What changed in this filing

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Item 1A. Risk Factors

2022-10-27 compared with 2022-07-28 · 21 added, 25 removed, 1236 unchanged (4% of the section changed)

27 unchanged sentences

and foreign laws and regulations and other requirements regarding privacy, data protection, security, and other matters.

Many of these laws and regulations are subject to change and uncertain or evolving guidance and interpretation, and could result in claims, changes to our business practices, product development impacts, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

• Cybersecurity risks and cyber incidents could result in the compromise of confidential data or critical data systems and give rise to potential harm to customers, remediation and other expenses, expose us to costs, negative attention or liability under HIPAA, FDA standards and requirements, consumer protection laws, or other common law theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business and operations.

• We conduct business in a heavily regulated industry and if we fail to comply with applicable laws and government regulations, we could become subject to government investigation, litigation, penalties, be excluded from participation in government programs, and/or be required to make significant changes to our operations.

Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

• Cybersecurity risks and cyber incidents could result in the compromise of confidential data or critical data systems and give rise to potential harm to customers, remediation and other expenses, expose us to liability under HIPAA, consumer protection laws, or other common law theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business and operations.

• We conduct business in a heavily regulated industry and if we fail to comply with applicable laws and government regulations, we could become subject to penalties, be excluded from participation in government programs, and/or be required to make significant changes to our operations.

• Managed care trends and consolidation in the health care industry could have an adverse effect on our revenues and results of operations.

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health care reform legislation, may have a material adverse effect on our business.

• If we are unable to successfully complete the pre-clinical studies or clinical trials or otherwise develop the data necessary to support additional marketing authorizations, we may be unable to commercialize our CGM candidate systems under development, which could impair our business, financial condition and operating results.

• If we are unable to successfully complete the pre-clinical studies or clinical trials necessary to support additional PMA, de novo or 501(k) applications or supplements, we may be unable to commercialize our CGM candidate systems under development, which could impair our business, financial condition and operating results.

• We are subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from shipping affected products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief.

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• We have indebtedness in the form of convertible senior notes, which could adversely affect our financial health and our ability to respond to changes in our business.

• We may be adversely affected by the effects of inflation.

Risks Related to Our Business and Operations

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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, 2022, the eight 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, 2022, the eight 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 of those third-party payors for the purchase of our current CGM systems by their members.

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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 most significant wholesalers and distributors, each generated 10% or more of our total revenue during the six months ended June 30, 2022.

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.

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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 27% of our revenue for the six months ended June 30, 2022, are accompanied by certain financial and other risks.

Our operations in countries outside the United States, which accounted for approximately 27% of our revenue for the nine months ended September 30, 2022, are accompanied by certain financial and other risks.

In addition to our offices in countries such as, Australia, Canada, Germany, Lithuania, the Philippines, and the United Kingdom, we intend to continue to pursue growth opportunities in sales outside the United States, especially in Asia and Europe.

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Our operations and performance depend on worldwide economic and political conditions.

These conditions have been adversely impacted by continued global economic uncertainty, political instability and military hostilities in multiple geographies, including the current conflict in Ukraine, concerns over the potential downgrade of U.S.

sovereign debt and continued sovereign debt, monetary and financial uncertainties in Europe and other foreign countries, and global health pandemics such as the ongoing COVID-19 pandemic.

sovereign debt and continued sovereign debt, monetary and financial uncertainties in Europe and other foreign countries, rising inflation rates, and global health pandemics such as the ongoing COVID-19 pandemic.

These include potential reductions in the overall stability and suitability of the Euro as a single currency, given the economic and political challenges facing individual Eurozone countries.

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Furthermore, during economic uncertainty, our customers have had job losses and may continue to have issues gaining timely access to sufficient health insurance or credit, which could result in their unwillingness to purchase products or impair their ability to make timely payments to us.

While the potential economic impact brought by and

the duration of the ongoing 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.

potential economic impact brought by and the duration of the ongoing 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.

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Any such occurrence could compromise our networks and the information stored thereon could be accessed, publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, and liability under laws that protect the privacy of personal

information and regulatory penalties, disrupt our operations and the services we provide to our clients or damage our reputation, any of which could adversely affect our profitability, revenue and competitive position.

Any such access, disclosure or

other loss of information could result in legal claims or proceedings, and liability under laws that protect the privacy of personal information and regulatory penalties, disrupt our operations and the services we provide to our clients or damage our reputation, any of which could adversely affect our profitability, revenue and competitive position.

As we grow and expand our administrative, customer support or IT support services, we may also utilize the services of personnel and contractors located outside of the United States to perform certain functions.

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For instance, in the European Union, increasingly stringent data protection and privacy rules that have and will continue to have substantial impact on the use of patient data across the healthcare industry became effective in May 2018.

The EU General Data Protection Regulation, or GDPR, applies across the European Union and includes, among other things, a

requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances and significant fines for non-compliance.

General Data Protection Regulation, or GDPR, applies across the European Union and includes, among other things, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances and significant fines for non-compliance.

The GDPR fine framework can be up to 20 million euros, or up to 4% of the company’s total global turnover of the preceding fiscal year, whichever is higher.

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Our network and storage applications, as well as those of our contractors, may be vulnerable to cyber-attack, malicious intrusion, malfeasance, loss of data privacy or other significant disruption and may be subject to unauthorized access by hackers, employees, consultants or other service providers.

In addition, hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security or

other problems that unexpectedly could interfere with the operation of our products.

In addition, hardware, software or applications we develop or procure from third parties

may contain defects in design or manufacture or other problems that could unexpectedly compromise information security or other problems that unexpectedly could interfere with the operation of our products.

Unauthorized parties may also attempt to gain access to our systems or facilities through fraud, trickery or other forms of deceiving our employees, contractors and temporary staff.

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These laws and regulations are extremely complex and, in many cases, still evolving.

If our operations are found to violate any of the foreign, federal, state or local laws and regulations which govern our activities, we may be subject to litigation, government enforcement actions, and applicable penalties associated with the violation, potentially including civil and criminal

penalties, damages, fines, exclusion from participation in certain payor programs or curtailment of our operations.

If our operations are found to violate any of the foreign, federal, state or local laws and regulations which govern our activities, we may be subject to litigation,

government enforcement actions, and applicable penalties associated with the violation, potentially including civil and criminal penalties, damages, fines, exclusion from participation in certain payor programs or curtailment of our operations.

Compliance obligations under these various laws are oftentimes detailed and onerous, further contributing to the risk that we could be found to be out of compliance with particular requirements.

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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, 2022 through June 30, 2022, the closing price of our common stock on the Nasdaq Global Select Market was as high as $132.89 per share and as low as $67.99 per share.

From January 1, 2022 through September 30, 2022, the closing price of our common stock on the Nasdaq Global Select Market was as high as $132.89 per share and as low as $67.99 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 ongoing COVID-19 pandemic.

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

As of June 30, 2022, we had no outstanding borrowings, $7.3 million in outstanding letters of credit, and a total available balance of $192.7 million under the Amended Credit Agreement.

As of September 30, 2022, we had no outstanding borrowings, $7.3 million in outstanding letters of credit, and a total available balance of $192.7 million under the Amended Credit Agreement.

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

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The Amended Credit Agreement imposes numerous financial and other restrictive covenants on our operations, including covenants relating to our general profitability and our liquidity.

As of June 30, 2022, we were in compliance with the covenants imposed by the Amended Credit Agreement.

As of September 30, 2022, we were in compliance with the covenants imposed by the Amended Credit Agreement.

If we violate these or any other covenants, any outstanding amounts under the Amended Credit Agreement 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.

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Climate-related events, including the increasing frequency of extreme weather events and their impact on the 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

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

ITEM 4 - MINE SAFETY DISCLOSURES

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