Sight Sciences, Inc.

Previous wording

We have incurred annual net losses since our formation in 2010. For the years ended December 31, 2024 and 2023, we had net losses of $51.5 million and $55.5 million, respectively. As of December 31, 2024, we had an accumulated deficit of $346.3 million. To date, we have financed our operations primarily through equity and debt financings and from product sales. Our net losses and accumulated deficit have primarily been due to the substantial investments we have made to develop our products, costs related to our sales and marketing efforts, general research and development expenses, including costs related to clinical trials and regulatory initiatives to obtain marketing clearance, and infrastructure improvements, and costs related to intellectual property development, protection and enforcement. In addition, as a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company.

Current wording

We have incurred annual net losses since our formation in 2010. For the years ended December 31, 2025 and 2024, we had net losses of $38.4 million and $51.5 million, respectively. As of December 31, 2025, we had an accumulated deficit of $384.7 million. To date, we have financed our operations primarily through equity and debt financings and from product sales. Our net losses and accumulated deficit have primarily been due to the substantial investments we have made to develop our products, costs related to our sales and marketing efforts, general research and development expenses, including costs related to clinical trials and regulatory initiatives to obtain marketing clearance, and infrastructure improvements, and costs related to intellectual property development, protection and enforcement, including our ongoing litigation intellectual property litigation against Alcon Inc., Alcon Vision, LLC and their affiliates (collectively “Alcon”). In addition, as a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company.

Previous wording

We began selling VISCO360 and TRAB360, commercial predicate devices to OMNI, in 2015, TearCare in 2019 and SION in 2022, and therefore do not have a long history operating as a commercial company. Currently, we are highly dependent on the success of OMNI. We also derive revenue from sales of SION, our other commercially available Surgical Glaucoma product, and our TearCare system and related accessories, which comprise our commercial Dry Eye products, and we expect substantially all of our revenue in at least the next 12 months to be derived from the sale of these OMNI, SION and TearCare products. We believe OMNI sales will continue to account for the large majority of our revenue over the next few years. In the longer term, our growth strategy is dependent upon achieving adequate and sustainable reimbursement for TearCare to help drive Dry Eye revenue growth. Because we devote substantially all of our resources to developing, marketing and selling these products and rely on the sale of our products as our sole source of revenue, any factors that negatively impact our products, particularly OMNI, or result in a decrease in sales, could have a material adverse effect on our business, financial condition and results of operations.

Current wording

We began selling VISCO360 and TRAB360, commercial predicate devices to OMNI, in 2015, TearCare in 2019 and SION in 2022, and therefore do not have a long history operating as a commercial company. Currently, we are highly dependent on the success of OMNI and TearCare. We derive revenue from sales of OMNI and SION, our commercially available Interventional Glaucoma products, and our TearCare system and related accessories, which comprise our commercial Interventional Dry Eye products, and we expect substantially all of our revenue in at least the next 12 months to be derived from the sale of these OMNI, SION and TearCare products. We believe that OMNI sales will continue to account for the majority of our revenue over the next twelve months. In the longer term, our growth strategy is dependent in large upon expanding adequate and sustainable reimbursement for TearCare to help drive Interventional Dry Eye revenue growth. Because we devote substantially all of our resources to developing, marketing and selling these products and rely on the sale of our products as our sole source of revenue, any factors that negatively impact our products, particularly factors negatively affecting OMNI or TearCare revenue growth or appropriately reimbursed access to our TearCare procedure, could have a material adverse effect on our business, financial condition and results of operations.

Previous wording

In June 2023, for instance, five of the seven Medicare Administrative Contractors (“MACs”) published proposed local coverage determinations (the “Prior LCDs”) that identified certain non-implantable MIGS procedures as investigational and not reasonable and necessary in the jurisdictions where these MACs administer Medicare Part B benefits, including adult canaloplasty in combination with trabeculotomy (ab interno), a procedure performed with OMNI and for which it is indicated. The Prior LCDs may also have categorized our SION technology as investigational and thus non-covered with respect to goniotomy procedures. The Prior LCDs were withdrawn in late December 2023 prior to becoming effective, and replaced with updated LCDs (the “Final LCDs”) that became effective in November 2024. The Final LCDs allow for continued coverage of canaloplasty and goniotomy procedures performed with our OMNI and SION technologies in these five MAC jurisdictions. However, each of the Final LCDs adopted a non-coverage policy when an aqueous shunt or stent procedure is performed with another surgical MIGS procedure, such as canaloplasty or goniotomy, at the same time in the same patient eye. We estimate that approximately 15% of total MIGS codes billed in the nine months ended September 30, 2024 were done in combination with another MIGS code and expect the non-coverage determination for multiple MIGS procedures will reduce overall MIGS claims volumes, which may adversely impact our business, revenue and prospects. Moreover, it is possible that one or more MACs will publish new or updated LCDs or other determinations in the future that could characterize procedures associated with our products as non-covered, or as covered under more limited parameters. The publication and effectiveness of any such future determinations would adversely affect our business and results of operations.

Current wording

In November 2023, for instance, five of the seven Medicare Administrative Contractors (“MACs”) published proposed local coverage determinations (the “Prior LCDs”) that identified certain non-implantable MIGS procedures as investigational and not reasonable and necessary in the jurisdictions where these MACs administer Medicare Part B benefits, including adult canaloplasty in combination with trabeculotomy (ab interno), a procedure performed with OMNI and for which it is indicated. The Prior LCDs may also have categorized our SION technology as investigational and thus non-covered with respect to goniotomy procedures. The Prior LCDs were withdrawn in late December 2023 prior to becoming effective, and replaced with updated LCDs (the “Final LCDs”) that became effective in November 2024. The Final LCDs allow for continued coverage of canaloplasty and goniotomy procedures performed with our OMNI and SION technologies in these five MAC jurisdictions. However, each of the Final LCDs adopted a non-coverage policy when an aqueous shunt or stent procedure is performed with another surgical MIGS procedure, such as canaloplasty or goniotomy, at the same time in the same patient eye. This non-coverage policy has resulted in a reduction in overall MIGS claims volumes, which has adversely impacted our business, revenue and prospects. If the remaining two MACs also publish LCDs with the same coverage restriction, we expect an even further decline in MIGS claims volumes. Moreover, it is possible that one or more payors will publish new or updated policies or other determinations in the future that could (i) characterize procedures associated with our products as non-covered, or as covered under more limited parameters; or (ii) establish lower reimbursement for procedures performed with our products. The publication and effectiveness of any such future determinations would adversely affect our business and results of operations.

Previous wording

Over the next several years, we expect to continue to devote substantial resources to expand our commercialization efforts, drive increased adoption of our products and continue to develop new and improved products. Our limited commercialization experience and number of products make it difficult to evaluate our current business and predict our future prospects. For example, we believe OMNI procedures can be highly effective in reducing IOP in adult POAG patients when performed as a Standalone Procedure. However, we have limited commercial experience with the Standalone Market Segment, and the extent to which we are able to penetrate and grow this market is unknown. If we and other market participants are unable to effectively drive the use of MIGS devices in Standalone Procedures, then our total addressable market will be significantly reduced, which will adversely affect our sales and growth strategy. In addition, a number of factors, including some outside of our control, may render our products less competitive, economically impracticable or obsolete and contribute to fluctuations in our financial results, including:

Current wording

Over the next several years, we expect to continue to devote substantial resources to expand our commercialization efforts, drive increased adoption of our products and continue to develop new and improved products. Our limited commercialization experience and number of products make it difficult to evaluate our current business and predict our future prospects. For example, we believe OMNI procedures can be highly effective in reducing IOP in adult POAG patients when performed on a standalone basis without concomitant cataract surgery (“Standalone Procedure”). However, we have limited commercial experience with the standalone procedure market segment, and the extent to which we are able to penetrate and grow this market is unknown. If we and other market participants are unable to effectively drive the use of MIGS devices in Standalone Procedures, then our total addressable market will be significantly reduced, which will adversely affect our sales and growth strategy. In addition, a number of factors, including some outside of our control, may render our products less competitive, economically impracticable or obsolete and contribute to fluctuations in our financial results, including:

Previous wording

Changes in reimbursement rates or coverage restrictions instituted by government or commercial payors, such as the coverage limitations on multiple MIGS procedures done at the same time as a cataract surgery included in the Final LCDs;

Current wording

Changes in reimbursement rates or coverage restrictions instituted by government or commercial payors, such as the coverage limitations on multiple MIGS procedures done at the same time as a cataract surgery included in the Final LCDs, or coverage limitations on our TearCare procedure;

Previous wording

Lack of adequate, equitable third-party payor coverage or reimbursement, or changes in (or new) third-party payor coverage or reimbursement policies or determinations that adversely affect coverage for procedures involving OMNI;

Current wording

Lack of adequate, equitable third-party payor coverage or reimbursement, or changes in (or new) third-party payor coverage or reimbursement policies or determinations that adversely affect coverage for Interventional Glaucoma and Interventional Dry Eye procedures;

Previous wording

Availability of lower-priced competitive products;

Current wording

Availability of lower-priced competitive products, especially competitive products with equivalent or superior reimbursement;

Previous wording

Lack of experience with our products and concerns that we are relatively new to market;

Current wording

Lack of experience with our products;

Previous wording

Competitive activities, including new product introductions, pricing tactics, and negative selling efforts from providers of alternative treatments;

Current wording

Competitive activities, including new product introductions, pricing, coding and coverage tactics, and negative selling efforts from providers of equivalent or alternative treatments;

Previous wording

Perceptions regarding the time commitment and skill development that may be required to gain familiarity and proficiency with our OMNI and TearCare products.

Current wording

Perceptions regarding the time commitment and skill development that may be required to gain familiarity and proficiency with our Interventional Glaucoma and Interventional Dry Eye products.

Previous wording

In addition, some physicians may choose to utilize our products on only a subset of their total patient population or may not adopt our products at all. Further, if procedures in which our products are used do not receive and maintain favorable third-party reimbursement coverage, particularly as compared to procedures in which competitive products are used, adoption of our products by ECPs and patients will suffer. Similarly, if competitive products are priced significantly lower than our products or are considered to offer greater ease of use than our products, then ECPs may elect to use these competitive products, even if we believe that other considerations such as clinical efficacy favor our products. Also, if ECPs prioritize alternative ophthalmic procedures to the procedures in which our products are currently used, whether for clinical, reimbursement or other reasons, then there will be less available surgical capacity to perform procedures using our products. We cannot assure you that our products will achieve broad market acceptance among payors, physicians and patients. Any failure of our products to satisfy demand or to achieve meaningful market acceptance and penetration will harm our future prospects and have a material adverse effect on our business, financial condition and results of operations.

Current wording

In addition, some physicians may choose to utilize our products on only a subset of their total patient population or may not adopt our products at all. Further, if procedures in which our products are used do not receive and maintain favorable third-party reimbursement coverage, particularly as compared to procedures in which competitive products are used, adoption of our products by ECPs and patients may be slower or more limited than expected. Similarly, if competitive products are priced significantly lower than our products or are considered to offer greater ease of use than our products, then ECPs may elect to use these competitive products, even if we believe that other considerations such as clinical efficacy favor our products. Also, if ECPs prioritize alternative ophthalmic procedures to the procedures in which our products are currently used, whether for clinical, reimbursement or other reasons, then there will be less available surgical capacity to perform procedures using our products. We cannot assure you that our products will achieve broad market acceptance among payors, physicians and patients. Any failure of our products to satisfy demand or to achieve meaningful market acceptance and penetration will harm our future prospects and have a material adverse effect on our business, financial condition and results of operations.

Previous wording

We may not be able to secure or maintain adequate levels of third-party coverage and reimbursement for procedures in which our Surgical Glaucoma or Dry Eye products are used, and third parties may rescind or modify their coverage or delay payments related to these products, which would adversely affect our business, financial condition, and results of operations.

Current wording

We may not be able to secure or maintain adequate levels of third-party coverage and reimbursement for procedures in which our Interventional Glaucoma or Interventional Dry Eye products are used, and third parties may rescind or modify their coverage or delay payments related to these products, which would adversely affect our business, financial condition, and results of operations.

Previous wording

We derive revenue from sales of OMNI and SION to physicians, ASCs, and HOPDs, which typically bill all or a portion of the costs and fees associated with our products to various third-party payors, including Medicare, Medicaid, foreign governmental payors, private commercial insurance companies, health maintenance organizations and other healthcare-related organizations, and then bill patients for any applicable deductibles or co-payments. Historically, we have sold our TearCare system components to customers on a limited cash-pay basis to drive customer awareness and acceptance in advance of reimbursement. We are pursuing reimbursement coverage for TearCare so ECPs can bill all or a portion of the costs and fees associated with this product to various third-party payors, including Medicare, Medicaid, private commercial insurance companies, health maintenance organizations, and other healthcare-related organizations, and then bill patients for any applicable deductibles or co-payments. ECPs have begun to have individual claims-made reimbursements for these services. As a result, access to adequate coverage and reimbursement for procedures in which our Surgical Glaucoma and Dry Eye products are used by third-party payors is essential to their broad acceptance and adoption by patients and ECPs.

Current wording

We derive revenue from sales of OMNI and SION to physicians, ASCs, and HOPDs, which typically bill all or a portion of the costs and fees associated with our products to various third-party payors, including Medicare, Medicaid, foreign governmental payors, private commercial insurance companies, health maintenance organizations and other healthcare-related organizations, and then bill patients for any applicable deductibles or co-payments. Historically, we have sold our TearCare system components to customers on a limited basis to drive customer awareness and acceptance in advance of reimbursement. We are pursuing broad reimbursement coverage for TearCare so that ECPs can bill all or a portion of the costs and fees associated with this product to a larger swath of third-party payors, including Medicare, Medicaid, private commercial insurance companies, health maintenance organizations, and other healthcare-related organizations, and then bill patients for any applicable deductibles or co-payments. Only recently have payors started establishing more appropriate payment values for CPT code 0563T, the code associated with TearCare procedures. ECPs have begun to receive individual claim-by-claim reimbursements for TearCare services. As a result, access to adequate coverage and reimbursement for procedures in which our Interventional Glaucoma and Interventional Dry Eye products are used by third-party payors is essential to their broad acceptance and adoption by patients and ECPs.

Previous wording

Internationally, medical reimbursement systems vary significantly from country to country, with some countries limiting medical centers’ spending through fixed budgets, regardless of levels of patient treatment, and other countries requiring application for, and approval of, government or third-party reimbursement. For example, in the third quarter of 2024, certain reimbursement advice published by the United Kingdom’s National Health Service has rendered untenable the code that had previously been relied upon as applicable to procedures performed with our OMNI technology. This shift has resulted in reduced reimbursement for OMNI procedures as compared to historic reimbursement levels, which in turn could materially affect our business, results of operations and prospects in the United Kingdom.

Current wording

Internationally, medical reimbursement systems vary significantly from country to country, with some countries limiting medical centers’ spending through fixed budgets, regardless of levels of patient treatment, and other countries requiring application for, and approval of, government or third-party reimbursement. For example, in the third quarter of 2024, certain reimbursement advice published by the United Kingdom’s National Health Service (NHS) had rendered untenable the code that had previously been relied upon as applicable to procedures performed with our OMNI technology. This shift has resulted in reduced reimbursement for OMNI procedures as compared to historic reimbursement levels, which in turn has affected our business, results of operations and prospects in the United Kingdom. Though we are working to establish appropriate reimbursement by NHS for the OMNI procedure, there is no guarantee that we will be successful in addressing this or other reimbursement challenges that we may encounter in the United Kingdom or other international markets in which we market and sell our products.

Previous wording

These third-party payors continually review new and existing technologies for possible coverage and can deny or reverse coverage for new or existing products and procedures, and there can be no assurance that third-party payor policies provide coverage, or will continue to provide coverage, for procedures in which OMNI or our other products are used. For example, in the U.S., CMS, MACs or commercial payors could require or issue coverage policies that could restrict or eliminate coverage for the patient populations eligible for treatment with our products or that are otherwise unfavorable to our business. In June 2023, for instance, five MACs published the Prior LCDs, which proposed to identify certain non-implantable MIGS procedures as investigational and not reasonable and necessary in the jurisdictions where these MACS administer Medicare Part B benefits, including but not limited to adult canaloplasty in combination with trabeculotomy ab interno, a procedure performed with OMNI and for which it is indicated. The Prior LCDs may also have categorized our SION technology as investigational and thus non-covered with respect to goniotomy procedures. Although the Prior LCDs were withdrawn in late December 2023 and replaced with the now-effective Final LCDs which allow for continued coverage of standalone canaloplasty and goniotomy procedures performed with our OMNI and SION technologies in these five MAC jurisdictions, in the future, governmental or private payors may issue coverage policies or guidance that may establish non-coverage, materially restrict coverage, or reduce reimbursement levels for one or more procedures involving our products. Any such policies, determinations or guidance could in turn influence coverage determinations by other third-party payors.

Current wording

These third-party payors continually review new and existing technologies for possible coverage and can deny or reverse coverage for new or existing products and procedures, and there can be no assurance that third-party payor policies provide coverage, or will continue to provide coverage, for procedures in which OMNI or our other products are used. For example, in the U.S., the Centers for Medicare & Medicaid Services (“CMS”), MACs or commercial payors could require or issue coverage policies that could restrict or eliminate coverage for the patient populations eligible for treatment with our products, or that are otherwise unfavorable to our business. In June 2023, for instance, five MACs published the Prior LCDs, which identified certain non-implantable MIGS procedures as investigational and not reasonable and necessary in the jurisdictions where these MACS administer Medicare Part B benefits, including but not limited to adult canaloplasty in combination with trabeculotomy ab interno, a procedure performed with OMNI and for which it is indicated. The Prior LCDs may also have categorized our SION technology as investigational and thus non-covered with respect to goniotomy procedures. Although the Prior LCDs were withdrawn in late December 2023 and replaced with the now-effective Final LCDs which allow for continued coverage of standalone canaloplasty and goniotomy procedures performed with our OMNI and SION technologies in these five MAC jurisdictions, in the future, governmental or private payors may issue coverage policies or guidance that may establish non-coverage, materially restrict coverage, or reduce reimbursement levels for one or more procedures involving our products. Any such policies, determinations or guidance could in turn influence coverage determinations by other third-party payors.

Previous wording

In addition, each of the Final LCDs adopted a non-coverage policy when an aqueous shunt or stent procedure is performed with another surgical MIGS procedure, such as canaloplasty or goniotomy, at the same time in the same patient eye. We estimate that approximately 15% of total MIGS codes billed in the nine months ended September 30, 2024 were done in combination with another MIGS code and expect the non-coverage determination for multiple MIGS procedures will reduce overall MIGS claims volumes, which may adversely impact our business, revenue and prospects. If we are not successful in reversing any proposed non-coverage policies, or if third-party payors that currently cover or reimburse procedures in which our products are used reverse or limit their coverage in the future, or if other third-party payors issue similar policies, it would have a material adverse effect on our business, financial condition, and results of operations. Moreover, any uncertainty with respect to coverage or coding may impact management’s ability to accurately forecast results.

Current wording

In addition, the Final LCDs’ non-coverage policies when an aqueous shunt or stent procedure is performed with another surgical MIGS procedure at the same time in the same patient eye has also adversely affected the market for MIGS devices, including our products. . If the remaining two MACs also publish LCDs with the same coverage restriction, we expect an even further decline in MIGS claims volumes. Adverse coding, coverage or payment determination such as these are not within our control. If we are not successful in reversing any proposed non-coverage policies, or if third-party payors that currently cover or reimburse procedures in which our products are used reverse or limit their coverage in the future, or if other third-party payors issue similar policies negatively impacting reimbursement for our products, it could have a material adverse effect on our business, financial condition, and results of operations. Moreover, any uncertainty with respect to coverage or coding may impact management’s ability to accurately forecast results.

Previous wording

We also derive revenue from sales of TearCare to ECPs and eye care clinics, which bill all or a portion of the costs and fees associated with treatments and products to patients or, on a limited basis, to third-party payors. We believe that access to adequate coverage and reimbursement for procedures in which TearCare is used by third-party payors is important to the broad acceptance and adoption of TearCare. Currently, no MACs have formal policies establishing coverage for the TearCare procedure; however, MACs from time to time may include, and we are currently aware of three MACs that have included, low payment rates for TearCare procedures in their fee schedules that, if not removed or increased to what we believe is an appropriate reimbursement level, could adversely impact our efforts to achieve reimbursement for TearCare that is sufficient to support its broad commercial growth and adoption. Further, commercial payors may from time to time make “no coverage”

Current wording

We also derive revenue from sales of TearCare to ECPs and eye care clinics, which bill all or a portion of the costs and fees associated with treatments and products to third-party payors. We believe that access to adequate coverage and reimbursement for procedures in which TearCare is used by third-party payors is important to the broad acceptance and adoption of TearCare. Currently, two MACs, FCSO and Novitas, have established fee schedules for code 0563T that more closely reflect the cost and value of the TearCare procedure. There is no guarantee that other MACs will establish similar fee schedule amounts, or that FCSO and Novitas will maintain their fee schedules for CPT code 0563T at their current levels. Further, MACs from time to time may include, and we are currently aware of two MACs that have included low payment rates for TearCare procedures in their fee schedules. If these low payment rates are not removed or increased to what we believe is an appropriate reimbursement level, they could adversely impact our efforts to achieve reimbursement for TearCare that is sufficient to support its broad commercial growth and adoption. While we will continue to engage with those MACs that currently maintain low fee schedules for the TearCare procedure, there is no guarantee that these MACs will remove these low payment values and replace them with payment values that are sufficient to support widespread customer adoption. It may not be commercially feasible for us to market and sell TearCare in those jurisdictions where reimbursement is not sufficient for TearCare adoption, which in turn would adversely affect our business and results of operations.

Previous wording

or similar determinations with respect to our TearCare product that could hamper our efforts to drive broad commercial adoption of TearCare. These determinations could be made with reference to a variety of factors, including our legacy TearCare component pricing practices, perceived clinical efficacy compared to other treatment alternatives and similar considerations. We are pursuing a comprehensive long-term market development and patient access plan for TearCare and focusing our efforts on partnering with key strategic accounts to pursue prior authorization approvals and reimbursement claims for procedures in which TearCare is used, but there is no guarantee that we will be successful. This strategy is dependent, among other things, on ECPs’ willingness to submit, and success in submitting, TearCare procedure claims with invoicing that supports appropriate reimbursement, as well as their success in appealing these claims with payors as needed. If patients are not willing to pay for procedures in which TearCare is used, or if third-party payors continue to decline to provide coverage and reimbursement, or provide insufficient levels of coverage and reimbursement, it would have a negative impact on ECPs’ adoption of TearCare and sales of TearCare, which could adversely affect our business and results of operations.

Current wording

Further, commercial payors may from time to time may deny coverage for our TearCare product, which could hamper our efforts to drive broad commercial adoption of TearCare. These determinations could be made with reference to a variety of factors, including our legacy TearCare commercial practices, perceived clinical efficacy compared to other treatment alternatives, and similar considerations. We are pursuing a comprehensive, long-term market development and patient access plan for TearCare and focusing our efforts on partnering with key strategic accounts to pursue prior authorization approvals and reimbursement claims for procedures in which TearCare is used, but there is no guarantee that we will be successful. This strategy is dependent, among other things, on ECPs’ willingness to submit, and their success in submitting, accurate TearCare procedure claims that support appropriate reimbursement, as well as their success in appealing denied or underpaid claims with payors, as needed. If patients are not willing to pay for procedures in which TearCare is used, or if third-party payors other than FCSO and Novitas continue to decline to provide coverage and reimbursement, or provide insufficient levels of reimbursement, it would have a negative impact on ECPs’ adoption of TearCare and sales of TearCare, which could adversely affect our business and results of operations. Further, though CPT code 0563T specifically describes the procedure enabled by the TearCare technology, it is possible that competitors could seek to use, promote for use, or encourage providers to bill under this code with competitive technology. In addition, the code could subsequently be modified or interpreted in a manner to allow competitive products to be billed thereunder, which could adversely affect our business and results of operations.

Previous wording

Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, no uniform policy of coverage and reimbursement for procedures using our products exists among third-party payors. Therefore, coverage and reimbursement for procedures using our products can differ significantly from payor to payor. Obtaining and maintaining coverage and reimbursement can be a time-consuming process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products. We may not be able to provide data sufficient to satisfy governmental and third-party payors that procedures using our products should be covered and reimbursed. With regard to our international sales efforts, even if and as we succeed in bringing our products to market in foreign countries, uncertainties regarding future healthcare policy, legislation and regulation, as well as private market practices, could affect our ability to sell our products in commercially acceptable quantities at acceptable prices.

Current wording

Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, no uniform policy of coverage and reimbursement for procedures using our products exists among third-party payors. Therefore, coverage and reimbursement for procedures using our products can differ significantly from payor to payor. Obtaining and maintaining coverage and reimbursement can be a time-consuming process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products. We may not be able to provide data sufficient to satisfy governmental and third-party payors that procedures using our products should be covered and reimbursed. The majority of potential TearCare patients are insured by commercial payors, If the Company is unsuccessful in establishing formal coverage policies with adequate reimbursement for the TearCare procedure, reimbursed market access for TearCare will be materially limited. With regard to our international sales efforts, even if and as we succeed in bringing our products to market in foreign countries, uncertainties regarding future healthcare policy, legislation and regulation, as well as private market practices, could affect our ability to sell our products in commercially acceptable quantities at acceptable prices.

Previous wording

In the United States, the AMA generally assigns specific billing codes for procedures under a coding system known as Current Procedure Terminology (“CPT”), which surgeons use to bill third-party payors and receive reimbursement. Once a permanent CPT code ("Category I CPT code") is established for a service, CMS establishes payment levels under Medicare, while other payors may establish rates and coverage rules independently. Canaloplasty followed by trabeculotomy procedures using OMNI are typically billed using the Category I CPT code 66174, which describes canaloplasty. Coding for ophthalmic surgical procedures is complex, and changes to the codes used to report services performed with our products may result in significant changes in reimbursement, which could negatively impact our revenue. For example, in 2021 the RVS Update Committee ("RUC") of the AMA reevaluated the physician work associated with CPT code 66174. As a result of this RUC review and further conversion factor reductions, CMS reduced the Medicare Physician Fee Schedule amount associated with this service from approximately $950 in 2021, to $761 in 2022, to $622 in 2023, to $608 in 2024, and to $600 in 2025. Many of the factors considered by the RUC, and many of the factors evaluated by payors and other payor advisory bodies, in assessing the costs of, and payments with respect to, procedures associated with our products are not within our control. For instance, with respect to determination of hospital, ASC and physician payment associated with CPT code 66174, evaluation of procedure costs may include the costs of competitive products that are priced well below our products and may also reflect reduced physician work with respect to procedures that are less comprehensive than the procedures performed with OMNI. This, in turn, may adversely affect our ability to obtain and maintain adequate and appropriate levels of reimbursement for the comprehensive procedure enabled by our OMNI technology, which could adversely affect our financial condition and results of operations.

Current wording

In the United States, the American Medical Association (“AMA”) generally assigns specific billing codes for procedures under a coding system known as Current Procedural Terminology (“CPT”), which surgeons use to bill third-party payors and receive reimbursement. Once a permanent CPT code ("Category I CPT code") is established for a service, CMS establishes national payment levels under Medicare, while other payors may establish rates and coverage rules independently. Canaloplasty followed by trabeculotomy procedures using OMNI are typically billed using the Category I CPT code 66174, which describes canaloplasty. ECPs may also bill for procedures in which our OMNI product is used under Category I CPT Code 65820, which describes goniotomy procedures. Coding for ophthalmic surgical procedures is complex, and changes to the codes used to report services performed with our products may result in significant changes in reimbursement, which could negatively impact our revenue. For example, the RVS Update Committee ("RUC") of the AMA has regularly reevaluated the physician work associated with CPT code 66174. As a result of these RUC reviews and further conversion factor reductions, CMS has reduced the Medicare Physician Fee Schedule amount associated with this service multiple times from approximately $950 in 2021 to $545 in 2026. These reductions in physician reimbursement have made the use of CPT code 66174 less attractive to ECPS, which in turn has adversely affected our business and results of operation. Many of the factors considered by the RUC, and many of the factors evaluated by payors and other payor advisory bodies, in assessing the costs of, and payments with respect to, procedures associated with our products are not within our control. For instance, with respect to determination of hospital, ASC and physician payment associated with CPT code 66174, evaluation of procedure costs may include the costs of competitive products that are priced well below our products and may also reflect reduced physician work with respect to procedures that are less comprehensive than the procedures performed with OMNI. This, in turn, may adversely affect our ability to obtain and maintain adequate and appropriate levels of reimbursement for the comprehensive procedure enabled by our OMNI technology, which could adversely affect our financial condition and results of operations. Further, if and to the extent that CPT code 65820 or another code describing a goniotomy procedure is established, modified, or revalued by the RUC so as to reduce the payment amount associated with goniotomy procedures, our business and results of operation may be adversely affected.

Previous wording

The AMA maintains a subset of temporary CPT codes ("Category III CPT codes") used for new and emerging technologies. For example, TearCare was assigned a Category III CPT code effective beginning January 1, 2020. Coverage for Category III CPT codes is often limited. Medicare does not generally establish national payment rates for Category III CPT codes on the Medicare Physician Fee Schedule ("MPFS"). As a result, individual Medicare contractors and private payors may establish their own payment rates for services described by Category III CPT codes, as has been the case with TearCare, which payment rates are subject to change, may be variable across Medicare contractors, may be materially below the final reimbursement rates that we are currently targeting, or may determine not to reimburse services described by Category III CPT codes. In 2024, various commercial insurance carriers paid small number of TearCare claims on a case-by-case basis, but these reimbursement amounts varied materially and no formal coverage policies were established.

Current wording

The AMA maintains a subset of temporary CPT codes ("Category III CPT codes") used for new and emerging technologies. For example, TearCare was assigned a Category III CPT code effective beginning January 1, 2020. Coverage for Category III CPT codes is often limited. Medicare does not generally establish national payment rates for Category III CPT codes on the Medicare Physician Fee Schedule ("MPFS"). As a result, individual Medicare contractors and private payors may establish their own payment rates for services described by Category III CPT codes, as has been the case with TearCare. These payment rates are subject to change, may be variable across Medicare contractors, or may be materially below the reimbursement rates that we are currently targeting for code 0563T. Payors may also determine not to reimburse any services described by Category III CPT codes in the absence of a formal, positive coverage policy for a specific service.

Previous wording

Further, we believe that future coverage and reimbursement may be subject to increased restrictions, such as additional prior authorization requirements, both in the United States and in international markets. Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory clearance, certification or approval may not be available or adequate in either the United States or international markets. Further, other devices or treatments that compete with our products may be more widely covered or subject to different co-pay policies and requirements, which could impact demand for our products. If hospital, surgical center, ECP and/or patient demand for our products is adversely affected by third-party reimbursement policies and decisions, it could have a material adverse effect on our business, financial condition and results of operations.

Current wording

Further, we believe that future coverage and reimbursement may be subject to increased restrictions, such as additional prior authorization requirements, both in the United States and in international markets. Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory clearance, certification or approval may not be available or adequate in either the United States or international markets. Further, other devices or treatments that compete with our products may be more widely covered, paid at more favorable rates, or subject to different co-pay policies and requirements, which could impact demand for our products. If hospital, surgical center, ECP and/or patient demand for our products is adversely affected by third-party reimbursement policies and decisions, it could have a material adverse effect on our business, financial condition and results of operations.

Previous wording

The market for our products is highly competitive and could grow increasingly competitive as new glaucoma and dry eye technologies are introduced in our industry. Our competitors may have longer operating histories, more established products and distribution networks, lower product prices or greater resources than we do, and may be able to develop or market treatments that are safer, more effective or gain greater acceptance in the marketplace than our products.

Current wording

The market for our products is highly competitive and could grow increasingly competitive as new glaucoma and dry eye technologies are introduced in our industry. Our competitors may have longer operating histories, more established products and distribution networks, lower product prices or greater resources than we do, and may be able to develop or market products that are safer, more effective or gain greater acceptance in the marketplace than our products.

Previous wording

The medical device industry is highly competitive, subject to rapid change and significantly affected by the introduction of new products and technologies and the other activities of industry participants. We compete, or plan to compete, with medical device and pharmaceutical companies that develop and commercialize products for eye conditions, including Glaukos, AbbVie, Novartis, Alcon, Johnson & Johnson, Nova Eye Medical, and New World Medical. These companies, or other entrants into the market, may have or develop competing technologies, other products that are in or that enter clinical trials, new devices or additional indications for existing devices that could demonstrate better safety, effectiveness, clinical results, ease of use, lower costs or greater ECP and market acceptance than our products. For example, there has been a recent increase in ECP trialing of alternative products that are offered at lower prices than OMNI, which we believe has had a near-term adverse impact on utilization of OMNI.

Current wording

The medical device industry is highly competitive, subject to rapid change and significantly affected by the introduction of new products and technologies and the other activities of industry participants. We compete, or plan to compete, with medical device and pharmaceutical companies that develop and commercialize products for eye conditions, including Glaukos, AbbVie, Novartis, Alcon, Johnson & Johnson, Iantrek, Nova Eye Medical, and New World Medical. These companies, or other entrants into the market, may have or develop competing technologies, other products that are in or that enter clinical trials, new devices or additional indications for existing devices that could demonstrate better safety, effectiveness, clinical results, ease of use, lower costs or greater ECP and market acceptance than our products. For example, there have been intermittent increases in ECP trialing of new, alternative products, some of which are offered at lower prices than OMNI. This trialing has led in certain instances to adoption of these alternatives products which we believe has adversely impacted utilization of OMNI and OMNI revenue growth.

Previous wording

Though in the past we have viewed such ECP trialing and use of alternative devices as temporary and not material to the continued growth of OMNI sales, we cannot guarantee that OMNI utilization will normalize relative to historical periods or grow in the future pursuant to our strategic initiatives. Sustained increases in ECP use of alternative MIGS devices could result in reduced OMNI sales and revenue growth or even loss of market share, which would adversely impact our competitive position, business and results of operations.

Current wording

We cannot guarantee that OMNI utilization will return to high growth in the future pursuant to our strategic initiatives. Sustained increases in ECP use of alternative MIGS devices could result in reduced OMNI sales and revenue growth or even loss of market share, which would adversely impact our competitive position, business and results of operations.

Previous wording

Established treatment patterns pursuant to which prescription medications, traditional glaucoma surgery or more conventional MIGS procedures are generally first-line therapies for the treatment of glaucoma and eye drops or warm-compresses are first-line therapies for the treatment of MGD;

Current wording

Established treatment patterns pursuant to which prescription medications, selective laser trabeculoplasty, traditional glaucoma surgery or more conventional MIGS procedures are generally first-line therapies for the treatment of glaucoma and eye drops or warm-compresses are first-line therapies for the treatment of MGD;

Previous wording

Established relationships with ECPs who are familiar with their products and procedures for the treatment of glaucoma or MGD;

Current wording

Established relationships with ECPs who are familiar with their products and procedures for the treatment of glaucoma or MGD-associated DED;

Previous wording

Established relationships with key stakeholders, including hospital outpatient departments, ambulatory surgery centers, optometrists and ophthalmologists, general practitioners and administrators;

Current wording

Established relationships with key stakeholders, industry associations, including hospital outpatient departments, ambulatory surgery centers, optometrists and ophthalmologists, general practitioners and administrators;

Previous wording

One of the major hurdles to adoption of our products will be overcoming established treatment patterns, which will require educating ECPs and supportive clinical data. For instance, we believe strongly in the efficacy of OMNI in Standalone Procedures, but concerted ongoing ECP education on the benefits of this approach is needed to alter surgeon perceptions and to convince them of the benefits of performing a MIGS procedure other than in conjunction with cataract surgery. Because of the size of the market opportunity for devices used in procedures to address MIGS and MGD, we believe current and potential future competitors will dedicate significant resources to aggressively promote their products or develop new products or treatments, such as Glaukos’ iStent® technologies, iPRIME™ Viscodelivery System, and iDose® TR intraocular implant; Alcon’s Hydrus® MicroStent; and various canaloplasty devices including Nova Eye’s iTrack™ Advance and New World’s Streamline® and Via360™ surgical systems.

Current wording

One of the major hurdles to adoption of our Interventional Glaucoma products will be overcoming established treatment patterns, which will require educating ECPs and supportive clinical data. For instance, we believe strongly in the efficacy of OMNI in Standalone Procedures, but concerted ongoing ECP education on the benefits of this approach is needed to alter surgeon perceptions and to convince them of the benefits of performing a MIGS procedure other than in conjunction with cataract surgery. Because of the size of the market opportunity for devices used in procedures to address MIGS and MGD, especially with the recent establishment of the FCSO and Novitas fee schedules with respect to CPT code 0563T, we believe current and potential future competitors may dedicate significant resources to promote their products or develop new products or treatments. Our Interventional Glaucoma products compete with products such as Glaukos’ iStent® technologies and iDose® TR intraocular implant; Alcon’s Hydrus® MicroStent; Iantrek’s C-Rex and Alloflo, various canaloplasty devices including Nova Eye’s iTrack™ Advance and New World’s Streamline® and Via360™ surgical systems. TearCare competes with numerous DED product offerings, including J&J’s Lipiflow® Thermal Pulsation System and numerous other treatment alternatives.

Previous wording

Whereas we have historically competed in the MIGS marketplace against stent technologies, such as the iStent family of products and the Hydrus® MicroStent, we are facing increasing competition from other microcatheter systems marketed for canaloplasty and goniotomy, and we expect this competition to increase in the future. Further, new treatment options may be developed that could compete more effectively with our products due to the prevalence of glaucoma and MGD, and the research and technological progress that exist within the market. Also, even if competitor products do not have indications for use or clinical data that are comparable to ours, ECPs can still choose these competitor products for a variety of reasons, including those discussed above. For instance, competitors may price their products significantly below ours, or bundle their products in a manner that is attractive to ECPs, which may result in decreased use or adoption of our products by ECPs, notwithstanding that our products may offer superior safety and efficacy.

Current wording

In addition, new treatment options may be developed that could compete more effectively with our products due to the prevalence of glaucoma and MGD-associated DED, and the research and technological progress that exist within the market. Also, even if competitor products do not have indications for use or clinical data that are comparable to ours, ECPs can still choose these competitor products for a variety of reasons, including those discussed above. For instance, competitors may price their products significantly below ours or bundle their products in a manner that is attractive to ECPs, which may result in decreased use or adoption of our products by ECPs, notwithstanding that our products may offer superior safety and efficacy.

Previous wording

The success of our products depends in part on the skill of the ECPs utilizing and administering products to treat patients and on their adherence to our stated patient selection criteria and the proper techniques that we provide in training sessions. We train ECPs on the correct use of OMNI and SION. However, ECPs rely on their previous medical training and experience when performing ophthalmic surgical procedures and may deviate from the techniques we provide in training sessions. Furthermore, we cannot guarantee that all such ECPs who use OMNI and SION will have the necessary skills or experience to safely and effectively perform these procedures. We have experienced recent declines in the number of ECPs undergoing training on the use of OMNI, which means that fewer physicians than we had anticipated are being trained regarding appropriate patient selection and OMNI surgical techniques. If we are not able to stabilize and return our physician training rates to a robust growth trajectory, our business could suffer. Similarly, though we train ECPs to ensure correct use of TearCare, including placement of SmartLids on patients’ eyelids and expression of the patients' meibomian glands, we cannot guarantee that all such ECPs will have the necessary skills or experience to safely and effectively use these devices. If ECPs utilize our products in a manner that is inconsistent with our labeled indications or with components that are not part of our products, the patient outcomes may be negative. This could negatively impact the perception of patient benefits and safety associated with our products and limit their adoption, which would have a material adverse effect on our business, financial condition and results of operations.

Current wording

The success of our products depends in part on the skill of the ECPs utilizing and administering products to treat patients and on their adherence to our stated patient selection criteria and the proper techniques that we provide in training sessions. We train ECPs on the correct use of our Interventional Glaucoma products. However, ECPs rely on their previous medical training and experience when performing ophthalmic surgical procedures and may deviate from the techniques we provide in training sessions. Furthermore, we cannot guarantee that all such ECPs who use our Interventional Glaucoma products will have the necessary skills or experience to safely and effectively perform these procedures. We have experienced recent declines in the number of ECPs undergoing training on the use of OMNI, which means that fewer physicians are being trained regarding appropriate patient selection and OMNI surgical techniques. If we are not able to stabilize and return our physician training rates to a robust growth trajectory, our business could suffer. Similarly, though we train ECPs to ensure correct use of our Interventional Dry Eye products, including placement of TearCare SmartLids on patients’ eyelids and the expression of the patients' meibomian glands, we cannot guarantee that all such ECPs will have the necessary skills or experience to safely and effectively use these devices. If ECPs utilize our products in a manner that is inconsistent with our labeled indications or with components that are not part of our products, the patient outcomes may be negative. This could negatively impact the perception of patient benefits and safety associated with our products and limit their adoption, which would have a material adverse effect on our business, financial condition and results of operations.

Previous wording

Development of our products for expanded indications depends upon positive clinical data, and the safety and efficacy of our products for the intended uses for which we intend to seek clearance, certification or approval are not yet supported by long-term clinical data, which could delay or prevent clearance by the FDA (or other foreign authorities or notified bodies) or limit sales, and our products might prove to be less safe or effective than initially thought.

Current wording

Development of our products for expanded indications depends upon positive clinical data, and applicable regulatory authorities may determine that the safety and efficacy of our products for the intended uses for which we intend to seek clearance, certification or approval are not yet supported by long-term clinical data, which could delay or prevent clearance by the FDA (or other foreign authorities or notified bodies) or limit sales, and our products might prove to be less safe or effective than initially thought.

Previous wording

We are conducting and intend to continue conducting additional clinical trials or investigations to develop our devices for expanded indications, including clinical trials to increase clinical evidence for OMNI and develop TearCare for expanded indications. Historical clinical results, including interim results, are not necessarily predictive of future clinical results, and we cannot assure you that the results reported in these studies will be consistent with, or better than, currently available clinical data. In addition, our competitors and other third parties may conduct clinical trials of our products without our participation. If future patient studies or clinical testing do not support our belief that our products are advantageous for their intended uses, market acceptance of our products could fail to increase or could decrease and our business could be harmed.

Current wording

We are conducting and intend to continue conducting additional clinical trials or investigations to develop our pre-commercial and commercial devices for new or expanded indications.. Historical clinical results, including interim results, are not necessarily predictive of future clinical results, and we cannot assure you that the results reported in these studies will be consistent with, or better than, currently available clinical data. In addition, our competitors and other third parties may conduct clinical trials of our products without our participation. If future patient studies or clinical testing do not support our belief that our products are advantageous for their intended uses, market acceptance of our products could fail to increase or could decrease and our business could be harmed.

Previous wording

Our products will be adopted and compete, in part, based on long-term data regarding patient outcomes and the risk of our products relative to other treatment options. The long-term clinical outcomes of the use of our products for their FDA-cleared uses are not known and, due to the novelty of our products, there is no long-term data regarding patient outcomes beyond our clinical trials or investigations. The results of short-term clinical experience of our products do not necessarily predict long-term clinical outcomes. We believe ECPs and third-party payers will compare the rates of long-term clinical outcomes for procedures using our products for their authorized uses against alternative procedures and treatment options. We also believe that ECPs and payers will give added weight to outcomes data derived from randomized controlled trials, which are considered to be the “gold standard” for proving efficacy of a treatment or intervention; while our TearCare SAHARA trial is an RCT, we have not completed an RCT for our OMNI technology, which may prove to be a competitive disadvantage as compared to competitive products with positive RCT data. If the nature and quality of the long-term data does not meet ECPs’ expectations, or if the long-term data indicates that our products are not as safe or effective as other treatment options or as current short-term data would suggest, physicians may recommend alternative treatments for their patients and our products may not become widely adopted, which will negatively affect our business, financial condition and results of operations. Further, if we choose to, or are required to, conduct additional studies, equivocal or unfavorable results from such studies or experience could lead to a reduction in the rate of coverage and reimbursement by both public and private third-party payors for procedures that are performed with our products, slow market adoption of our products by ECPs, significantly reduce our ability to achieve expected revenue and prevent us from being profitable.

Current wording

Our products will be adopted and compete, in part, based on long-term data regarding patient outcomes and the risk of our products relative to other treatment options. We believe ECPs and third-party payers will compare the rates of long-term clinical outcomes for procedures using our products for their authorized uses against alternative procedures and treatment options. We also believe that ECPs and payers will give added weight to outcomes data derived from randomized controlled trials, which are considered to be the “gold standard” for proving efficacy of a treatment or intervention; while our TearCare SAHARA trial is an RCT, we have not completed an RCT for our OMNI technology, which can be a reimbursement and competitive disadvantage as compared to competitive products with positive RCT data. If the nature and quality of the long-term data does not meet ECPs’ expectations, or if the long-term data indicates that our products are not as safe or effective as other treatment options or as data would suggest, physicians may recommend alternative treatments for their patients and our products may not become widely adopted, which will negatively affect our business, financial condition and results of operations. Further, if we choose to, or are required to, conduct additional studies, equivocal or unfavorable results from such studies or experience could lead to a reduction in the rate of coverage and reimbursement by both public and private third-party payors for procedures that are performed with our products, slow market adoption of our products by ECPs, significantly reduce our ability to achieve expected revenue and prevent us from being profitable.

Previous wording

We rely on third parties to manufacture and supply our products. A number of these suppliers are single-source providers, and certain key suppliers are located outside of the U.S. We are subject to numerous risks relating to our reliance on such third parties.

Current wording

We rely on third parties to manufacture and supply all of our products, and a substantial portion of our products and components are manufactured in China. A number of our suppliers are also single-source providers. We are subject to numerous risks relating to our reliance on such third-party suppliers, including the impact of tariffs on products imported from China.

Previous wording

Our business strategy depends on our ability to manufacture our current and future products in sufficient quantities, on terms that are acceptable to us, and on a timely basis to meet customer demand, while adhering to product quality standards, complying with regulatory quality system requirements, and managing manufacturing costs. We do not have any internal manufacturing capabilities or infrastructure and rely on a limited number of third-party manufacturers, many of which are single-source suppliers, and certain of which are located outside the U.S., for the components, accessories, materials and assembly that we utilize in our products. These items are critical, and, for certain items, there are relatively few or no readily available alternative sources of supply. These single-source suppliers may be unwilling or unable to supply these items reliably and at the levels we anticipate or that are required by the market, or we may be unable to purchase these items on terms that are acceptable to us, or at all.

Current wording

Our business strategy depends on our ability to manufacture our current and future products in sufficient quantities, on terms acceptable to us, and on a timely basis to meet customer demand, while adhering to product quality standards, complying with regulatory requirements, and managing manufacturing and import costs. We do not have, and do not currently intend to develop, any internal manufacturing capabilities or infrastructure, and we rely on a limited number of third-party manufacturers, many of which are single-source suppliers, for the components, accessories, materials and assembly that we utilize in our products. Specifically, most of our OMNI and SION products, as well as our TearCare SmartLids, are currently produced and assembled by a single Taiwan-based manufacturer in China. These commercial products comprise substantially all of our current revenue. Our suppliers may be unwilling or unable to supply products or components to us reliably and at the levels we anticipate or that are required by our customers, or we may be unable to purchase these items on terms that are acceptable to us, or at all. In an effort to diversify our manufacturing footprint and have product readily available from multiple manufacturing facilities, we are expanding our manufacturing to include additional facilities outside of China in 2026.

Previous wording

For our business strategy to be successful, our suppliers must be able to provide us with products in sufficient quantities, in compliance with regulatory requirements, including the FDA’s Quality System Regulation (“QSR”) or other applicable laws or regulations enforced by the FDA, state and foreign regulatory authorities, in accordance with agreed-upon specifications, at acceptable costs and on a timely basis, and current and future tariffs or trade wars could materially and adversely impact our ability to do so. If we are unable to meet our demand requirements on a timely basis, we may not have enough of our products available for delivery to support ECPs that utilize our products as part of their treatment. For instance, if our supply of OMNI, SION, and certain TearCare products from our manufacturer in China was interrupted or suspended for any significant period, or tariffs that materially affect our products or components were imposed at a significantly high enough level by the United States, we may be unable to meet customer demand for our OMNI, SION, and TearCare products during that time. Any shortfall in the supply of products may result in lower adoption and usage rates of our products and have a material adverse effect on our business, financial condition and results of operations.

Current wording

Our suppliers must be able to provide us with products and components in compliance with regulatory requirements, including the FDA’s QMSR and other applicable laws or regulations, in accordance with agreed-upon specifications, at acceptable costs and on a timely basis. If our suppliers are unable or unwilling to meet our demand requirements, we may not have enough of our products available for delivery to support ECPs that utilize our products as part of their treatment. For instance, if the supply of our products and components from our manufacturer in China was interrupted or suspended for any significant period, we may be unable to meet customer demand for these products during that time. Our ability to obtain products and components in sufficient quantities and on a timely basis from our suppliers may be limited for several reasons, including quality issues at their manufacturing facilities, damage to their manufacturing equipment or facilities, problems with their own suppliers, inability to obtain components required for our products, their financial difficulties, our relative importance as a customer to each supplier, or prohibitive cost increases associated with importing items from certain regions where our suppliers are located. Any shortfall in the supply of our products may result in lower adoption and utilization rates of our products by ECPs, as well as harm to our reputation, either of which could have a material adverse effect on our business, financial condition and results of operations.

Previous wording

With respect to tariffs, in February 2025, the United States imposed a 10% tariff on all Chinese imports, which tariff was increased to 20% in early March 2025. This 20% tariff applies to our products and product components imported from China. China has responded with certain retaliatory tariffs on select U.S. agricultural products, natural resources and machinery and has indicated an intent to implement additional retaliatory tariffs. The 20% tariff will have a negative impact on our gross margins for as long as it remains in effect, as the large majority of our products are manufactured on our behalf in China. Any further escalation in the use of retaliatory trade tariffs between the U.S. and China could cause a further significant increase in the cost of our products and the components for our products, which could materially and adversely affect our business, results of operations, and financial condition. To mitigate these risks, we have also contracted with a U.S.-based manufacturer to produce and assemble OMNI products, and have supply arrangements with other suppliers to produce certain TearCare system components; however, at least in the near-term, a large majority of our products will continue to be manufactured in China.

Current wording

Commencing in February 2025, the U.S. imposed a significant new tariff on products imported from China. The tariff rate has fluctuated significantly since its inception and may continue to vary materially in the future depending on a number of factors, including the regulatory regime under which the current U.S. administration seeks to apply the tariff. This tariff applies to all of our products and product components imported from China. China has responded with certain retaliatory tariffs, and the U.S. and China could implement additional retaliatory tariffs. The U.S. tariff on China exports has increased the cost of our products and components and will likely have a negative impact on our gross margins for as long as it remains in effect. There can be no assurance that U.S. tariff rate on products imported from China will not increase or materially and adversely affect our cost of goods sold in the future. Any further escalation in the use of retaliatory trade tariffs between the U.S. and China could cause a further increase in the cost of our products and components. There is also the risk that new tariffs could be implemented with other U.S. trading partners. These tariffs may cause supply chain disruptions and will also likely increase the shipping and other logistical costs involved in importing our products and components, which would further adversely impact our gross margins.

Previous wording

The process of identifying and qualifying alternative manufacturing facilities for any other reason could be time-consuming and expensive, may result in interruptions in our operations and product delivery, and could affect the performance specifications of our products. We cannot assure you that we will be able to identify and engage alternative contract manufacturers on terms similar to our current arrangements, or without delay. Furthermore, our contract manufacturers could require that their manufacture and assembly of our products be moved to another of their production facilities, which would require us to complete another re-qualification process at the new facility, with no guarantee that the new facility would pass our quality audit. The occurrence of any of these events could harm our ability to meet the demand for our products in a timely and cost-effective manner, which could have a material adverse effect on our business, financial condition and results of operations.

Current wording

The process of identifying and qualifying additional manufacturing facilities could be time-consuming and expensive, result in interruptions in our operations, cause delays in the supply of our products, or affect the quality or performance specifications of our products. We cannot assure you that we will be able to identify and engage additional contract manufacturers on terms similar to our current arrangements or that are otherwise favorable to us. In addition, we cannot guarantee that the costs associated with obtaining products and components from an additional manufacturer, including any associated tariffs, will be lower than the costs associated with obtaining products from our current manufacturers, or that any reduction in the costs will be sufficient to offset the cost of adding new manufacturers. Furthermore, any change in our manufacturers could require us to complete another qualification process at the manufacturer’s facility, and there is no guarantee the facility would pass our quality audit. The occurrence of any of these events could increase our operating costs or harm our ability to meet the demand for our products in a timely manner, either of which could have a material adverse effect on our business, financial condition and results of operations.

Previous wording

We are also subject to numerous other risks relating to our reliance on third parties, including potential quality issues at our suppliers' manufacturing facilities with respect to our products or logistics operations, and our potential inability to renew or extend contracts and arrangements with such third parties or renew any such contracts or arrangements on terms that are favorable to us, and price fluctuations due to a lack of long-term supply agreements with certain of our suppliers. These risks are likely to be exacerbated by our limited experience with our current products and manufacturing processes. If demand for our products increases, we will have to invest additional resources to manage the manufacturing process. If we fail to secure increased production capacity efficiently, we may not be able to fill customer orders on a timely basis, our sales may not increase in line with our expectations and our operating margins could fluctuate or decline. In addition, the manufacture of future products may require modification of the current production processes or unique production processes, the identification of new suppliers for specific components, sub-assemblies and materials or the development of new manufacturing technologies. It may not be possible for our current third-party manufacturers to produce these products at a cost or in quantities sufficient to make these products commercially viable or to maintain current operating margins, all of which could have a material adverse effect on our business, financial condition and results of operations.

Current wording

If demand for our products increases, we will have to invest additional resources to manage the manufacturing process. If we fail to secure increased production capacity efficiently, we may not be able to respond to customer demand on a timely basis, our sales may not increase in line with our expectations, and our operating margins could fluctuate or decline. In addition, the manufacture of future products may require modification of our current production processes, the identification of new suppliers for specific components, sub-assemblies and materials, or the development of new manufacturing processes or technologies. It may not be possible for our current third-party manufacturers to produce these products at a cost or in quantities sufficient to make these products commercially viable or to maintain current operating margins, all of which could have a material adverse effect on our business, financial condition and results of operations.