TCMD 10-K & 10-Q changes, risk factors and insider trading

Determinations of which products or services will be reimbursed under Medicare can be developed at the national level through a National Coverage Determination, or NCD, by CMS, or at the local level through a Local Coverage Determination, or LCD, by the two regional Durable Medical Equipment (DME) Medicare Administrative Contractors (MACs), which are private contractors that process and pay claims on behalf of CMS for different regions. The NCD for Pneumatic Compression Devices (PCDs) was established on January 14, 2002 and the LCD for PCDs was established by the MACs on October 1, 2015. On November 14, 2024 the LCD for PCDs was retired, and therefore the NCD will apply to all PCDs. We are not able to predict how the application of the NCD to PCDs that were previously covered by the LCD will impact coverage determinations, but unfavorable interpretations may occur. In addition, beginning April 13, 2026, CMS will require prior authorization requests (“PARs”) for pneumatic compression devices billed under the HCPCS codes for our PCD products. While the impacts of the new PAR process are uncertain at this time, the requirement to obtain PARs related to our products could result in increased claim denials, delays in shipments due to additional administrative requirements associated with the process and other negative effects. The new PAR process could adversely affect coverage matters, particularly during the initial implementation phase of the new requirement.

For our respiratory therapy products,product, we rely on DME providers for all aspects of sales, reimbursement, training and support. Our future success with respect to our respiratory therapy productsproduct depends largely on our ability to maintain and expand relationships with our current, and to enter into relationships with new, distributors of our airway clearance products. Our ability to continue to market, distribute, and sell our airway clearance products may be at risk if key or multiple of the DME providers choose to stop selling our products or if we are unable to enter into relationships with new distributors. Further, because we fully rely on DME providers related to sales of our AffloVest product, any disruption affecting those DMEs could adversely impact our results, such as the large DME provider that experienced slowed placements of AffloVest due to eligibility requirement changes that led to the decrease in our airway clearance product line revenue in 2023 and the first half of 2024.

We are subject to extensive federal and state regulation, and if we or our partners fail to comply with applicable regulations,requirements, we could beface substantial penalties, such as being required to repay amounts previously received, and could suffer severe criminal or civil sanctions or be required to make significant changes to our operations that could adversely affect our business, financial condition and operating results. Further, requirements to comply with new laws, regulations and guidance may have an adverse effect on our financial condition and results of operations.

Unless an exemption applies, each medical device we seek to distribute commercially in the United States requires marketing authorization from the FDA prior to distribution. The two primary types of FDA marketing authorizations applicable to a medical device are premarket notification, also called a 510(k) clearance, and premarket approval. The type of marketing authorization is generally linked to the classification of the device. When a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is "substantially equivalent" to a legally marketed device previously found substantially equivalent through a 510(k) premarket notification, a legally marketed device which has been reclassified from high to low or moderate risk or a legally marketed device in commercial distribution before May 28, 1976 for which the FDA does not require the submission of a premarket approval application. Such a device is commonly known as a ‘‘”predicate device.’’device.’” In 2019, the FDA released a final guidance for industry regarding an optional Safety and Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device. The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence. A medical device may be found not to be equivalent if it has different intended uses from the predicate device or possesses different technological characteristics from the predicate device which raise new questions of safety and effectiveness. A premarket approval application must be submitted to the FDA if the device cannot be cleared through the 510(k) process. The premarket approval application process is much more demanding and in-depth than the 510(k) premarket notification process and requires the payment of more significant user fees. A premarket approval application must be supported by valid scientific evidence, which typically requires extensive data to demonstrate the reasonable assurance of safety and effectiveness of the device. The approval process involves FDA review of information, including but not limited to, technical, pre-clinical (bench and/or animal), clinical trials, manufacturing and labeling. The FDA clearance and approval processes frequently take longer than anticipated due to increasing FDA demands for clarification of data or new data requirements.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which 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. For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA published a draft guidance on the 510(k) regulatory pathway in 2014, finalized in 2019, and again in 2023 through draft guidance, which altered and clarified the manner in which the 510(k) regulatory pathway is administered and interpreted. The FDA intends these reform actions to improve the efficiency and transparency of the clearance process, as well as bolster patient safety. Any new guidance could impose additional regulatory requirements upon us which could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances. In addition, as part of the Food and Drug Administration Safety and Innovation Act, Congress reauthorized the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several "Medical Device Regulatory Improvements" and miscellaneous reforms which are further intended to clarify and improve medical device regulation both pre- and post-market.

We will likely need to conduct additional clinical studies in the future to support new indications for our products or for clearances or approvals of new product lines, or for the approval of the use of our products in some foreign countries. Clinical testing can take many years, can be expensive and carries uncertain outcomes. The initiation and completion of any of these studies may be prevented, delayed, or halted for numerous reasons.

We often must rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories, to conduct our clinical trials and to assist us with pre-clinical development. If these third parties do not successfully carry out their contractual duties or regulatory obligations, have difficulty recruiting sufficient subjects for clinical studies or fail to meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control. For example, clinical studies may have certain limitations that affect outcomes, including sample size, study population, and participation due to reasons outside of our control, such as COVID-19.

If we or our component manufacturers fail to comply with the FDA's Quality Management System Regulation, our manufacturing operations could be interrupted,interrupted or our business otherwise may be negatively impacted, and our product sales and operating results could suffer.

We and many of our component manufacturers are required to comply with the FDA's Quality System Management Regulation, or QSR,QMSR, which covers the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our devices. The QMSR went into effect on February 2, 2026, replacing the former QSR. The FDA audits compliance with the QSRQMSR through periodic announced and unannounced inspections of manufacturing sites and other applicable facilities. We and our component manufacturers have been, and anticipate in the future being, subject to such inspections. We cannot provide assurance that any future inspection will not result in adverse findings with respect to our QSRQSMR compliance. If our manufacturing facilities or those of any of our component manufacturers or suppliers are found to be in violation of applicable laws and regulations, or we or our manufacturers or suppliers fail to take satisfactory corrective action in response to an adverse inspection, the FDA could take enforcement action, including one or more of the following non-exclusive sanctions:

The Federal Communications Commission maintains oversight of the Federal Telephone Consumer Privacy Act (“TCPA”) governing how entities engage with consumers via telephone, including text communications, typically thought of as “telephone solicitations.” Several states have issued or may issue similar statutes or regulations. These statutes mandate compliance with requirements such as limiting time of day for calls/outreach, restricting autodial processes, limiting or prohibiting robot-calling, and compliance with “do not call” registries, among other aspects. Violations can subject our company to fines, penalties and consumer actions. We may need to comply with applicable laws in these jurisdictions that regulate telephone and text messaging to consumers, including our patients, which may increase our costs of compliance.

Other state laws contain additional disclosure obligations for businesses that collect personal information about residents and afford those individuals additional rights relating to their personal information that may affect our ability to use personal information or share it with our business partners. For example, California has laws that give California residents certain privacy rights in the collection and disclosure of their personal information and requires businesses to make certain disclosures and take certain other acts in furtherance of those rights, and has created a new agency, the California Privacy Protection Agency, authorized to implement and enforce California’s privacy laws, which could result in increased privacy and information security regulatory actions. Other U.S. states have passed, or are considering passing, consumer privacy laws. We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.

We believe our cash and cash flows from operations will be sufficient to meet our working capital, capital expenditure and debtcommitment repayment and related interest paymentfee requirements for at least the next twelve months. However, we have based these estimates on assumptions that may prove to be incorrect, and we could spend our available financial resources much faster than we currently expect. Any future funding requirements will depend on many factors, including:

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If too few securities or industry analysts commence or maintain coverage of our company, the trading price for our common stock would likely be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our common stock would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause the price of our shares and trading volume to decline.

We are a medical technology company that develops and provides innovativecommercializes medical devices forin the treatmentUnited of underserved chronic diseases.States. Our mission is to help people suffering from chronic diseases live better and care for themselves at home. We focus our efforts on advancing the standard of care in treating underserved chronic diseases in the home setting to improve patient outcomes and quality of life and help control rising healthcare expenditures. Our areas of therapeutic focus are (1) vascular disease, with a goal of advancing the standard of care in treating lymphedema and chronic venous insufficiency, (2) oncology, where lymphedema is a common consequence among cancer survivors and (3) providing airway clearance therapy for those suffering from chronic respiratory conditions. We possess a unique, scalable platform to deliver at-home healthcare solutions throughout the United States. This evolving home care delivery model is recognized by policymakers and insurance payers as a key for controlling rising healthcare costs. Our solutions deliver cost-effective, clinically proven, long-term treatment for people with these chronic diseases. We generally employ a direct-to-patient and -provider model within our lymphedema portfolio, through which we obtain patient referrals from clinicians, manage insurance claims on behalf of our patients and their clinicians, deliver our solutions directly to patients and train them on the proper use of our solutions. This model allows us to engage directly with patients and clinicians, which are both critical audiences to which we can provide clinical evidence and education. For our respiratory therapy product, we have a durable medical equipment (“DME”) distribution model, through which we sell the AffloVest product to accredited DME providers, whose representatives gather and submit documentation for payer reimbursement, train patients on use of the device, and provide ongoing patient support.

Our current lymphedema products are the Flexitouch Plus, Entre Plus and Nimbl pneumatic compression pump systems and our airway clearance product is thea High-Frequency Chest Wall Oscillation (“HFCWO”) device called AffloVest. AThe predecessorFlexitouch tosystem ourproduct line is considered an advanced pneumatic compression device. The first generation Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in July 2002, andintroducing wea introducedmedical thedevice systemtechnology to address the many limitations of self-administered home-based manual lymphatic drainage therapy. WeA begansecond selling our more advancedgeneration Flexitouch system after receivingreceived 510(k) clearance from the FDA in October 2006. In September 2016, we received 510(k) clearance from the FDA for the Flexitouch system in treating lymphedema of the head and neck. InA third generation, Flexitouch Plus, received 510(k) clearance from the FDA in June 2017,2017. weIn announcedDecember that2020, we received 510(k) clearance from the FDA for the Flexitouch Plus, the third-generation version of our Flexitouch system. In December 2020, we received 510(k) clearance for two new indications for our Flexitouch Plus system: phlebolymphedema and lipedema. We introduced ourThe Entre system inproduct the United States in February 2013line and ourNimbl Entreproduct Plusline systemare inconsidered Marchbasic, 2023.or Thesimple, Entrepneumatic Pluscompression systemdevices. isThese systems are sold or rented to patients who need a simple pump or who do not yet qualify for insurance reimbursement for an advanced compression device suche.g., as oura Flexitouch Plus system. We introduced the Entre system in the United States in February 2013, this device was manufactured by Thermotek, Inc. and received FDA clearance in 2010. In 2015, we received FDA clearance for our own first generation Entre system and the second generation, Entre Plus, was released in March 2023. Nimbl, our next-generation pneumatic compression platform, received 510(k) clearance in June 2024 and,and beginning in October 2024, iswas commercially available throughout the United Stateslaunched for the treatment of upper extremity lymphedema within plannedOctober expansion2024 toand was commercially launched for lower extremity lymphedema in February 2025. Nimbl has replaced most orders for our Entre system and we expect to continue to do so. Sales and rentals of our lymphedema products represented 89%84% and 88%89% of our revenue in the years ended December 31, 20242025 and 2023,2024, respectively.

To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of oura directseparate lymphedema and respiratory sales force, DMEmarketing salesteam team,including clinical education programs, patient education team, reimbursement capabilities and clinical expertise. We market our lymphedema products in the United States using a direct-to-patient and -provider-clinician model. The AffloVest device is sold through respiratory durable medical equipment providers throughout the United States that service patients and bill third-party payers for the product. We also employ a small group of respiratory specialists, who educate DME representatives, provide product demonstrations for targeted clinicians and support technical questions related to the AffloVest. As of December 31, 2024,2025, we employed 166 account managers and 166 specialists for our lymphedema products and a team of 19 specialists supporting our airway clearance products. This compares to 169 account managers and 111 specialists for our lymphedema products and a team of 18 specialists supporting our airway clearance products. This compares to 150 account managers and 104 specialists for our lymphedema products and a team of 16 specialists supporting our airway clearance products as of December 31, 2023.2024.

We rely on third-party contract manufacturers for the sourcing of parts, the assembly of our controllers and the manufacturing of the garments used with our systems. We conduct final assembly of the garments used with our products, perform quality assurance and ship our products from our facility in Minnesota. We also manufacture and ship the AffloVest device from our Minnesota-based facility.

In July 2022, we launched Kylee™, a free mobile applicationapp that allowsmakes it easier for patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources. Flexitouch Plus and Nimbl devices include Bluetooth technology, which is viewable using Kylee.

For the year ended December 31, 2025, we generated revenue of $329.5 million and had net income of $19.1 million, compared to revenue of $293.0 million and net income of $17.0 million for the year ended December 31, 2024, we generated revenue of $293.0 million and had net income of $17.0 million, compared to revenue of $274.4 million and net income of $28.5 million for the year ended December 31, 2023, and revenue of $246.8 million and a net loss of $17.9 million for the year ended December 31, 2022.2023. Our primary sources of capital since our initial public offering in 2016 have been from operating income, bank financing and our public offering in February 2023.

We derive revenue from sales and rentals of our Flexitouch Plus, Entre Plus and Nimbl systems to patients in the United States. Revenue growth has been driven by increased clinician, patient and payer awareness of lymphedema and the clinical efficacy of our Flexitouch Plus system, and the launch of our Entre Plus system in March 2023.2023, and the launch of Nimbl in October 2024. We have expanded our direct sales force, which helps us drive and support our revenue growth and intend to continue this expansion. However, any reversal in these recent trends could have a negative impact on our future revenue.

We sell or rent our Flexitouch Plus, Entre Plus and Nimbllymphedema systems either directly to patients or to the Veterans Administration on behalf of patients, who are referred to us by physicians, clinical lymphatic therapists or nurses. We bill payers, such as private insurers, Medicare, or Medicaid, on behalf of our patients and bill patients directly for their cost-sharing amounts, including any portion of an unsatisfied deductible and any copayments or co-insurance. We bill the Veterans Administration directly for the purchase or lease of our product on behalf of the patient. Approximately 9% of our revenue in 2025 and 11% of our revenue in 2024 and 10% of our revenue in 2023 came from the Veterans Administration. Approximately 24% of our revenue in 2025 and 18% of our revenue in 2024 and 24% of our revenue in 2023 came from Medicare patients. Changes to the level of Medicare coverage for our products could reduce the number of Medicare patients who have access to our products. Our products currently are not subject to the competitive bidding process for supplying covered items to Medicare recipients.

We also derive revenue from sales of our AffloVest product to accredited DME providers. These respiratory DME providers provide a full range of solutions for these patients with complex diseases, and represent a large, developed channel. Respiratory DME partners serve the role of receiving prescriptions, verifying coverage criteria, shipping, billing and training the patient. We intend to expand and support our respiratory DME partners, in an effort to help demonstrate High Frequency Chest Wall Oscillation (“HFCWO”) as a staple among the host of treatments they bring to chronic respiratory patients, thereby allowing us to continue to grow revenue from this product offering.

We calculate gross margin as gross profit divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, including product and payer mix, production volumes, manufacturing costscosts, and cost-reduction strategies. We continue to work to reduce product manufacturing costs through enhanced product design efforts as well asefforts, supply chain initiatives in an effort to offset anticipated price erosion.erosion and improving product quality. Our gross margin will likely fluctuate from quarter to quarter.

OtherInterest Income (Expense), Net

OtherInterest income (expense), net consists primarily of interest income related to investment income earned on our invested capital portfolio and interest expense consists primarily of interest expense related to our debt obligations.

The increase in the lymphedema product line revenue in the year ended December 31, 2024,2025, was attributabledriven toby theaccelerating growthcommercial momentum from our strong partnerships, execution of our fieldgo-to-market commercial strategy and disciplined focus on sales teamforce and ongoing technology and workflow initiatives.productivity. The increase in the airway clearance product line revenue was primarily attributabledriven toby thestrong onboardingpartnerships ofand aprioritized newplacement agreements with our top 10 respiratory DME partner in 2024.providers.

Cost of revenue decreasedincreased $3.0$3.1 million, or 4%, to $79.4 million during the year ended December 31, 2025, compared to $76.3 million during the year ended December 31, 2024, compared to $79.3 million during the year ended December 31, 2023.2024. The decreaseincrease in cost of revenue was primarily attributable to lowerhigher manufacturing and warranty costs.sales.

Intangible Asset Amortization and Earn-out

Interest income increaseddecreased $1.5$0.3 million, or 81%,8%, to $3.1 million during the year ended December 31, 2025, compared to $3.4 million during the year ended December 31, 2024, compared to $1.9 million during the year ended December 31, 2023, primarily due to a higherlower cash balance and the movement of cash into a higher yielding Institutional Insured Liquid Deposit demand account indecreasing Augustthe 2023.rates. Interest expense decreased $2.1$1.0 million, or 50%, to $1.0 million during the year ended December 31, 2025, compared to $2.1 million during the year ended December 31, 2024, compared to $4.1 million during the year ended December 31, 2023, primarily due to the decrease in the outstanding balance of our term loan.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities during the year ended December 31, 2024,2025, was $4.8$51.2 million, primarily consisting of payments of $3.5$26.6 million for the repurchase of our common stock and payments of $3.0$26.2 million on our term loan, partially offset by $1.7$1.4 million in proceeds from the issuance of common stock under our Employee Stock Purchase Plan (the “ESPP”). and $0.2 million in proceeds from exercises of common stock options.

Net cash providedused byin financing activities during the year ended December 31, 2023,2024, was $5.7$4.8 million, primarily consisting of netpayments proceedsof from$3.5 million for the offeringrepurchase of our common stock and payments of $34.6 million, $8.3$3.0 million in borrowings underon our term loan, andpartially $1.5offset by $1.7 million in proceeds from the issuance of common stock under the ESPP, partially offset by payments of $25.0 million on the revolving credit facility, $10.6 million on the AffloVest earn-out, and $3.0 million on our term loan.ESPP.

On April 30, 2021, we entered into an Amended and Restated Credit Agreement (the “2021 Restated Credit Agreement”) with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent. The 2021 Restated Credit Agreement amended and restated in its entirety our prior credit agreement.

On September 8, 2021, we entered into a First Amendment Agreement (the “Amendment”), which amended the 2021 Restated Credit Agreement (as amended by the Amendment, the “Credit Agreement”) with the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent. The Amendment, among other things, added a $30.0 million incremental term loan to the $25.0 million revolving credit facility provided by the 2021 Restated Credit Agreement. The term loan is reflected on our consolidated financial statements as a note payable. The Credit Agreement provides that, subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed $25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $80.0 million.

On November 1, 2024, we entered into a Fifth Amendment Agreement (the “Fifth Amendment”), which further amended the Credit Agreement. The Fifth Amendment permitspermitted the Company to make payments to repurchase shares of its common stock, as long as the Company is not in default before and after giving effectsubject to suchcertain repurchases, and as long as such repurchases do not exceed $30.0 million.limitations.

OnAs of December 21,31, 2023,2025, we madehad ano paymentoutstanding ofborrowings $16.8 million to repay in fullunder the outstanding2025 balanceRestated onCredit the revolving credit facility.Agreement.

For additional information regarding the 2025 Restated Credit Agreement, including interest rates, fees and maturities, see Note 1110 – “Credit Agreement” of the consolidated financial statements contained in this report.

On October 30,16, 2024,2025, our Board of Directors authorized a new program to repurchase up to $30.0$25.0 million of our common stock. Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both. The timing and number of shares to be purchased will be based on the price of ourthe Company's common stock, general business and market conditions and other investment considerations and factors. TheThis share repurchase program expires on OctoberNovember 31,3, 2026.2027. The program does not obligate usthe Company to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice.

We believe our cash and cash flows from operations will be sufficient to meet our working capital, capital expenditure,expenditures, debt repayment and related interest,obligations, and other cash requirements for at least the next twelve months.

Our current lymphedema products are the Flexitouch Plus, Entre Plus and Nimbl pneumatic compression pump systems and our airway clearance product is a High-Frequency Chest Wall Oscillation (“HFCWO”) device called AffloVest. The Flexitouch system product line is considered an advanced pneumatic compression device. The first generation Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in July 2002, introducing a medical device technology to address the many limitations of self-administered home-based manual lymphatic drainage therapy. A second generation Flexitouch system received 510(k) clearance from the FDA in October 2006. In September 2016, we received 510(k) clearance from the FDA for the Flexitouch system in treating lymphedema of the head and neck. A third generation, Flexitouch Plus, received 510(k) clearance from the FDA in June 2017. In December 2020, we received 510(k) clearance from the FDA for two new indications for our Flexitouch Plus system: phlebolymphedema and lipedema. The Entre system product line and Nimbl product line are considered basic, or simple, pneumatic compression devices. These systems are sold or rented to patients who need a simple pump or who do not yet qualify for insurance reimbursement for an advanced compression device e.g., a Flexitouch Plus system. We introduced the Entre system in the United States in February 2013, this device was manufactured by Thermotek, Inc. and received FDA clearance in 2010. In 2015, we received FDA clearance for our own first generation Entre system and the second generation, Entre Plus, was released in March 2023. Nimbl, our next-generation pneumatic compression platform, received 510(k) clearance in June 2024 and was commercially launched for upper extremity lymphedema in October 2024 and was commercially launched for lower extremity lymphedema in February 2025. Nimbl has replaced most orders for our Entre system and we expect will continue to do so. Sales and rentals of our lymphedema products represented 84% and 83% of our revenue in each of the threesix months ended MarchJune 31,30, 2026 and 2025.2025, respectively.

On September 8, 2021, we acquired the assets of the AffloVest airway clearance product line. AffloVest is a portable, wearable vest that provides airway clearance to treat patients with chronic respiratory conditions such as bronchiectasis or conditions resulting from neuromuscular disorders. In April 2026, we received FDA 510(k) clearance for our AffloVest Gen 6 and it was commercially launched in June 2026. For each of the threesix months ended MarchJune 31,30, 2026 and 2025, sales of AffloVest represented 16% and 17% of our revenue.revenue, respectively.

To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of a lymphedema and respiratory sales force, marketing team including clinical education programs, patient education team, reimbursement capabilities and clinical expertise. We market our lymphedema products using a direct-to-patient and -clinician model. The AffloVest device is sold through respiratory durable medical equipment providers throughout the United States that service patients and bill third-party payers for the product. We employ a small group of respiratory specialists, who educate DME representatives, provide product demonstrations for targeted clinicians and support technical questions related to the AffloVest. As of MarchJune 31,30, 2026, we employed 172169 account managers and 163 specialists for our lymphedema products and a team of 1819 specialists supporting our airway clearance products. This compares to 161 account managers and 103132 specialists for our lymphedema products and a team of 19 specialists supporting our airway clearance products as of MarchJune 31,30, 2025.

For the three months ended MarchJune 31,30, 2026, we generated revenue of $75.3$85.7 million and had a net lossincome of $1.8$7.8 million, compared to revenue of $61.3$78.9 million and net lossincome of $3.0$3.2 million for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, we generated revenue of $161.0 million and had net income of $6.0 million, compared to revenue of $140.2 million and net income of $0.2 million for the six months ended June 30, 2025. Our primary sources of capital since our initial public offering in 2016 have been from operating income, bank financing and our public offering in February 2023.

Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

Revenue increased $14.0$6.8 million, or 23%,9%, to $75.3$85.7 million in the three months ended MarchJune 31,30, 2026, compared to $61.3$78.9 million in the three months ended MarchJune 31,30, 2025. The increase in total revenue was attributable to an increase of $11.7$7.7 million, or 23%,12%, in sales and rentals of the lymphedema product line andin anthe three months ended June 30, 2026, compared to the three months ended June 30, 2025. The increase was partially offset by a decrease of $2.3$0.9 million, or 22%,7%, in sales of the airway clearance product line in the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025.

The increase in the lymphedema product line revenue in the three and six months ended MarchJune 31,30, 2026, was driven by accelerating commercial momentum from our strong partnerships, execution of our go-to-market commercial strategy and disciplined focus on sales force productivity. The decrease in the airway clearance product line revenue for the three months ended June 30, 2026 was primarily driven by inventory timing dynamics among a few large DME providers. The increase in the airway clearance product line revenue for the six months ended June 30, 2026 was primarily driven by strong partnerships and prioritized placement agreements with our top 10 respiratory DME providers.

The following tabletables summarizessummarize our revenue by product line for the three and six months ended MarchJune 31,30, 2026 and 2025, both in dollars and percentage of total revenue:

Cost of revenue increased $1.7$0.2 million, or 11%,1%, to $17.7$20.3 million in the three months ended MarchJune 31,30, 2026, compared to $15.9$20.1 million in the three months ended MarchJune 31,30, 2025. Cost of revenue increased $2.0 million, or 5%, to $38.0 million in the six months ended June 30, 2026, compared to $36.0 million in the six months ended June 30, 2025. The increase in cost of revenue in both periods was primarily attributable to the increase in revenue.

Gross margin was 77%76% and 74%75% in the three months ended MarchJune 31,30, 2026 and 2025, respectively, and 76% and 75% in the six months ended June 30, 2026 and 2025, respectively.

Sales and marketing expenses increased $5.2$2.0 million, or 19%,7%, to $32.7$32.0 million in the three months ended MarchJune 31,30, 2026, compared to $27.5$30.0 million in the three months ended MarchJune 31,30, 2025. The increase was primarily attributable to a $4.1$2.9 million increase in personnel-related compensation expenses,expenses (including travel and entertainment expenses) and a $1.3$0.2 million increase in expenses for professional services, partially offset by a $1.4 million decrease in expenses related to meetings and seminars and a $0.1 million increase in expenses for demo units, partially offset by a $0.3 million decrease in travel and entertainment expenses.seminars.

Research and development (“R&D”) expenses increased $1.0$0.5 million, or 59%,24%, to $2.8$2.5 million in the three months ended MarchJune 31,30, 2026, compared to $1.7$2.0 million in the three months ended MarchJune 31,30, 2025. The increase was primarily attributable to a $0.6$0.2 million increase in IT and other professional fees relatedIT-related expenses and a $0.5$0.2 million increase in personnel-related compensation expenses. IT-related expenses reflected in both R&D expenses and Reimbursement, general and administrative expenses primarily relate to the ongoing implementation of new technology across the entire order process, replacing legacy systems, which we expect to continue through the remainder of 2026.

Reimbursement, general and administrative expenses increased $3.0$1.3 million, or 15%,6%, to $23.0$23.4 million in the three months ended MarchJune 31,30, 2026, compared to $20.0$22.0 million in the three months ended MarchJune 31,30, 2025. This increase was primarily attributable to a $1.2$2.2 million increase in personnel-related compensation expenses, a $0.8$0.3 million increase in IT-related expenses and a $0.2 million increase in acquisition and integration costs related to the LymphaTech acquisition, partially offset by a $0.6$1.6 million increasedecrease in occupancy costs, depreciation expense and professional fees and a $0.4 million increase in IT-related expenses.costs.

Intangible asset amortization remainedwas consistent$0.7 atand $0.6 million for each of the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively.

Interest income decreased $0.2$0.3 million, or 26%,34%, to $0.7$0.6 million in the three months ended MarchJune 31,30, 2026, compared to $0.9 million in the three months ended MarchJune 31,30, 2025, primarily due to a lower cash balance in an Institutional Insured Liquid Deposit demand account due to funds being utilized for the LymphaTech acquisition. Interest expense decreased $0.4 million, or 93%,95%, to $28,000$19,000 in the three months ended MarchJune 31,30, 2026, compared to $0.4 million in the three months ended MarchJune 31,30, 2025, primarily due to the repayment of debt.

We recorded an income tax benefit of $0.4 million and an income tax expense of $0.9 million compared to an income tax benefit of $1.1$1.3 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The primary driver of the change in our effective tax rate was attributable to the Company recording stock-based compensation discrete items when compared to the prior year period.

Net cash provided byin operating activities during the threesix months ended MarchJune 31,30, 20252026 was $0.4$2.9 million, resulting from non-cash net income adjustments of $4.0$7.6 million, a net lossincome of $3.0$6.0 million and a net decrease in operating assets and liabilities of $0.7$10.7 million. The positive non-cash net income adjustments consisted primarily of $2.1$4.0 million of stock-based compensation expenseexpense, and $1.7$3.5 million of depreciation.depreciation and amortization, and a loss on disposal of property and equipment and intangibles of $0.1 million. Cash usedprovided relating to the change in operating assets and liabilities primarily consisted of a decrease in net accounts receivable of $9.2 million, a $1.4 millionan increase in accounts payable and a $0.3 million increase in accruedprepaid expenses and other liabilities,assets partiallyof offset$5.2 bymillion, a decrease in accrued payroll and related taxes of $7.0$3.8 million, an increase in prepaid expenses and other assetsinventories of $2.5$2.8 million, a $2.2 million decrease in income taxes payablepayable, ofa $1.3$0.8 million,million decrease in accrued expenses and other liabilities and an increase in right of use operating lease assets of $0.3$0.4 million, anpartially offset by a $2.9 million increase in accounts payable, a decrease of $0.8 million in net investment in leases of $0.3 million and ana increasedecrease in inventoriesnet accounts receivable of $0.2$0.8 million.

Net cash used in investing activities during the threesix months ended MarchJune 31,30, 2026, was $7.1$11.4 million, primarily consisting of $6.2 million of net payments related to the acquisition of LymphaTechLymphaTech, anda $0.8$3.0 million payment for the exclusive distribution agreement for MyoSleeve, $2.1 million of purchases of property and equipment and $0.1 million of patent costs.

Net cash used in investing activities during the threesix months ended MarchJune 31,30, 2025, was $0.4$0.8 million, consisting of purchases of property and equipment and patent costs.

Net cash used in financing activities during the threesix months ended MarchJune 31,30, 2025,2026, was $10.8$5.1 million, primarily consisting of payments of $10.0$6.4 million for the repurchase of our common stock, partially offset by $1.0 million in proceeds from the issuance of common stock under the ESPP and a$0.2 paymentmillion in proceeds from the exercise of $0.8common millionstock made on our term loan.options.

The 2025 Credit Agreement includes financial covenants consisting of a maximum consolidated total leverage ratio covenant and a minimum fixed charge coverage ratio covenant. In addition, the 2025 Credit Agreement includes customary negative covenants, including a restricted payment covenant that permits the Company to repurchase shares of its common stock and make certain other payments, as long as the Company is not in default under the 2025 Credit Agreement, has a consolidated total leverage ratio of no greater than 1.75 to 1.00, and has liquidity of not less than $30.0 million, in each case both before and after giving effect to such stock repurchases or the making of such payments. As of MarchJune 31,30, 2026, we were in compliance with all covenants under the 2025 Credit Agreement.

As of MarchJune 31,30, 2026, we had no outstanding borrowings under the 2025 Credit Agreement.

During the threesix months ended MarchJune 31,30, 2026, we repurchased 40,250249,150 shares for approximately $1.1$6.4 million. We used cash on hand to fund these repurchases.