What changed in this filing

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Item 1A. Risk Factors

2021-10-28 compared with 2021-07-29 · 45 added, 37 removed, 1262 unchanged (6% of the section changed)

68 unchanged sentences

Adverse coverage or reimbursement decisions relating to our products by CMS, its Medicare Administrative Contractors, other state, federal or international payors, and/or third-party commercial payors could significantly reduce reimbursement, which could have an impact on the acceptance of, and demand for, our products and the prices that our customers are willing to pay for them.

As of June 30, 2021, the seven largest private third-party payors, in terms of the number of covered lives, have issued coverage policies for the category of CGM devices.

As of September 30, 2021, the seven largest private third-party payors, in terms of the number of covered lives, have issued coverage policies for the category of CGM devices.

In addition, we have negotiated contracted rates with all seven of those third-party payors for the purchase of our current CGM systems by their members.

154 unchanged sentences

Our distributors might not have the resources to continue to support our recent rapid growth.

Our distribution agreements with Byram and affiliates, Cardinal Health and affiliates (including Edgepark Medical Supplies), AmerisourceBergen, and McKesson, our four most significant distributors, each generated 10% or more of our total revenue during the six months ended June 30, 2021.

We cannot guarantee that these relationships will continue or that we will be able to maintain this volume of sales from these relationships in the future.

86 unchanged sentences

We are subject to a variety of risks due to our international operations that could adversely affect our business, our operations or profitability and operating results.

Our operations in countries outside the United States, which accounted for approximately 23% of our revenues for the six months ended June 30, 2021, are accompanied by certain financial and other risks.

Our operations in countries outside the United States, which accounted for approximately 24% of our revenues for the nine months ended September 30, 2021, are accompanied by certain financial and other risks.

In addition to opening offices in Austria, Canada, Germany, the Philippines, Switzerland, Lithuania, and the United Kingdom, in connection with distributor acquisitions and otherwise, we intend to continue to pursue growth opportunities in sales outside the United States, especially in Asia (including Japan and Korea) and Europe, and we may increase our use of administrative and support functions from locations outside the United States, which could expose us to greater risks associated with our sales and operations.

16 unchanged sentences

Separately, the European Union is asserting that a number of country-specific favorable tax regimes and rulings in certain member states may violate, or have violated, European Union law, and may require rebates of some or all of the associated tax benefits to be paid by benefited taxpayers in particular cases.

In 2016, the European Union adopted the "Anti-Tax Avoidance Directive," which requires European Union member states to implement measures to prohibit

tax avoidance practices, and Germany published the European Union Anti-Tax Avoidance Directive Implementation Law on June 30, 2021.

In 2016, the European Union adopted the "Anti-Tax Avoidance Directive," which requires European Union member states to implement measures to prohibit tax

avoidance practices, and Germany published the European Union Anti-Tax Avoidance Directive Implementation Law on June 30, 2021.

We have a significant presence in the European Union, as well as significant sales in the European Union, such that any changes in tax laws in the European Union will impact our business.

5 unchanged sentences

On June 23, 2016, the United Kingdom, or U.K., held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” On June 23, 2016, the United Kingdom, or U.K., held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” As a result, the U.K.

left the European Union on January 31, 2020, and this began a transition period that is set to end on December 31, 2020, during which the U.K.

government will negotiate the terms of the U.K.’s future relationship with the E.U.

left the European Union on January 31, 2020, and this began a transition period that ended on December 31, 2020, during which the U.K.

government negotiated the terms of the U.K.’s future relationship with the E.U.

In December 2020, the U.K.

agreed on a trade and cooperation agreement that will apply provisionally after the end of the transition period until it is ratified by the parties to the agreement.

agreed on a trade and cooperation agreement that was applied provisionally from January 1, 2021 until it was ratified by the parties to the agreement.

On December 31, 2020, the U.K.

passed legislation giving effect to the trade and cooperation agreement, with the E.U.

expected to formally adopt the agreement in early 2021.

passed legislation giving effect to the trade and cooperation agreement, and the E.U.

formally adopted the agreement on May 1, 2021.

The agreement sets out certain procedures for approval and recognition of medical products in each jurisdiction.

498 unchanged sentences

In addition, from time to time, we are subject to various claims, complaints and legal actions arising out of the ordinary course of business, including commercial insurance, product liability or employment related matters.

Also, from time to time,

we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters.

Also, from time to time, we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters.

We do not believe we are party to any currently pending legal proceedings, the outcome of which could have a material adverse effect on our business, financial condition or results of operations.

29 unchanged sentences

Further, if additional products are approved for marketing, we may seek additional insurance coverage.

If we are unable to obtain insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may harm our business.

A product liability claim, recall or other claim with

respect to uninsured liabilities or for amounts in excess of insured liabilities could result in significant costs and significant harm to our business.

If we are unable to obtain insurance at an

acceptable cost or on acceptable terms with adequate coverage or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may harm our business.

A product liability claim, recall or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could result in significant costs and significant harm to our business.

We may be subject to claims against us even if the apparent injury is due to the actions of others or misuse of the device or a partner device.

29 unchanged sentences

However, any future investigations of our executives, our managers or us could result in significant liabilities or penalties to us, as well as adverse publicity.

Even if we are found to have complied with applicable law, the investigation or litigation may pose a considerable expense and would divert management’s attention, and have a potentially negative impact on the public’s perception of us, all of which could negatively impact our financial position and results of operations.

Further, should we be found out of

compliance with any of these laws, regulations or programs, depending on the nature of the findings, our business, our financial position and our results of operations could be negatively impacted.

Even if we are found to have complied with applicable law, the investigation or litigation may pose a considerable

expense and would divert management’s attention, and have a potentially negative impact on the public’s perception of us, all of which could negatively impact our financial position and results of operations.

Further, should we be found out of compliance with any of these laws, regulations or programs, depending on the nature of the findings, our business, our financial position and our results of operations could be negatively impacted.

We may be subject to fines, penalties and injunctions if we are determined to be promoting the use of our products for unapproved or improper off-label uses or determined to have made claims that are untruthful or misleading or not adequately substantiated.

17 unchanged sentences

We have incurred significant operating losses in the past.

As of June 30, 2021, we had an accumulated deficit of $98.9 million.

As of September 30, 2021, we had an accumulated deficit of $28.0 million.

We have financed our operations primarily through private and public offerings of equity securities and debt and the sales of our products.

4 unchanged sentences

We expect our research and development expenses to increase in connection with our clinical trials and other development activities related to our products, including our next-generation sensors, transmitters and receivers, as well as other collaborations.

We also expect that our general and administrative expenses will continue to increase due, among other things,

to the additional operational and regulatory burdens applicable to public healthcare and medical device companies.

We also expect that our general and administrative expenses will continue to increase due, among other things, to the additional operational and regulatory burdens applicable to public healthcare and medical device companies.

As a result, it is possible that we could incur operating losses in the future.

63 unchanged sentences

If we fail to successfully integrate other companies, products or technologies that we acquire, our business could be harmed.

Furthermore, we may have to incur debt or issue equity or equity-linked securities to pay for any future acquisitions or investments, the issuance of which could be dilutive to our existing stockholders.

Furthermore, we may have to incur debt or issue equity or equity-linked securities to pay for any future acquisitions or investments, the issuance of which could be dilutive to our existing

stockholders.

In addition, our operating results may suffer because of acquisition-related costs or amortization expenses or charges relating to acquired intangible assets.

20 unchanged sentences

In 2016, the European Union adopted the "Anti-Tax Avoidance Directive," which requires European Union member states to implement measures to prohibit tax avoidance practices, and Germany published the European Union Anti-Tax Avoidance Directive Implementation Law on June 30, 2021.

We have a significant presence in th European Union, as well as significant sales in th European Union, such that any changes in tax laws in the European Union will impact our business.

We have a significant presence in the European Union, as well as significant sales in the European Union, such that any changes in tax laws in the European Union will impact our business.

The overall impact of such legislation in European Union member states is uncertain, and our business and financial condition could be adversely affected by any laws impacting our tax rate.

9 unchanged sentences

We cannot guarantee the outcome of these examinations.

If our effective tax rates were to increase, particularly in the United States, or in other countries implementing legislation to reform existing tax legislation, including the European Union and Germany, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our financial condition, operating results and cash flows could be adversely affected.

is for an amount in excess of amounts previously accrued, our financial condition, operating results and cash flows could be adversely affected.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations which could subject our business to higher tax liability.

25 unchanged sentences

Historically, the market price of our common stock, like the securities of many other medical products companies, fluctuates and could continue to be volatile in the future, especially as our business continues to grow and our business plan continues to evolve.

From January 1, 2021 through June 30, 2021, the closing price of our common stock on the Nasdaq Global

Select Market was as high as $431.72 per share and as low as $323.96 per share.

From January 1, 2021 through September 30, 2021, the closing price of our common stock on the Nasdaq Global Select Market was as high as $572.73 per share and as low as $323.96 per share.

In addition, the trading prices for our common stock and other medical device companies have been highly volatile as a result of the COVID-19 pandemic.

49 unchanged sentences

Increasing our financial leverage could affect our operations and profitability.

In December 2018, we entered into a five-year $200.0 million revolving credit agreement, which was subsequently amended on May 11, 2020.

As of June 30, 2021, we had no outstanding borrowings, $6.4 million in outstanding letters of credit, and a total available balance of $193.6 million under our multi-currency revolving credit facility.

In October 2021, we entered into a Second Amended and Restated Credit Agreement (the Amended Credit Agreement) which amended and restated the credit agreement we had previously entered into in December 2018 as amended in May 2020 (the Credit Agreement).

The Amended Credit Agreement is a five-year $200.0 million revolving credit facility.

As of September 30, 2021, we had no outstanding borrowings, $6.4 million in outstanding letters of credit, and a total available balance of $193.6 million under our Credit Agreement.

Our leverage ratio may affect the availability to us of additional capital resources as well as our operations in several ways, including:

7 unchanged sentences

Failure to comply with covenants in our revolving credit agreement with JPMorgan Chase Bank and other syndicate lenders could result in our inability to borrow additional funds and adversely impact our business.

We have entered into a revolving credit agreement and a pledge and security agreement with JPMorgan Chase Bank and four other lenders to fund our business operations.

We have entered into a revolving credit agreement and a pledge and security agreement with JPMorgan Chase Bank and five other lenders to fund our business operations.

These agreements impose numerous financial and other restrictive covenants on our operations, including covenants relating to our general profitability and our liquidity.

As of June 30, 2021, we were in compliance with the covenants imposed by the loan and security agreement.

As of September 30, 2021, we were in compliance with the covenants imposed by the loan and security agreement.

If we violate these or any other covenants, any outstanding amounts under these agreements could become due and payable prior to their stated maturity dates, each lender could proceed against any collateral in our operating accounts and our ability to borrow funds in the future may be restricted or eliminated.

41 unchanged sentences

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the 2023 Notes or our common stock.

In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

In addition, we do not make any

representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

We are subject to counterparty risk with respect to the 2023 Note Hedge transactions.

31 unchanged sentences

Under GAAP, an entity must separately account for the debt component and the embedded conversion option of convertible debt instruments that may be settled entirely or partially in cash upon conversion, such as the Notes, in a manner that reflects the issuer’s economic interest cost.

The effect of the accounting treatment for such instruments is that the value of such embedded conversion option would be treated as original issue discount for purposes of accounting for the debt component of the Notes, and that original issue discount is amortized into interest expense over the term of the Notes using an

effective yield method.

As a result, we will be required to record a greater amount of non-cash interest expense because of the amortization of the original issue discount to the Notes’ face amount over the term of the Notes and because of the amortization of the debt issuance costs.

18 unchanged sentences

While the potential economic impact brought by and the duration of the COVID-19 pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital on favorable terms or at all.

In addition, a recession, depression or other sustained adverse market event resulting from the spread of COVID-19 could materially and adversely affect our business and the value of our common stock.

In addition, a recession, depression or other

sustained adverse market event resulting from the spread of COVID-19 could materially and adversely affect our business and the value of our common stock.

We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery, worldwide, in the United States, or in our industry.

30 unchanged sentences

We are subject to international and domestic (including federal, state and local) laws, rules and regulations governing the use, handling, storage and disposal of hazardous and biological materials and we incur expenses relating to compliance with these laws and regulations.

If violations of environmental, health and safety laws occur, we could be held liable for damages, penalties and costs of remedial actions.

If violations of environmental, health and safety laws occur, we could

be held liable for damages, penalties and costs of remedial actions.

These expenses or this liability could have a significant negative impact on our financial condition.

9 unchanged sentences

These ESG provisions and initiatives are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with, given the complexity of our supply chain and the outsourced manufacturing of certain components of our products.

If we are unable to comply, or are unable to cause our suppliers to comply, with such

policies or provisions, a customer may stop purchasing products from us, and may take legal action against us, which could harm our reputation, revenue and results of operations.

If we are unable to comply, or are unable to cause our suppliers to comply, with such policies or provisions, a customer may stop purchasing products from us, and may take legal action against us, which could harm our reputation, revenue and results of operations.

Our business could be negatively impacted by corporate citizenship and ESG matters and/or our reporting of such matters.

5 unchanged sentences

Any such matters, or related corporate citizenship and sustainability matters, could have a material adverse effect on our business.

Climate change may have a long-term impact on our business.

While we seek to partner with organizations that mitigate their business risks associated with climate change, we recognize that there are inherent risks related to climate change wherever business is conducted.

Access to clean water and reliable energy in the communities where we conduct our business, whether for our offices or for our vendors, is a priority.

Our manufacturing sites in California, Arizona and Malaysia and our operations in the Philippines are vulnerable to climate change effects.

For example, in California and Arizona, increasing intensity of drought throughout the state and annual periods of wildfire danger increase the probability of planned power outages in the communities where we work and live.

While this danger has a low-assessed risk of disrupting normal business operations, it has the potential impact on employees’ abilities to commute to work or to work from home and stay connected effectively.

Climate-related events, including the increasing frequency of extreme weather events and their impact on U.S., the Philippines, Malaysia and other major regions’ critical infrastructure, have the potential to disrupt our business, our third-party suppliers, and/or the business of our customers, and may cause us to experience higher attrition, losses, and additional costs to maintain or resume operations.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors