we install the system, and we perform the requisite training for use of the system for direct customers. System sales to distributors are recognized as revenue upon shipment as they do not require training and installation. PID and Procedure Licenses.
System sales are recognized as Product revenue when the Company transfers control of the system. This usually occurs after the customer signs a contract, we install the system, and we perform the requisite training for use of the system for direct customers. System sales to distributors are recognized as revenue upon shipment as they do not require training and installation.
Our ALLY System received clearance from the FDA in June 2022, and we executed a controlled and targeted initial launch of the ALLY System beginning in August 2022. The ALLY System is available to all U.S. cataract surgeons and has also received regulatory clearance in India and the Philippines.
Our ALLY System received clearance from the FDA in June 2022, and we executed a controlled and targeted initial launch of the ALLY System beginning in August 2022. The ALLY System is available to all U.S. and EU cataract surgeons and has also received regulatory clearance in India, Taiwan, as well as certain other countries.
In addition, based on inventory of our LENSAR Laser System, our future revenue and cash flows will depend on, among other factors, our installed base of systems and the timing of and applicable clearances for our ALLY System.
Our future revenue and cash flows will depend on, among other factors, our installed base of Systems and the timing of and applicable clearances for our ALLY System.
Liquidity and Capital Resources Overview For the years ended December 31, 2023 and 2022, we had net losses of $14.4 million and $19.9 million, respectively, and, as of December 31, 2023, we had an accumulated deficit of $111.9 million.
Liquidity and Capital Resources Overview For the years ended December 31, 2024 and 2023, we had net losses of $31.4 million and $14.4 million, respectively, and, as of December 31, 2024, we had an accumulated deficit of $143.3 million.
Geographically, the United States represented 71% and 64% of product and service revenues for the years ended December 31, 2023 and 2022, respectively. Lease revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $0.5 million, or 9.0%, primarily due to increased leased systems.
Geographically, the United States represented 63% and 71% of product and service revenues for the years ended December 31, 2024 and 2023, respectively. Lease revenue for the year ended December 31, 2024 compared to the year ended December 31, 2023 increased by $1.1 million, or 17%, primarily due to increased leased systems.
Our revenue increased from $35.4 million for the year ended December 31, 2022 to $42.2 million for the year ended December 31, 2023, representing an increase of 19.2%. Our net losses were $19.9 million and $14.4 million for the years ended December 31, 2022 and 2023, respectively.
Our revenue increased from $42.2 million for the year ended December 31, 2023 to $53.5 million for the year ended December 31, 2024, representing an increase of 27%. Our net losses were $14.4 million and $31.4 million for the years ended December 31, 2023 and 2024, respectively.
Our growth, market presence and ability to sell the ALLY System will depend on whether the ALLY System receives regulatory clearance in other regions outside the United States and the timing of these clearance or certifications, among other factors.
Our growth, market presence and ability to sell the ALLY System will depend on whether the ALLY System receives additional regulatory clearances or certifications and the timing of these clearances or certifications, among other factors.
We believe Adjusted EBITDA, which is defined as EBITDA and further excluding stock-based compensation expense, change in fair value of warrant liabilities, and income from the employee retention credit, or ERC, provides meaningful supplemental information for investors when evaluating our results and comparing us to peer companies as stock-based compensation expense and change in fair value of warrant liabilities are significant non-cash charges and the ERC is not recurring.
We believe Adjusted EBITDA, which is defined as EBITDA and further excluding stock-based compensation expense, change in fair value of warrant liabilities, impairment of intangible assets and the ERC, provides meaningful supplemental information for investors when evaluating our results and comparing us to peer companies, as stock-based compensation expense and change in fair value of warrant liabilities are significant non-cash charges and impairment of intangible assets is a non-cash charge that is not indicative of our core operating results and the ERC is not recurring.
We expect our selling, general and administrative expenses to continue to increase in association with our planned growth. 78 Research and Development Expense Our research and development expenses consist primarily of engineering, product development, clinical studies to develop and support our products, personnel costs, such as salaries and wages, including stock-based compensation and benefits, regulatory expenses, and other costs associated with products and technologies that are in development.
Research and Development Expense Our research and development expenses consist primarily of engineering, product development, clinical studies to develop and support our products, personnel costs, such as salaries and wages, including stock-based compensation 80 and benefits, regulatory expenses, and other costs associated with products and technologies that are in development.
Net operating assets decreased due to accounts receivable, net, and inventories offset with accounts payable. Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $4.2 million, which consisted primarily of purchases of investments and capital expenditures for property and equipment.
Net operating assets decreased due to prepaid and other current assets, inventories, and accounts payable offset with accounts receivable, net. Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $2.2 million, which consisted primarily of purchases and maturities of investments.
As discussed above, ongoing global supply chain disruptions, inflationary pressures and other macroeconomic conditions have negatively affected our capital requirements and more operating capital may be needed to fund our operations in the future.
We maintain cash balances with financial institutions in excess of insured limits. As discussed above, ongoing global supply chain disruptions, inflationary pressures and other macroeconomic conditions have negatively affected our capital requirements and more operating capital may be needed to fund our operations in the future.
Cash Flows The following table summarizes, for the periods indicated, selected items in our statements of cash flows: Year Ended December 31, (Dollars in thousands) 2023 2022 Net cash used in operating activities $ (9,659 ) $ (14,856 ) Net cash used in investing activities (4,156 ) (115 ) Net cash provided by (used in) financing activities 19,762 (1,992 ) Net increase (decrease) in cash and cash equivalents $ 5,947 $ (16,963 ) Operating Activities Net cash used in operating activities for the year ended December 31, 2023 was $9.7 million, consisting primarily of a net loss of $14.4 million and a decrease in net operating assets of $7.8 million, partially offset by non-cash charges of $12.5 million.
Cash Flows The following table summarizes, for the periods indicated, selected items in our statements of cash flows: Year Ended December 31, (Dollars in thousands) 2024 2023 Net cash used in operating activities $ (2,275 ) $ (9,659 ) Net cash used in investing activities (2,161 ) (4,156 ) Net cash provided by financing activities 78 19,762 Net (decrease) increase in cash and cash equivalents $ (4,358 ) $ 5,947 Operating Activities Net cash used in operating activities for the year ended December 31, 2024 was $2.3 million, consisting primarily of a net loss of $31.4 million and a decrease in net operating assets of $3.0 million, partially offset by non-cash charges of $32.2 million.
Net cash used in operating activities for the year ended December 31, 2022 was $14.9 million, consisting primarily of a net loss of $19.9 million and a decrease in net operating assets of $5.6 million, partially offset by non-cash charges of $10.6 million. Non-cash charges consisted of depreciation, amortization, and stock-based compensation.
Net cash used in operating activities for the year ended December 31, 2023 was $9.7 million, consisting primarily of a net loss of $14.4 million and a decrease in net operating assets of $7.8 million, partially offset by non-cash charges of $12.5 million. Non-cash charges consisted of depreciation, amortization, stock-based compensation, and change in fair value of warrant liabilities.
Our material contractual obligations and commercial commitments at December 31, 2023 primarily consist of $2.3 million in operating lease liabilities for our facility lease and $6.5 million in remaining minimum purchase obligations for inventory components for the manufacture and supply of certain components within the next 12 months.
Our material contractual obligations and commercial commitments at December 31, 2024 primarily consist of $2.6 million in operating lease liabilities for our facility lease, $0.7 million in lease obligations for additional facility space not recorded on the balance sheet, and $12.2 million in remaining minimum purchase obligations for inventory components for the manufacture and supply of certain components within the next 15 months.
Net cash used in investing activities for year ended December 31, 2022 was $0.1 million, which consisted primarily of capital expenditures for property and equipment.
Net cash used in investing activities for the year ended December 31, 2023 was $4.2 million, which consisted primarily of purchases of investments and capital expenditures for property and equipment.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $19.8 million, primarily due to the net proceeds from issuance of Series A Redeemable Convertible Preferred Stock and Warrants of $19.5 million.
Net cash provided by financing activities for the year ended December 31, 2023 was $19.8 million, primarily due to the net proceeds from issuance of Series A Redeemable Convertible Preferred Stock and Warrants of $19.5 million. 86 Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S.
Determining whether products and services are considered distinct performance obligations that should be accounted for separately may require significant judgment. Judgment is required to determine the level of interdependency 85 between the system and the sale of other related products and services.
Determining whether products and services are considered distinct performance obligations that should be accounted for separately may require significant judgment. Judgment is required to determine the level of interdependency between the system and the sale of other related products and services. We evaluate each product or service promised in a contract to determine whether it represents a distinct performance obligation.
The successful commercialization of the ALLY System depends in part on the Company’s ability to produce the ALLY System in sufficient quantities, within requested timing and at an acceptable price to satisfy customer demand.
The successful commercialization of the ALLY System depends in part on the Company’s ability to produce the ALLY System in sufficient quantities, within requested timing and at an acceptable price to satisfy customer demand. Our primary sources of liquidity are our cash and cash equivalents, cash from the sale and lease of our Systems and the sale of our consumables.
The following table provides information about procedure volume: 2023 2022 2021 Q1 31,600 38,901 28,122 Q2 35,349 33,359 30,966 Q3 32,649 28,453 30,765 Q4 37,414 31,400 41,642 Total procedure volume 137,012 132,113 131,495 Service revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $0.6 million.
The following table provides information about procedure volume: 2024 2023 2022 Q1 39,486 31,600 38,901 Q2 42,203 35,349 33,359 Q3 42,231 32,649 28,453 Q4 45,586 37,414 31,400 Total procedure volume 169,506 137,012 132,113 Service revenue for the year ended December 31, 2024 compared to the year ended December 31, 2023 increased by $0.8 million.
We believe this structure allows the surgeon to implement a budget while also providing us with a predictable revenue stream. We are focused on continuous innovation and have launched our proprietary next-generation ALLY System. The ALLY System enables cataract surgeons to complete the femtosecond-laser-assisted cataract surgery, or FLACS, procedure seamlessly in a single, sterile environment.
We believe this structure allows the surgeon to implement a budget while also providing us with a predictable revenue stream. We are focused on continuous innovation and have launched our proprietary next generation ALLY System.
Year Ended December 31, (Dollars in thousands) 2023 2022 Net loss $ (14,383 ) $ (19,914 ) Less: Interest income (698 ) (263 ) Add: Depreciation expense 2,418 2,258 Add: Amortization expense 1,097 1,148 EBITDA (11,566 ) (16,771 ) Add: Stock-based compensation expense 5,539 6,611 Add: Change in fair value of warrant liabilities 2,852 — Less: Employee retention credit (1,368 ) — Adjusted EBITDA $ (4,543 ) $ (10,160 ) EBITDA is defined as net loss before interest expense, interest income, income tax expense, depreciation and amortization expenses.
Year Ended December 31, (Dollars in thousands) 2024 2023 Net loss $ (31,404 ) $ (14,383 ) Less: Interest income (660 ) (698 ) Add: Depreciation expense 2,961 2,418 Add: Amortization expense 970 1,097 EBITDA (28,133 ) (11,566 ) Add: Stock-based compensation expense 2,665 5,539 Add: Change in fair value of warrant liabilities 21,399 2,852 Add: Impairment of intangible assets 3,729 — Less: Employee retention credit — (1,368 ) Adjusted EBITDA $ (340 ) $ (4,543 ) EBITDA is defined as net loss before interest expense, interest income, income tax expense, depreciation and amortization expenses.
We recognize revenue as the performance obligations are satisfied by transferring control of the product or service to a customer as described below. We record a contract liability, or deferred revenue, when we have an obligation to provide a product or service to the customer and payment is received or due in advance of our performance. Product revenue.
We record a contract liability, or deferred revenue, when we have an obligation to provide a product or service to the customer and payment is received or due in advance of our performance. Product revenue. We recognize revenue for the sale of the products at a point in time when control is transferred to customers. Equipment.
We have built and are continuing to grow our commercial organization, which includes a direct sales force in the United States and distributors in Germany, China, South Korea and other targeted international markets. We believe there is significant opportunity for us to expand our presence in these countries and other markets and regions, subject to applicable regulatory clearance or certification.
We have built and are continuing to grow our commercial organization, which includes a direct sales force in the United States and distributors in Germany, China, India, South Korea and other targeted international markets.
This is because we are able to fulfill each promise in the contract independently of the others and we would be able to fulfill our promise to transfer the system even if the customer did not purchase a PID or procedure license or to fulfill our promise to provide the PID or the procedure license even if the customer acquired the system separately.
This is because we are able to fulfill each promise in the contract independently of the others and we would be able to fulfill our promise to transfer the system even if the customer did not purchase a PID or procedure license or to fulfill our promise to provide the PID or the procedure license even if the customer acquired the system separately. 87 The extended warranty, unlike our standard product warranty, is a performance obligation because it provides an incremental service that is beyond ensuring the product delivered will be consistent with stated contractual specifications.
We expect to continue to incur losses and operating cash outflows for the near-term future as we continue to build our commercial and clinical infrastructure and pursue further regulatory clearances of our ALLY System.
The change in fair value of the warrant liability was a result of an increase in the Company’s stock price of approximately 155% during 2024. We expect to continue to incur losses and operating cash outflows for the near-term future as we continue to build our commercial and clinical infrastructure and pursue further regulatory clearances of our ALLY System.
Selling, general and administrative expenses for the year ended December 31, 2023 were $26.1 million, a decrease of $1.1 million, or 3.9%, compared to $27.2 million for the year ended December 31, 2022.
Selling, general and administrative expenses for the year ended December 31, 2024 were $26.5 million, an increase of $0.4 million, or 1%, compared to $26.1 million for the year ended December 31, 2023.
In some situations, we lease our laser systems to surgeons, primarily through non-cancellable leases with a fixed lease payment. We consider all components of our revenue to be recurring source revenue, with the exception of sales of our systems.
In some situations, we lease our Systems to surgeons, primarily through non-cancellable leases with a fixed lease payment.
Recently Issued Accounting Standards See Note 2, Summary of Significant Accounting Policies , to our financial statements included elsewhere in this Annual Report for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 31, 2023.
We will remain an emerging growth company until December 31, 2025 (the fiscal year-end following the fifth anniversary of the completion of the Spin-Off). 89 Recently Issued Accounting Standards See Note 2, Summary of Significant Accounting Policies , to our financial statements included elsewhere in this Annual Report for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 31, 2024.
The increase was primarily attributable to the number of system sales, which have a lower gross margin than procedure licenses as well as the full costing of raw materials for ALLY Systems as all raw materials previously charged to research and development expenses have been utilized in production.
The increase was primarily attributable to the number of Systems sales, which have a lower gross margin than procedure licenses, as well as the full costing of raw materials for ALLY Systems in 2024, whereas some raw materials utilized in manufacturing were previously charged to research and development expenses. 82 Cost of service revenue for the year ended December 31, 2024 compared to the year ended December 31, 2023 increased by $1.4 million or 28%.
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
We intend to rely on other exemptions provided by the JOBS Act so long as we remain eligible, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
The Company will continue to review the applicability of new notices to its operations and will review the proposed regulations and adjust the estimates as necessary. 79 Seasonality We have historically experienced seasonal variations in the sales and leases of our products, with our fourth quarter typically being the strongest and the first or third quarter being the slowest.
Seasonality We have historically experienced seasonal variations in the sales and leases of our products, with our fourth quarter typically being the strongest and the first quarter being the slowest.
Global economic uncertainty and other factors have impeded global supply chains, resulted in longer lead times and delays in procuring component parts and raw materials, and resulted in inflationary cost increases in certain raw materials, labor and transportation. In particular, a global semiconductor supply shortage has had, and is continuing to have, wide-ranging effects across multiple industries.
Global economic uncertainty and other factors have impeded global supply chains, resulted in longer lead times and delays in procuring component parts and raw materials, and resulted in inflationary cost increases in certain raw 79 materials, labor and transportation. We expect these inflationary impacts to continue for the foreseeable future.
Amortization of intangible assets was approximately $1.1 million for the year ended December 31, 2023, which was consistent with the year ended December 31, 2022. Non-GAAP Financial Measures We prepare and analyze operating and financial data and non-GAAP measures to assess the performance of our business, make strategic and offering decisions and build our financial projections.
Non-GAAP Financial Measures We prepare and analyze operating and financial data and non-GAAP measures to assess the performance of our business, make strategic and offering decisions and build our financial projections. The key non-GAAP measures we 83 use, EBITDA and Adjusted EBITDA, are reconciled to net loss below for the years ended December 31, 2024 and 2023.
Cost of Revenue Total cost of revenue for the year ended December 31, 2023 was $21.1 million, an increase of 36.7% when compared to total cost of revenue of $15.4 million for the year ended December 31, 2022. 80 Cost of product revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $5.0 million or 56.0%.
Cost of product revenue for the year ended December 31, 2024 compared to the year ended December 31, 2023 increased by $4.4 million, or 31%.
Research and development expenses were $6.1 million for the year ended December 31, 2023, a decrease of $5.7 million, or 48.0%, compared to $11.8 million for the year ended December 31, 2022.
We expect our selling and marketing expenses will continue to increase in the future to support the continued growth in ALLY System placements. Research and Development . Research and development expenses were $5.3 million for the year ended December 31, 2024, a decrease of $0.8 million, or 13%, compared to $6.1 million for the year ended December 31, 2023.
Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 (Dollars in thousands) 2023 2022 Change from Prior Year % Revenue: Product $ 31,643 $ 25,959 21.9 % Lease 6,448 5,915 9.0 % Service 4,073 3,484 16.9 % Total revenue $ 42,164 $ 35,358 19.2 % Cost of revenue (excluding intangible amortization): Product $ 13,902 $ 8,910 56.0 % Lease 2,091 1,941 7.7 % Service 5,064 4,552 11.2 % Total cost of revenue $ 21,057 $ 15,403 36.7 % Revenue Total revenue for the year ended December 31, 2023 was $42.2 million, an increase of 19.2% when compared to total revenue of $35.4 million for the year ended December 31, 2022.
We believe these seasonal variations are consistent across our industry. 81 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 Year Ended December 31, Change from Prior (Dollars in thousands) 2024 2023 Year % Revenue: Product $ 41,065 $ 31,643 30 % Lease 7,532 6,448 17 % Service 4,897 4,073 20 % Total revenue $ 53,494 $ 42,164 27 % Cost of revenue (excluding intangible amortization): Product $ 18,254 $ 13,902 31 % Lease 2,930 2,091 40 % Service 6,459 5,064 28 % Total cost of revenue $ 27,643 $ 21,057 31 % Revenue Total revenue for the year ended December 31, 2024 was $53.5 million, an increase of 27% when compared to total revenue of $42.2 million for the year ended December 31, 2023.
Product revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $5.7 million, or 21.9%. The increase was primarily attributable to higher system sales, which amounted to a $4.8 million increase, and increased procedure volume, which amounted to a $0.9 million increase, during the year ended December 31, 2023.
The increase was primarily attributable to higher Systems sales (including the ability to sell the ALLY System in the EU beginning in August 2024), which amounted to a $3.8 million increase, and increased procedure volume, which amounted to a $5.6 million increase, during the year ended December 31, 2024.
The ALLY System has received regulatory approval in the United States, India, and the Philippines. In September 2022, we submitted the ALLY System for certification in the EU and, in 2023, submitted documentation to distributors in South Korea, Taiwan, and China for additional marketing or certification applications.
The ALLY System has received regulatory approval in the United States, EU, India, Taiwan, as well as certain other countries. In addition, we are pursuing additional marketing or certification applications through our distributors in South Korea or China, but this process could take multiple years.
Net cash used in financing activities for the year ended December 31, 2022 was $2.0 million, primarily due to the payment of $2.4 million in contingent consideration due to regulatory approval of the ALLY System offset from proceeds from the sale of common stock under the employee stock purchase plan.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2024 was $0.1 million, primarily due to the net proceeds from issuance of common stock under equity incentive plans.
The extended warranty, unlike our standard product warranty, is a performance obligation because it provides an incremental service that is beyond ensuring the product delivered will be consistent with stated contractual specifications. When a contract contains multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price.
When a contract contains multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price. We recognize revenue as the performance obligations are satisfied by transferring control of the product or service to a customer as described below.
Cost of service revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 increased by $0.5 million or 11.2%. This increase was primarily attributable to an increase in service volume due to an increase in installed LENSAR Laser Systems and ALLY Systems.
Lease revenue is generated by Systems placements primarily in the United States. Cost of Revenue Total cost of revenue for the year ended December 31, 2024 was $27.6 million, an increase of 31% when compared to total cost of revenue of $21.1 million for the year ended December 31, 2023.
However, recently proposed tax legislation, if enacted, would restore the ability to deduct currently domestic research and development expenditures through 2025 and would retroactively restore this benefit for 2022 and 2023. The impact of Section 174 on the Company’s cash from operations depends primarily on the amount of research and development expenditures incurred.
The impact of Section 174 on the Company’s cash from operations depends primarily on the amount of research and development expenditures incurred. Section 174 has not had a material impact on the Company since its effective date.
In September 2022, we submitted the ALLY System for certification in the European Union, or EU, and, in 2023, submitted documentation to distributors in South Korea, Taiwan, and China for additional marketing or certification applications.
In 2022, we transitioned from manufacturing and selling our LLS to focus on our ALLY System. In addition, we are pursuing additional marketing or certification applications through our distributors in South Korea and China, but this process could take multiple years.
We expect selling, general and administrative expenses to continue to increase from current levels to support the expansion efforts in the U.S. and internationally for the ALLY System. Research and Development .
We expect our selling, general and administrative expenses to continue to increase in association with our planned growth.
Removed
Our ability to place systems in 2022 was limited by supply chain constraints that delayed the delivery of certain ALLY System raw materials and the completion and testing of ALLY Systems for use as launch-stock. In 2022, we transitioned from manufacturing and selling our LENSAR Laser System to focus on our ALLY System.
Added
The ALLY System is designed to transform premium cataract surgery by utilizing our advanced robotic technologies with the ability to perform the entire procedure in a sterile operating room or in-office surgical suite, delivering operational efficiencies and reducing overhead.
Removed
We have seen significant disruptions in the supply of, timing of delivery of and fluctuations in pricing for various component parts needed for our products, including the integrated circuits used in our systems, and expect these trends to continue.
Added
We believe there is significant opportunity for us to expand our presence in these countries and other markets and regions, subject to applicable regulatory clearance or certification.
Removed
While we are not directly exposed to economic conditions in Russia or Ukraine, the ongoing war between Russia and Ukraine has also had a substantial impact on global supply chains and may be a contributing factor to the supply chain shortages we are experiencing.
Added
The following table provides information about revenue and revenue attributable to recurring sources, which we consider to be all components of our revenue except for sales of our Systems: Year Ended December 31, (Dollars in thousands) 2024 2023 System $ 13,345 $ 9,561 Recurring source revenue: Procedure 27,720 22,082 Lease 7,532 6,448 Service 4,897 4,073 Total recurring source revenue 40,149 32,603 Total revenue $ 53,494 $ 42,164 Recurring source revenue % 75% 77% Cost of Revenue Total cost of revenue comprises cost of product revenue , cost of lease revenue and cost of service revenue.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur investments consist primarily of U.S. treasury bills and certificates of deposit and all our investments are classified as available-for-sale. Our cash and cash equivalents are held in deposit demand accounts at large financial institutions in amounts in excess of the Federal Deposit Insurance Corporation, or FDIC, insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category.
Biggest changeOur cash and cash equivalents are held in deposit demand accounts at large financial institutions in amounts in excess of the Federal Deposit Insurance Corporation, or FDIC, insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category.
Management has reviewed the financial situation and government guarantees to depositors, if applicable, of the financial institutions and believes there to be little or no credit risk to us. A hypothetical 10% change in interest rates would not have had a material impact on the value of our cash and cash equivalents as of December 31, 2023.
Management has reviewed the financial situation and government guarantees to depositors, if applicable, of the financial institutions and believes there to be little or no credit risk to us. A hypothetical 10% change in interest rates would not have had a material impact on the value of our cash and cash equivalents as of December 31, 2024.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. We had cash, cash equivalents and short-term and long-term investments of $24.6 million as of December 31, 2023. We generally hold our cash and cash equivalents in interest-bearing bank accounts, money market funds, and U.S. treasury bills.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. We had cash, cash equivalents and short-term and long-term investments of $22.5 million as of December 31, 2024. We generally hold our cash and cash equivalents in interest-bearing bank accounts, money market funds, and U.S. treasury bills.
We do have the ability to disable the system’s ability to operate for lack of payment and, in the case of notes receivable, repossess the system if scheduled payments lapse. As of December 31, 2023, no customers accounted for more than 10% of our accounts receivable, net.
We do have the ability to disable the system’s ability to operate for lack of payment and, in the case of notes receivable, repossess the system if scheduled payments lapse. As of December 31, 2024, one customer accounted for approximately 12% of our accounts receivable, net.
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Our investments consist primarily of U.S. treasury bills and agency bonds, as well as certificates of deposit. All our investments are classified as available-for-sale.

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