Financial Analysis

Note 11. Commitments and Contingencies Lease Obligations We lease property and equipment under operating leases, typically with terms greater than 12 months, and determine if an arrangement contains a lease at inception. In general, an arrangement contains a lease if there is an identified asset and we have the right to direct the use of and obtain substantially all of the economic benefit from the use of the identified asset. We record an operating lease liability at the present value of lease payments over the lease term on the commencement date. The related right of use (ROU) operating lease asset reflects rental escalation clauses, as well as renewal options and/or termination options. The exercise of lease renewal and/or termination options are at our discretion and are included in the determination of the lease term and lease payment obligations when it is deemed reasonably certain that the option will be exercised. When available, we use the rate implicit in the lease to discount lease payments to present value; however, certain leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. We classify our leases as buildings, vehicles or computer and office equipment and do not separate lease and nonlease components of contracts for any of the aforementioned classifications. In accordance with applicable guidance, we do not recor …

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Note 10. Credit Agreement 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 September 8, 2021, in connection with the closing of the AffloVest acquisition, we borrowed the $30.0 million term loan and utilize …

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Year Ended December 31, (In thousands) 2025 2024 2023 Revenue Lymphedema products $ 278,380 $ 259,361 $ 241,721 Airway clearance products 51,142 33,623 32,702 Total $ 329,522 $ 292,984 $ 274,423 Percentage of total revenue Lymphedema products 84% 89% 88% Airway clearance products 16% 11% 12% Total 100% 100% 100% …

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Note 16. Fair Value Measurements We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3). As of December 31, 2023, our obligations under the AffloVest earn-out arrangements had been paid in full. Prior to the determination of the actual amount of the earn-out, the earn-out liability was valued by employing a Monte Carlo Simulation model in a risk-neutral framework, which is a Level 3 input. The underlying simulated variable included recognized revenue. The recognized revenue volatility estimate was based on a study of h …

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Note 7. Goodwill and Intangible Assets Goodwill In the third quarter of fiscal 2021, we completed the AffloVest acquisition. The purchase price of the AffloVest business exceeded the net acquisition-date estimated fair value amounts of the identifiable assets acquired and the liabilities assumed by $31.1 million, which was assigned to goodwill. Intangible Assets Our patents and other intangible assets are summarized as follows: Weighted- At December 31, 2025 Average Gross Amortization Carrying Accumulated Net (In thousands) Period Amount Amortization Amount Definite-lived intangible assets: Patents 11 years $ 1,083 $ 318 $ 765 Customer relationships 9 years 31,000 10,280 20,720 Developed technology 7 years 13,000 5,095 7,905 Subtotal 45,083 15,693 29,390 Unamortized intangible assets: Tradenames 9,500 9,500 Patents pending 277 277 Total intangible assets $ 54,860 $ 15,693 $ 39,167 Weighted- At December 31, 2024 Average Gross Amortization Carrying Accumulated Net (In thousands) Period Amount Amortization Amount Definite-lived intangible assets: Patents 12 years $ 1,148 $ 333 $ 815 Defensive intangible assets < 1 year 1,125 1,065 60 Customer accounts 125 125 Customer relationships 10 years 31,000 7,896 23,104 Developed technology 8 years 13,000 3,913 9,087 Subtotal 46,398 13,332 33,066 Unamortized intangible assets: Tradenames 9,500 9,500 Patents pending 223 223 Total intangible assets $ 56,121 $ 13,332 $ 42,789 Amortization expense was $3.7 million for the year ended Decemb …

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"Note 14. Income Taxes The provision (benefit) for income tax expense consisted of the following: Year Ended December 31, (In thousands) 2025 2024 2023 Current income taxes, Federal $ 2,290 $ 4,304 $ 5,045 Current income taxes, State 1,400 1,365 1,440 3,690 5,669 6,485 Deferred income taxes, Federal 7,163 702 (19,046) Deferred income taxes, State 1,364 365 (332) 8,527 1,067 (19,378) Unrecognized tax benefit, Federal 36 (207) 148 Unrecognized tax benefit, State 36 (207) 148 Total provision (benefit) for income taxes $ 12,253 $ 6,529 $ (12,745) The components of our deferred tax assets and liabilities were as follows: At December 31, (In thousands) 2025 2024 Deferred tax assets: Operating lease liability $ 4,034 $ 4,755 Net operating loss carryforwards 1 Accounts receivable and inventory reserves 2,930 5,406 Stock-based compensation 2,519 5,818 Accrued liabilities 2,638 1,766 Warranty reserves 589 752 Intangible assets 755 875 Business credits 830 761 R&D expenses 3,253 Other 712 342 Total deferred tax assets 15,007 23,729 Deferred tax liabilities: Right of use operating lease assets (3,488) (4,177) Fixed assets (802) (877) Prepaid expenses (151) (209) R&D expenses (710) Other (73) (155) Total deferred tax liabilities (5,224) (5,418) Net deferred tax assets $ 9,783 $ 18,311 A reconciliation of income tax expense (benefit) to the statutory federal tax rate is as follows: Year Ended December 31, ($ In thousands) 2025 2024 2023 US Federal Statutory Tax Expense/Rate $ 6,581 …

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Recently Adopted Accounting Pronouncement In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which requires entities to enhance disclosures around income taxes. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We retrospectively adopted this ASU for the year ended December 31, 2025. The adoption of this ASU affects only our disclosures, with no impacts to our financial condition and results of operations. …

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Note 13. Revenue We derive our revenue from the sale and rental of our products to our customers in the United States. The following table presents our revenue, inclusive of sales and rental revenue, disaggregated by product: Year Ended December 31, (In thousands) 2025 2024 2023 Revenue Lymphedema products $ 278,380 $ 259,361 $ 241,721 Airway clearance products 51,142 33,623 32,702 Total $ 329,522 $ 292,984 $ 274,423 Percentage of total revenue Lymphedema products 84% 89% 88% Airway clearance products 16% 11% 12% Total 100% 100% 100% Our revenue by channel, inclusive of sales and rental revenue, for the years ended December 31, 2025, 2024 and 2023, are summarized in the following table: Year Ended December 31, (In thousands) 2025 2024 2023 Private insurers and other payers $ 168,920 $ 175,432 $ 148,901 Veterans Administration 28,997 30,890 27,003 Medicare 80,463 53,039 65,817 Durable medical equipment distributors 51,142 33,623 32,702 Total $ 329,522 $ 292,984 $ 274,423 Our rental revenue is derived from rent-to-purchase arrangements that typically range from three to ten months . As title transfers to the patient, with whom we have the contract, upon the termination of the lease term and because collectability is probable, under ASC 842, these are recognized as sales-type leases. Each rental agreement contains two components, the controller and related garments, both of which are interdependent and recognized as one lease component. The revenue and associated cost of revenue …

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"Note 3. Summary of Significant Accounting Policies Cash Cash consists of all cash on hand and deposits. Our cash was held primarily in checking accounts and an Institutional Insured Liquid Deposit demand account as of December 31, 2025 and 2024. At times the amount of cash on deposit may exceed the federally insured limit of the bank. Deposit accounts at each of the institutions are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2025 and 2024, the Company exceeded FDIC limits at various institutions. The Company has not experienced any losses in such accounts. Equity Investments Equity investments (including equity securities) with readily determinable fair value are reported at fair value, with unrealized gains and losses included in the determination of net income (loss). For equity investments with no readily determinable fair value, we measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Such observable price changes may include instances where the investee issues equity securities to new investors, thus creating a new indicator of fair value, as an example. As of each of December 31, 2025 and 2024, the total carrying value of our equity investments, with no readily determinable fair value, was $0.3 million, and are included in other non-current assets on our Consolidated Bal …

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Note 17. Subsequent Event On February 17, 2026, the Company completed the acquisition of LymphaTech, a provider of digital 3D scanning technology for chronic swelling detection, measurement, and monitoring. The acquisition is expected to enhance the Companys expanding lymphedema portfolio. The transaction included an initial cash payment of $6.8 million, which was paid at closing. The acquisition agreement also provided for additional consideration contingent upon the achievement of certain milestones during periods following the acquisition date. As of the date the financial statements were issued, the Company has not determined the probability of the milestones, and the related contingent consideration cannot be reasonably estimated. The transaction will be accounted for as a business combination under ASC 805. The Company is in the process of determining the preliminary purchase price allocation, including the valuation of acquired assets and contingent consideration. The results of LymphaTech will be included in the Companys consolidated financial statements beginning on the acquisition date. …

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