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Item 1A. Risk Factors

2021-02-24 compared with 2020-02-25 · 400 added, 214 removed, 807 unchanged (43% of the section changed)

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Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.

Risk factors include, but are not limited to, statements concerning the following:

Risks related to our business and strategy:

the intense international, national, regional and local competition we face in our industry;

our dependence on a limited number of customers for a significant portion of our sales revenue;

our reliance on a single source or a limited group of manufacturers or suppliers;

the need to continue to enhance our existing products and develop and market new products;

risks associated with public health threats and epidemics, including the COVID-19 pandemic and related public health emergency (PHE);

the competitive bidding process or other reimbursement policy changes under Medicare or other third-party payors, including recently enacted and potential future changes in the reimbursement rates or payment methodologies under Medicare, Medicaid and other government programs;

healthcare reform measures;

the complex and lengthy reimbursement process we depend upon for a significant portion of our revenue;

the lack of long-term supply contracts with many of our third-party suppliers;

the possibility our manufacturing facilities could become unavailable or inoperable and other potential manufacturing problems or delays;

our reliance upon a third-party contract manufacturer for certain manufacturing and repair operations;

potential failure to maintain or obtain new private payor contracts and future reductions in reimbursement rates from private payors;

our ability to manage our anticipated growth effectively;

potential acquisitions of, or investments in, other companies;

our international sales and manufacturing activities;

warranty or product liability claims or other litigation;

increases in our operating costs;

our dependence on the services of our senior executives and other key technical personnel;

variance in our financial condition and results of operations;

the market opportunities for our products.

Risks related to the regulatory environment:

extensive federal and state regulation related to our business by numerous government agencies, including the U.S.

Food and Drug Administration, or FDA;

the potential need to seek additional clearances or approvals for our products;

potential FDA or state regulatory enforcement action.

Risks related to our intellectual property:

our ability to secure and maintain patent or other intellectual property protection for the intellectual property used in our products;

the possibility that any of our patents may be challenged, invalidated, circumvented or rendered unenforceable;

patent and other intellectual property litigation if our products infringe or appear to infringe the intellectual property rights of others.

Risks related to being a public company:

increased costs as a result of operating as a public company and the substantial time our management will be required to devote to compliance initiatives and corporate governance practices;

our ability to maintain effective internal controls.

Risks related to our common stock:

the volatility of the trading price of our common stock;

the publication of research reports by securities or industry analysts;

potential sales of a large number of shares of our common stock;

anti-takeover provisions in our charter documents and under Delaware law;

our intention not to pay dividends for the foreseeable future.

Risks related to our business and strategy

We face intense international, national, regional and local competition and if we are unable to compete successfully, it could have an adverse effect on our revenue, revenue growth rate, if any, and market share.

The long-term oxygen therapy market and the non-invasive ventilator market are highly competitive industries.

We compete with a number of manufacturers and distributors of portable oxygen concentrators, as well as providers of other long-term oxygen therapy solutions such as home delivery of oxygen tanks or cylinders, stationary concentrators, transfilling concentrators, and liquid oxygen.

In the non-invasive ventilator market, we compete with manufacturers and distributors of other portable non-invasive ventilators, as well as HME providers that supply these products.

Our significant manufacturing competitors are Respironics (a subsidiary of Koninklijke Philips N.V.), Invacare Corporation, Caire Medical (subsidiary of NGK Spark Plug), DeVilbiss Healthcare (a subsidiary of Drive Medical), O2 Concepts, Precision Medical, Resmed, Gas Control Equipment (subsidiary of Colfax), Breathe Technologies, Inc.

(recently announced to be acquired by Hill-Rom Holdings, Inc.), Breas Medical, Ventec Life Systems, Covidien, and Nidek Medical.

Additional competitors have also pre-announced upcoming product launches of portable oxygen concentrators including 3B Medical, SysMed, and Bellascura.

We compete with a number of manufacturers and distributors of portable oxygen concentrators (POCs), as well as providers of other long-term oxygen therapy solutions such as home delivery of oxygen tanks or cylinders, stationary concentrators, transfilling concentrators, and liquid oxygen.

In the non-invasive ventilator market, we compete with manufacturers and distributors of other portable non-invasive ventilators, as well as home medical equipment (HME) providers that supply these products.

Additional competitors have also pre-announced upcoming product launches of POCs including SysMed and Bellascura.

Given the relatively straightforward regulatory path in the oxygen therapy and non-invasive ventilator device manufacturing market, we expect that the industry will become increasingly competitive in the future.

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For many years, Lincare , Inc.

(a subsidiary of the Linde Group), Apria Healthcare, Inc., AdaptHealth Corp., Aerocare Holdings, Inc.

and Rotech Healthcare, Inc.

(a subsidiary of the Linde Group), Apria Healthcare, Inc., AdaptHealth Corp., and Rotech Healthcare, Inc.

have been among the market leaders in providing respiratory therapy products, while the remaining market is serviced by local providers.

Because of reimbursement reductions, we expect more industry consolidation and volatility in ordering patterns based on how providers are restructuring their businesses and their access to capital.

In addition, providers may reduce or eliminate purchases from us due to our increased focus on building out a physician sales team and pursuing rentals directly, which could be in competition with our providers in the United States.

Respiratory therapy providers compete primarily on the basis of product features and service, rather than price, since reimbursement levels are established by Medicare and Medicaid, or by the individual determinations of private payors.

Some of our competitors are large, well-capitalized companies with greater resources than we have.

As a consequence, they are able to spend more aggressively on product development, marketing, sales and other product initiatives than we can.

Consequently, they are able to spend more aggressively on product development, marketing, sales and other product initiatives than we can.

Some of these competitors have:

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greater financial and human resources for product development, sales and marketing, and patent litigation.

As a result, our competitors may be able to respond more quickly and effectively than we can due to new or changing opportunities, technologies, standard regulatory and reimbursement development and customer requirements.

In light of these advantages that our competitors maintain, even if our technology and direct-to-consumer distribution strategy is more effective than the technology and distribution strategy of our competitors, including those who have adopted or may in the future adopt direct-to-consumer sales models, current or potential customers might accept competitor products and services in lieu of purchasing our products.

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We depend on a limited number of customers for a significant portion of our sales revenue and the loss of, or a significant shortfall in demand from, these customers could have a material adverse effect on our financial condition and operating results.

We receive a significant amount of our sales revenue from a limited number of customers, including distributors, HME providers, our private label partner and resellers.

We receive a significant amount of our sales revenue from a limited number of customers, including distributors, HME providers, our private label partner, resellers, and charitable organizations.

For the years ended December 31, 2020, 2019, and 2018, sales revenue to our top 10 customers accounted for approximately 29.0%, 33.5% and 37.9%, respectively, of our total revenue.

No single customer represented more than 10% of our total revenue for the year ended December 31, 2019 and one single customer represented more than 10% of our total revenue for the years ended December 31, 2018 and 2017.

One single customer represented more than 10% of our total revenue for the year ended December 31, 2020.

No single customer represented more than 10% of our total revenue for year ended December 31, 2019, and one single customer represented more than 10% of our total revenue for the year ended December 31, 2018.

We expect that sales to relatively few customers will continue to account for a significant percentage of our total revenue in future periods.

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We have also experienced a decline in sales from other home medical equipment providers and these providers have communicated to us that they continue to be subject to capital constraints.

Certain providers have also indicated that they intend to reduce or limit purchases in the future.

Moreover, in the second, third, and fourth quarters of 2020, we experienced a decline in total sales to business-to-business customers worldwide, which we believe was primarily due to the COVID-19 pandemic and related PHE.

If we were to lose one of our key customers or have a key customer significantly reduce its volume of business with us, such as we previously experienced with the large national homecare provider, our revenue may be materially reduced and there would be an adverse effect on our business, financial condition and results of operations.

We obtain some of the components, subassemblies and completed products included in our products from a single source or a limited group of manufacturers or suppliers, and the partial or complete loss of one or more of these manufacturers or suppliers could cause significant production delays, an inability to meet customer demand, substantial loss in revenue, and an adverse effect on our financial condition and results of operations.

We utilize single-source suppliers for some of the components and subassemblies we use in our Inogen One systems, our Inogen At Home systems, and our Tidal Assist Ventilators ( TAV ).

We utilize single-source suppliers for some of the components and subassemblies we use in our Inogen One systems, our Inogen At Home systems, and our Tidal Assist ® Ventilator ( TAV ® ) .

For example, we have elected to source certain key components from single sources of supply, including our batteries, motors, valves, TAV-compatible stationary concentrators, columns, and some molded plastic components.

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we or our suppliers may not be able to respond to unanticipated changes in customer orders, and if orders do not match forecasts, we or our suppliers may have excess or inadequate inventory of materials and components;

we may be subject to price fluctuations due to a lack of long-term supply arrangements for key components or changes in import tariffs;

we may be subject to price fluctuations due to a lack of long-term supply arrangements for key components or changes in import tariffs, trade restrictions or barriers or other government actions that impact our ability to obtain such components;

we may experience delays in delivery by our suppliers due to customs clearing delays, shipping delays, scarcity of raw materials or changes in demand from us or their other customers;

our suppliers may be unable to meet demands due to the effect of exposure to infectious disease and epidemics, including the coronavirus outbreak;

our suppliers may be unable to meet demands due to the effect of exposure to infectious diseases, epidemics or other public health emergencies, including the COVID-19 pandemic and related PHE;

we or our suppliers may lose access to critical services, tools, moldings, and components, resulting in an interruption in the manufacture, assembly and shipment of our systems;

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Any interruption or delay in the supply of components or subassemblies, or our inability to obtain components or subassemblies from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and cause them to cancel orders or switch to competitive products.

Recently, the U.S.

Food and Drug Administration (FDA) released guidance that requires manufacturers of certain medical devices, including ventilation-related products under product code CAW, among others, to notify FDA of a permanent discontinuance or interruption in manufacturing of an applicable device under Section 506J of the Federal Food, Drug, and Cosmetic Act during the COVID-19 PHE.

To the extent we experience an interruption in our manufacturing that falls within the scope of this guidance, we would be required to notify FDA.

This and other regulatory requirements could increase the cost of our operations and compliance.

In addition, we may be deemed to manufacture or contract to manufacture products that contain certain minerals that have been designated as “conflict minerals” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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In some cases, we would need to change the components or subassemblies if we sourced them from an alternative supplier.

This, in turn, could require a redesign of our products and, potentially, require additional Food and Drug Administration (FDA) clearance or approval before we could use any redesigned product with new components or subassemblies, thereby causing further costs and delays that could adversely affect our business, financial condition and results of operations.

This, in turn, could constitute a material modification or require a redesign of our products and, potentially, require additional FDA clearance or approval before we could use any materially modified or redesigned product with new components or subassemblies, thereby causing further costs and delays that could adversely affect our business, financial condition and results of operations.

If we are unable to continue to enhance our existing products and develop and market new products that respond to customer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products and our business could suffer.

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While we expended $14.1 million, $9.4 million and $7.0 million for the years ended December 31, 2020, 2019, and 2018, respectively, in research and development efforts, we cannot assure that this level of investment will be sufficient to maintain a competitive advantage in product innovation, which could cause our business to suffer.

In addition, we plan to sell the TAV, the newly acquired technology from New Aera, through our domestic direct-to-consumer sales channel and our business-to-business sales channels worldwide, pending reimbursement and regulatory clearances in each market.

In addition, we plan to sell the TAV, the newly acquired technology from New Aera, Inc.

(New Aera), through our domestic direct-to-consumer sales channel and our business-to-business sales channels worldwide, pending reimbursement and regulatory clearances in each market.

We also plan to incorporate the TAV technology directly into our oxygen concentrators.

patent protection and regulatory clearances or approvals for such product improvements or new products in a timely manner, or at all.

Product improvements and new product introductions also require significant planning, design, development, patent protection, and testing at the technological, product, and manufacturing process levels and we may not be able to timely develop product improvements or new products or obtain necessary patent protection and regulatory clearances or approvals for such product improvements or new products in a timely manner, or at all.

Our competitors’ new products may enter the market before our new products reach the market, be more effective with more features, obtain better market acceptance, or render our products obsolete.

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As a result, our business, financial condition and results of operations could be materially harmed.

In particular, it is uncertain if the current TAV product acquired from New Aera, will be reimbursable in its current configuration under Healthcare Common Procedure Coding System (HCPCS) code E0466.

As discussed in the “Legal Proceedings” section of the Annual Report on Form 10-K, in September 2020, we filed a lawsuit against defendants, Alex M.

Azar, Secretary of the Department of HHS, in his official capacity, Seema Verma, Administrator of CMS, in her official capacity and Palmetto GBA, LLC.

The lawsuit seeks to invalidate the defendants’ arbitrary and capricious decision to retract a valid HCPCS code to Inogen’s TAV, thereby eliminating reimbursements for the ventilator, in violation of the Administrative Procedures Act, CMS’s failure to provide notice and the opportunity to comment on a change in HCPCS code verification for the Sidekick TAV and similar devices constitutes a violation of the procedural right provided under the Social Security Act, and Inogen’s due process rights.

If we do not receive revised coding, it could limit this product’s adoption by HME providers and also our direct rentals and could adversely affect our business, financial condition and results of operations .

We are subject to risks associated with public health threats and epidemics, including the COVID-19 pandemic and related PHE.

Public health outbreaks, epidemics, pandemics of contagious or infectious diseases, such as COVID-19, may significantly disrupt our business.

Such outbreaks pose the risk that we or our employees, contractors, suppliers, or other partners may be prevented from conducting business activities for an indefinite period of time due to spread of the disease, or due to shutdowns that may be requested or mandated by federal, state and local governmental authorities.

Business disruptions could include disruptions or restrictions on our ability to travel, as well as temporary closures of our facilities or the facilities of our contractors, suppliers, and other partners.

For example, business-to-business demand declined in the second, third, and fourth quarters of 2020 due to physician offices limiting patient interactions for COPD patient referrals, HME providers minimizing patient interactions in response to the COVID-19 pandemic and related PHE which includes replacing existing oxygen patient setups with POCs and temporary reduced operating capacity of certain respiratory assessment centers and continued tender delays in certain European markets due to the COVID-19 pandemic and related PHE.

While it is not possible at this time to estimate the overall impact that the COVID-19 pandemic and related PHE could have on our business, the continued rapid spread of COVID-19, both across the United States and through much of the world, and the measures taken by the governments and local authorities of affected regions has adversely effected our operating results and could cause or contribute to, among other things:

significant volatility or reductions in demand for our products;

delays in our product development pipeline;

delays in obtaining regulatory clearances or approvals to market our products in certain jurisdictions;

failure of third parties on which we rely to meet their obligations to us, or significant disruptions in their ability to do so;

and our inability to meet our customers’ needs due to disruptions to our operations or the operations of our contractors, suppliers, other partners or customers including disruptions to production, development, manufacturing, administrative and supply operations and arrangements.

In addition, new variants of COVID-19 could prove to be deadlier or more transmittable, or the developed vaccines may be ineffective versus these new variants, which could negatively impact our business and financial results.

In addition, w e have strived to follow recommended actions of government and health authorities to protect the health and safety of our employees and community, while working to ensure the sustainability of our business operations as this unprecedented situation continues to evolve.

Employees whose tasks can be done offsite have been allowed to work from home and most of our total personnel continue to work from home.

While we have worked closely with local and national officials and have thus far been able to

keep our manufacturing facilities open due to the essential nature of our products, there can be no assurance that we will be able to keep such facilities open indefinitely during the COVID-19 pandemic and related PHE.

We have thus far been able to keep our contract manufacturer capability and capacity available but there can be no assurance that we will be able to keep such facilities open indefinitely during COVID-19 pandemic and related PHE .

We continue to evaluate the impact COVID-19 may have on our ability to effectively conduct our business operations as planned to mitigate risk to our employees and customers while taking into account regulatory, institutional, and government guidance and policies, but there can be no assurance that we will be able to avoid part or all of any impact from the spread of COVID-19 or its consequences.

The COVID-19 pandemic and related PHE continues to rapidly evolve.

The COVID-19 pandemic and related PHE has already adversely effected our financial results and the extent to which COVID-19 ultimately impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to address its impact, including on financial markets or otherwise, and how quickly and to what extent normal economic and operating conditions can resume if and when the COVID-19 pandemic and related PHE subsides.

While the extent of the impact of the COVID-19 pandemic and related PHE on our business and financial results is uncertain, we have already been negatively impacted and a continued and prolonged public health crisis could have a further material negative impact on our business, financial condition and results of operations.

Even after the COVID-19 pandemic and related PHE has subsided, we may continue to experience materially adverse impacts on our financial condition and our results of operations and many of our known risks described in this Annual Report on Form 10-K may be heightened.

While we have received funding from programs enacted under the CARES Act, due to the recent enactment of the CARES Act and related legislation, there is still a high degree of uncertainty surrounding their implementation, and the COVID-19 pandemic and related PHE continues to evolve.

HHS is still issuing additional guidance to providers and suppliers regarding the terms and conditions associated with the implementation of the CARES Act Provider Relief Fund.

The federal government may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus measures will be enacted or their impact.

There can be no assurance as to the total amount of financial and other types of assistance we will receive under the CARES Act or future legislation, if any, and it is difficult to predict the impact of such legislation on our operations.

Further, there can be no assurance that the terms of provider relief funding or other programs will not change in ways that affect our funding or eligibility to participate.

We will continue to assess the potential impact of the COVID-19 pandemic and related PHE and government responses to the pandemic on our business, results of operations, financial condition and cash flows.

A significant majority of our rental patients who use our product have health coverage under the Medicare program, and recently enacted and future changes in the reimbursement rates or payment methodologies under Medicare, Medicaid and other government programs have affected and could continue to materially and adversely affect our business and operating results.

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Legislation, including the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the Deficit Reduction Act of 2005, the Medicare Improvements for Patients and Providers Act of 2008, and the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, contain provisions that directly impact reimbursement for the durable medical equipment products provided by us:

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 significantly reduced reimbursement for inhalation drug therapies beginning in 2005, reduced payment amounts for certain durable medical equipment, including oxygen, beginning in 2005, froze payment amounts for other covered home medical equipment items through 2008, established a competitive bidding program for home medical equipment and implemented quality standards and accreditation requirements for durable medical equipment suppliers.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 significantly reduced reimbursement for inhalation drug therapies beginning in 2005, reduced payment amounts for certain durable medical equipment, including oxygen, beginning in 2005, froze payment amounts for other covered HME items through 2008, established a competitive bidding program for home medical equipment and implemented quality standards and accreditation requirements for durable medical equipment suppliers.

The Deficit Reduction Act of 2005 limited the total number of continuous rental months for which Medicare will pay for oxygen equipment to 36 months, after which time there is generally no additional reimbursement to the supplier (other than for periodic, in-home maintenance and servicing).

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For purposes of the rental cap, the Deficit Reduction Act of 2005 provided for a new 36-month rental period that began January 1, 2006 for all oxygen equipment.

After the 36th continuous month during which payment is made for the oxygen equipment, the supplier is generally required to continue to furnish the equipment during the period of medical need for the remainder of the useful lifetime of the equipment, provided there are no breaks in service due to medical necessity that exceed 60 days.

After the 36th continuous month during which payment is made for the oxygen equipment, the supplier is generally required to continue to furnish the equipment during

the period of medical need for the remainder of the useful lifetime of the equipment, provided there are no breaks in service due to medical necessity that exceed 60 days.

The reasonable useful lifetime for our portable oxygen equipment is 60 months.

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We anticipate that the Deficit Reduction Act of 2005 oxygen payment rules will continue to negatively affect our net revenue on an ongoing basis, as each month additional customers reach the capped rental period in month thirty-seven, resulting in potentially two or more years without rental income from these customers while we continue to incur customer service and maintenance costs.

Our capped patients as a percentage of total patients on service was approximately 20.3% as of December 31, 2019, which was slightly higher than the capped patients as a percentage of total patients on service of approximately 19.1% as of December 31, 2018.

Our capped patients as a percentage of total patients on service was approximately 11.7 % as of December 3 1 , 2020 and 20.

3 % as of December 3 1 , 2019.

The percentage of capped patients may fluctuate over time as new patients come on service, patients come off of service before and during the capped rental period, and existing patients enter the capped rental period.

We cannot predict the potential impact to rental revenues in future periods associated with patients in the capped rental period.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, includes, among other things, new face-to-face physician encounter requirements for certain durable medical equipment and home health services, and a requirement that by 2016, the competitive bidding process must be nationalized or prices in non-competitive bidding areas must be adjusted to match competitive bidding prices.

As of January 1, 2017, CMS has decreased prices for durable medical equipment in non-competitive bidding areas to match competitive bidding prices.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, includes, among other things, face-to-face physician encounter requirements for certain durable medical equipment and home health services, and a requirement that by 2016, the competitive bidding process must be nationalized or prices in non-competitive bidding areas must be adjusted to match competitive bidding prices.

As of January 1, 2017, Centers for Medicare and Medicaid Services (CMS) has decreased prices for durable medical equipment in non-competitive bidding areas to match competitive bidding prices.

There have been significant U.S.

reimbursement and policy changes associated with the COVID-19 PHE that impact oxygen therapy and other durable medical equipment.

The CARES Act allows HHS to waive certain Medicare telehealth payment requirements during the COVID-19 PHE declared by HHS on January 31, 2020 to allow beneficiaries in all areas to receive telehealth services, including at their home, starting March 6, 2020.

The Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R.

6074) also granted HHS the authority to waive certain requirements with respect to telehealth services.

Under this authority, CMS clarified that HHS would not conduct audits to determine whether there was a prior physician-patient relationship for telehealth claims submitted during the COVID-19 PHE.

The CARES Act, passed on March 27, 2020 included the extension of the 50/50 blended rate for HME in rural and non-contiguous, non-competitively bid areas and established a new 75/25 blended rate for all other non-competitively bid areas through the duration of the COVID-19 PHE.

The 75/25 blended rate was retroactive to March 6, 2020.

While the duration of the current emergency is impossible to predict, the Zika virus PHE lasted approximately 360 days, and the H1N1 flu PHE lasted approximately 450 days.

The CARES Act also included a temporary elimination of the 2% Medicare sequestration reduction that went into effect in 2013.

The CARES Act implemented the relief effective May 1, 2020 through December 31, 2020.

The Consolidated Appropriations Act of 2021 was signed into law on December 27, 2020 and extended the suspension period to March 31, 2021.

In addition, the CARES Act established a provider relief fund of $100 billion, of which $30 billion was distributed on April 10, 2020, for Medicare providers and suppliers to prevent, prepare for, and respond to the COVID-19 PHE, and as a Medicare supplier we also received funds of $6.2 million in the second quarter of 2020.

The Paycheck Protection Program and Heath Care Enhancement Act was also signed into law on April 24, 2020 and provides additional funding of $484 billion to programs enacted under the CARES Act.

Of the $484 billion, $75 billion is additional funding for healthcare providers to reimburse healthcare related expenses and lost revenues attributable to COVID-19 PHE, which is in addition to the $100 billion approved in the CARES Act.

On April 6, 2020, an Interim Final Rule (IFR) was published in the Federal Register for policy and regulatory revisions in response to the COVID-19 PHE.

This IFR included that for the duration of the COVID-19 PHE, the face-to-face requirements and clinical indications of coverage for home oxygen, among other respiratory products, will be waived.

The Trump administration also issued a number of regulatory waivers to increase the flexibility in durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) suppliers’ ability to service patients quickly and without the normal requirements.

For example, the patient signature for proof of delivery for DMEPOS is waived when signatures cannot be collected during the COVID-19 PHE for dates of services within the PHE.

In addition, CMS increased Medicare contractors’ ability to waive replacement product requirements, paused the national prior authorization program for certain DMEPOS, automatically extended expiring accreditations, granted contractors the flexibility to grant appeals extensions, and suspended medical review of claims.

Both the IFR and temporary regulatory changes show significant flexibility from CMS to improve access for oxygen and other DMEPOS items during this COVID-19 PHE.

These changes were retroactive to early March 2020.

However, in July 2020, CMS released a COVID-19 Provider Burden Relief FAQs document that stated that effective August 3, 2020, CMS would resume full operations for the prior authorization program for certain DMEPOS and resume medical review of claims.

These legislative provisions as currently in effect have had and may continue to have a material and/or adverse effect on our business, financial condition and results of operations.

Department of Health and Human Services (HHS) Office of Inspector General (OIG) has recommended states to review Medicaid reimbursement for durable medical equipment (DME) and supplies.

The HHS Office of Inspector General (OIG) has recommended that states review Medicaid reimbursement for durable medical equipment (DME) and supplies.

The OIG cites an earlier report estimating that four states (California, Minnesota, New York, and Ohio) could have saved more than $18.1 million on selected DME items if their Medicaid prices were comparable to those under round one of the Medicare competitive bidding program.

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However, if this plan is not effective, the appeals backlog could increase, which could increase our collection times and decrease our cash flow, increase billing administrative costs, and/or increase the provision for rental revenue adjustments, which would adversely affect our business, financial condition and results of operations.

The competitive bidding process under Medicare could negatively affect our business and financial condition.

The competitive bidding process or other reimbursement policy changes under Medicare or other third-party payors could negatively affect our business and financial condition.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires the Secretary of HHS to establish and implement programs under which competitive acquisition areas are established throughout the United States for purposes of awarding contracts for the furnishing of competitively priced items of durable medical equipment, including oxygen equipment.

Effective January 1, 2019, Medicare beneficiaries may receive durable medical equipment from any Medicare-enrolled supplier until new contracts are in effect under competitive bidding Round 2021, which is expected to begin on January 1, 2021.

Reimbursement rates between January 1, 2019 and December 31, 2020 will be set at the current pricing level throughout the United States for all Medicare patients, subject to Consumer Price Index (CPI) and budget neutrality adjustments.

Pricing in competitive bidding areas will be subject to annual CPI adjustments beginning in 2019 until Round 2021 begins.

However, CMS also changed the calculation on budget neutrality to apply the offset to all oxygen and oxygen equipment classes beginning January 1, 2019 instead of previously only applying these adjustments to stationary oxygen equipment and oxygen contents.

Based on these CPI and budget neutrality adjustments, effective January 1, 2019 the average Medicare reimbursement rates in former competitive bidding areas decreased to $72.92 a month for E1390 and $35.72 a month for E1392.

Effective January 1, 2020, the average Medicare reimbursement rates were increased by 1.5% to $73.98 a month for E1390 and $36.25 a month for E1392 in these regions that were previously subject to competitive bidding.

In addition, the average Medicare reimbursement rates in non-rural, non-former competitive bidding areas increased by 3.5% to $74.84 a month for E1390 and $36.87 a month for E1392.

In Round 2021 of DMEPOS competitive bidding program, there have been some revisions to the bidding methodology including surety bond requirements, lead item pricing, and setting reimbursement rates at the maximum winning bid rate instead of the median winning bid rate.

In prior rounds of competitive bidding, our products were categorized in the product category of respiratory equipment and related supplies and accessories, which included oxygen equipment, continuous positive airway pressure (CPAP) devices and respiratory assist devices (RADs) and related supplies and accessories.

In Round 2021 of bidding, oxygen and oxygen equipment is its own product category and the lead item has been established as E1390.

However, due to the lead item pricing methodology based on the 2015 standard Medicare fee schedule, E1392 reimbursement rates could be reduced significantly (we estimate approximately 42%) even if E1390 reimbursement rates do not change.

This would lead to combined E1390 plus E1392 reimbursement rates to decrease by approximately 15%.

The bidding window closed on September 18, 2019.

It is unclear how pricing will be impacted due to these new bids.

We expect contracts and pricing to be announced in 2020.

We rely significantly on reimbursement from Medicare and private payors, including Medicare Advantage plans, Medicaid and patients for our rental revenue.

For the year ended December 31, 2020, approximately 81.5% of our rental revenue was derived from Medicare’s traditional fee-for-service reimbursement programs.

list price for our stationary oxygen rentals (HCPCS E1390) is $260 per month and the U.S.

list price for our oxygen generating portable equipment (OGPE) rentals (HCPCS E1392) is $70 per month.

The average Medicare reimbursement rates in former competitive bidding areas (CBAs) in the prior three years are outlined in the table below for E1390 and E1392, which are the two primary codes that we bill to Medicare and other payors for our oxygen product rentals.

These rates were updated annually each January as they are subject to Consumer Price Index (CPI) and budget neutrality adjustments.

Competitive bidding contracts were scheduled to go into effect on January 1, 2021, however, on October 27, 2020, CMS announced that competitive bidding contracts would not be awarded for most product categories, including oxygen, due to the payment amounts not achieving the expected savings and the current COVID-19 PHE.

See the table below for average Medicare rates in former CBAs, using a simple average of rates in each CBA.

Average Medicare reimbursement rates in former CBAs

As of January 1, 2021

As of January 1, 2020

As of January 1, 2019

As of January 1, 2018

CMS also issued a proposed rule on November 4, 2020 (CMS-1738-P) to establish payment amounts going forward for DMEPOS products and services covered under Medicare.

We believe that Medicare rates will not change for the length of the PHE, except for budget neutrality adjustments that typically occur annually each January but have not yet been announced.

CMS is proposing three different fee schedule adjustment methodologies for non-CBAs after the termination of the COVID-19 PHE:

(1) for non-contiguous non-CBAs;

(2) for contiguous non-CBAs defined as rural areas;

and (3) for non-rural non-CBAs within the contiguous United States.

Proposed adjustment methodologies (1) and (2) contemplate utilizing 50/50 blended rates as a permanent construct, but proposed adjustment methodology (3) contemplates setting the fee schedule amounts to 100% of the

Medicare rates.

This c ould reduce Medicare rates after the PHE is over in the current areas that are considered non-rural but not covered by a former CBA, as those areas are currently receiving a 75/25 blended reimbursement rate.

There was a 60-day comment period on this proposed rule, and we expect this rule to be finalized in the first half of 2021.

In January 2021, CMS announced the pivotal bid amounts for the competitive bidding round 2021.

As a reminder, the bids for oxygen were based on the HCPCS code E1390, which is for stationary oxygen, and there were 130 regions bid.

The simple average of the 2018 single payment amounts for these regions for this code was $73.98.

The simple average of the pivotal bid amounts for these regions for this code was $122.61, or an average increase of 65.7%.

If CMS would have implemented these rate changes, the average payment amounts in these regions for POCS (codes E1390 and E1392) would have been $157.60, which is significantly higher than the $110.07 per month being paid as of January 1, 2021 .

In addition to regional pricing, CMS imposed different pricing on “frontier states” and rural areas.

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Effective June 1, 2018 through December 31, 2020, for frontier and rural states, frontier and rural zip codes in non-frontier/rural states and non-contiguous United States areas, the single payment amount will be the 50/50 blended reimbursement rates based on an average of the pre-competitive reimbursement bidding rates and the current average reimbursement rates to account for higher servicing costs in these areas.

In 2019, this rate was $134.71 a month for E1390 and $44.32 a month for E1392, and this rate increased by 1.5% effective January 1, 2020 to $136.71 a month for E1390 and $44.93 a month for E1392.

We estimate that approximately 15% of our patients are eligible to receive the higher reimbursement rates based on the geographic locations of our current patient population.

Note that the 2021 rates listed below include CARES Act increased rates due to the COVID-19 PHE, which may not be in place for all of 2021.

See the table below for average Medicare rates in rural areas, using a simple average of rates in each state.

Average Medicare reimbursement rates in rural areas

As of January 1, 2021

As of January 1, 2020

As of January 1, 2019

As of January 1, 2018

Rates in non-former CBAs that are not defined as rural are set based on the rates in former CBAs.

See the table below for average Medicare rates in these non-former CBAs, non-rural areas, using a simple average of rates in each state.

Note that the 2021 rates listed below include CARES Act increased rates due to the COVID-19 PHE, which may not be in place for all of 2021.

Average Medicare reimbursement rates in non-former CBAs, non-rural areas

As of January 1, 2021

As of January 1, 2020

As of January 1, 2019

As of January 1, 2018

CMS is required to propose future rounds of competitive bidding, which could reduce reimbursement rates, negatively impact the premium for POCs over other oxygen modalities, or limit beneficiary access to our technologies.

Cumulatively in previous rounds of competitive bidding, we were offered contracts for a substantial majority of the CBAs and product categories for which we submitted bids.

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These 130 CBAs represented approximately 36% of the Medicare market with the remaining approximately 64% of the market not subject to competitive bidding.

As of January 1, 2019, and until Round 2021 of competitive bidding becomes effective, we can choose to accept Medicare oxygen patients throughout the United States.

As of January 1, 2019, we can choose to accept Medicare oxygen patients throughout the United States.

As of July 2018, we currently operate in all 50 states in the U.S.

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Medicare reimbursement for oxygen rental equipment is limited to a maximum of 36 months within a 60-month service period, and the equipment remains the property of the home oxygen supplier.

The supplier that billed Medicare for the 36th month of service continues to be responsible for the patient’s oxygen therapy needs for months 37 through 60, and there is generally no additional reimbursement for oxygen generating portable equipment for these later months.

The supplier that billed Medicare for the 36th month of service continues to be responsible for the patient’s oxygen therapy needs for months 37 through 60, and there is generally no additional

reimbursement for oxygen generating portable equipment for these later months.

CMS does not separately reimburse suppliers for oxygen tubing, cannulas and supplies that may be required for the patient.

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We have analyzed the potential impact to revenue associated with patients in the capped rental period and have deferred $0 associated with the capped rental period as of December 3 1 , 2020 and December 3 1 , 2019.

Our capped patients as a percentage of total patients on service was approximately 11.7 % as of December 31, 2020 and 20.3% as of December 3 1 , 20 19 .

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If the equipment malfunctions, we must repair or replace the equipment.

We determine what equipment the patient receives, as long as that equipment meets the physician’s prescription, and we can deploy used assets in working order as long as the prescription requirements are met.

We determine what equipment the patient receives, and we can deploy used assets in working order as long as the prescription requirements are met.

We must also procure a recertification of the certificate of medical necessity from the patient’s doctor to confirm the patient’s need for oxygen therapy one year after the patient first receives oxygen therapy and one year after each new 36-month reimbursement period begins.

The patient can choose to receive oxygen supplies and services from another supplier at any time, but the supplier may only transition the patient to another supplier in certain circumstances.

Round 2021 of the competitive bidding program includes non-invasive ventilation (NIV) as a new product category effective January 1, 2021 for code E0466.

Average Medicare reimbursement rates for HCPCS code E0466 were a monthly, non-capped rental with rates of $1,042.26 a month in 2019, and increased 0.9% effective January 1, 2020 to $1,051.64 a month, excluding Puerto Rico where the monthly Medicare reimbursement rate for E0466 was $1,827.24 per month in 2019 and increased to $1,843.69 a month effective January 1, 2020.

Since this is the first-time non-invasive ventilators are being included in the competitive bidding program, it is uncertain what impact bidding will have on the reimbursement rates.

If there is a significant decline in reimbursement rates or changes in coverage criteria, this may negatively impact the adoption of the TAV product by home medical equipment providers, or increase pricing pressure, as well as negatively impact our rental reimbursement rates, which would adversely affect our business, financial condition and results of operations .

It is also uncertain if we will win any bids for NIV for Round 2021 of the competitive bidding program.

We have not previously provided NIV products to Medicare beneficiaries.

If we do not win contracts to service Medicare beneficiaries for NIV in Round 2021, that may limit our ability to grow rental revenue for NIV.

It is also uncertain if the TAV product acquired from New Aera will be reimbursable in its current configuration under HCPCS code E0466.

We requested confirmation on the assigned HCPCS codes for the TAV system from the Pricing, Data Analysis, and Coding Contractor in August 2019 following the closing of the New Aera transaction.

Average Medicare reimbursement rates for NIV HCPCS code E0466 are listed in the table below and were a monthly, non-capped rental.

These rates exclude Puerto Rico, where rates have ranged from $1,786.16 to $1,847.38 over the periods presented.

Average Medicare reimbursement rates for NIV (excludes Puerto Rico)

As of January 1, 2021

As of January 1, 2020

As of January 1, 2019

As of January 1, 2018

While NIV has been removed from competitive bidding round 2021, NIV may be included in future rounds, which could reduce the reimbursement rates for these products.

In addition, the Medicare Coverage Advisory Committee (MEDCAC) had a meeting on July 22, 2020 to discuss home use of non-invasive positive pressure ventilation in patients with chronic respiratory failure consequent to COPD.

CMS is seeking MEDCAC’s recommendations regarding the characteristics that define patient selection and usage criteria for these items.

This request could signal forthcoming changes in Medicare coverage of these items, and possibly changes in HCPCS codes, which could impact our NIV business and growth initiatives.

It is uncertain if the current TAV product acquired from New Aera, will be reimbursable in its current configuration under HCPCS code E0466.

We requested confirmation on the assigned HCPCS codes for the TAV system from the PDAC Contractor in August 2019 following the closing of the New Aera transaction.

In August 2019, we received positive confirmation that this product was assigned HCPCS code E0466.

However, in September 2019, we received a revised communication that the product was assigned HCPCS code E1390 and E1352, which was then revoked at our request in December 2019.

In September 2019, we appealed to the Centers for Medicare and Medicaid Services, and in January 2020 our appeal was denied.

We are currently pursuing additional appeal opportunities.

If we do not receive revised coding, it could limit this product’s adoption by home medical equipment providers and also our direct rentals and would adversely affect our business, financial condition and results of operations.

On May 15, 2019, a bi-partisan bill was introduced in the House of Representatives that would provide relief from competitive bidding in non-bid areas.

In September 2019, we appealed to CMS, and in January 2020 our appeal was denied.

In September 2020, we filed a lawsuit against Palmetto GBA, LLC and Alex Azar and Seema Verma in their official capacities at the Department of Health and Human Services and the Centers for Medicare and Medicaid Services, respectively.

The lawsuit seeks to invalidate the retraction of a valid HCPCS code to Inogen’s TAV system and claims a violation of our procedural rights provided under the Social Security Act, the Administrative Procedure Act, and our due process rights due to CMS’ failure to provide notice and the opportunity to comment on a change in HCPCS code verification for the TAV product.

If we do not receive revised coding, it could limit this product’s adoption by HME providers and also our direct rentals.

On May 15, 2019, H.R.

2771, a bi-partisan bill was introduced in the House of Representatives that would provide relief from competitive bidding in non-bid areas.

As of February 5, 2021, there were 83 co-sponsors on this bill.

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There is no known timing on voting on this bill.

On March 11, 2019, the current presidential administration sent Congress a 2020 budget proposal that included language on competitive bidding.

Specifically, the proposal would eliminate the requirement under the competitive bidding program that CMS pay a single payment amount based on the median bid price, proposing instead that CMS pay winning suppliers at their own bid amounts.

As part of the CARES Act, portions of this bill including the 50/50 blended reimbursement rate in rural and noncontiguous areas and the 72/25 blended reimbursement rate for non-rural, non-competitive bidding areas were approved effective for claims after March 6, 2020 for the length of the COVID-19

The proposed rule CMS-1738-P would make the 50/50 blended rates in the non-contiguous and rural areas permanent but did not address the 75/25 blended reimbursement rates in certain areas or the budget neutrality adjustment.

In February 2020, the Trump administration sent Congress a 2021 budget proposal that included language on competitive bidding.

Additionally, this proposal would expand competitive bidding to all areas of the country, including rural areas, which will be based on competition in those areas rather than on competition in urban areas.

This specific proposal is estimated to save the government $7.1 billion in Medicare savings and $0.4 billion in Medicaid savings over 10 years.

In addition to changes to competitive bidding, the 2020 budget proposal would enable CMS not to impose the face-to-face requirement on all providers for durable medical equipment.

In addition to changes to competitive bidding, the 2021 budget proposal would allow on an annual basis through rulemaking for CMS to use retail price information to create DMEPOS fee schedule rates, which would not take into account associated services that Medicare DME suppliers offer.

The proposal would also enable CMS not to impose the face-to-face requirement on all providers for durable medical equipment.

Furthermore, the proposal seeks to address excessive billing of durable medical equipment that requires refills or serial claims.

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The benefits manager would be responsible for ensuring beneficiaries were receiving the correct quantity of supplies or service for the appropriate time period.

In addition, the proposal allows an administrative penalty of $50 for Part B items/services and $100 for Part A services on providers for ordering high-risk, high-cost items or services without proper documentation, such as diagnosis or encounter data.

Lastly, the proposal would expand prior authorization to additional items and services that are both high-cost and at high-risk for improper payments.

These provisions were not included in the latest omnibus budget, so it is unclear if any of these proposals will be implemented.

We believe additional cuts to reimbursement would continue to drive conversion to non-delivery technologies, including portable oxygen concentrators, however this could also exacerbate patient access issues for treatment.

On August 6, 2019, CMS issued a proposed rule to establish methodologies to modernize pricing of new DMEPOS items and services based on commercial pricing data.

In addition, the proposed rule recommends streamlining requirements related to face-to-face encounters, written orders prior to delivery and/or prior authorizations to reduce provider confusion.

Lastly, the proposed rule recommends revising the existing DMEPOS competitive bidding program regulations to recognize that changes of ownership may occur on shorter timeframes and revising the submission of a hearing request in notices of breach of contract.

CMS solicited comments on this proposed rule through September 27, 2019.

We believe additional cuts to reimbursement would continue to drive conversion to non-delivery technologies, including POCs;

however, this could also exacerbate patient access issues for treatment.

Although we continue to monitor developments regarding the implementation of the competitive bidding program, we cannot predict the outcome of the competitive bidding program on our business when fully implemented, nor the Medicare reimbursement rates that will be in effect in future years for the items subject to competitive bidding, including our products.

We expect that the stationary oxygen and non-delivery ambulatory oxygen reimbursement rates will continue to fluctuate, and a large negative payment adjustment would adversely affect our business, financial condition and results of operations.

The Medicare Fee-For-Service (FFS) sequestration reduction has and may continue to negatively affect our revenue and profits.

Medicare FFS claims with dates of service on or after April 1, 2013 are subject to a 2% reduction in Medicare payment, including claims for DMEPOS, including in competitive bidding areas.

The claims payment adjustment is applied to all claims after determining co-insurance, any applicable deductible, and any applicable Medicare secondary payment adjustments.

These reductions

are included in rental revenue adjustments.

This sequestration reduction will continue until further notice.

As a result, this could adversely affect our financial condition and results of operations.

The implementation of prior authorization rules for DMEPOS under Medicare could negatively affect our business and financial condition.

CMS has issued a final rule to require Medicare prior authorization (PA) for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that the agency characterizes as “frequent subject to unnecessary utilization.” The final rule was published on December 30, 2015 and specified an initial master list of 135 items that could potentially be subject to PA.

Initially stationary oxygen rentals (code E1390) was included on the master list, but it was later removed.

On April 22, 2019, stationary oxygen rentals (E1390) was again added to the list of potential codes that could be subject to PA.

The master list is updated annually and published in the Federal Register.

The presence of an item on the master list does not automatically mean that a PA is required.

CMS will select a subset of these master list items for its “Required Prior Authorization List.” There will be a notice period of at least 60 days prior to implementation.

The ruling does not create any new clinical documentation requirements;

instead the same information necessary to support Medicare payment will be required prior to the item being furnished to the beneficiary.

CMS has proposed that reasonable efforts are made to provide a PA decision within 10 days of receipt of all applicable information, unless this timeline could seriously jeopardize the life or health of the beneficiary or the beneficiary’s ability to regain maximum function, in which case the proposed PA decision would be 2 business days.

CMS will issue additional sub-regulatory guidance on these timelines in the future.

If our products are subject to prior authorization, it could reduce the number of patients qualified to come on service using their Medicare benefits, it could delay the start of those patients while we wait for the prior authorization to be received, and/or it could decrease sales productivity.

As a result, this could adversely affect our business, financial conditions and results of operations.

Healthcare reform measures may have a material adverse effect on our business and results of operations.

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This includes aggregate reductions of Medicare reimbursements to providers up to 2% per fiscal year, which went into effect on April 1, 2013, and will remain in effect through 2030 unless additional Congressional action is taken.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures.

For example, a provision in the CARES Act and the December stimulus bill temporarily eliminated the 2% Medicare sequestration reduction for claims dated from May 1, 2020 through December 31, 2020 and the CARES Act also extends the end date of the Medicare sequestration reduction by one year, through 2030, in order to offset the 2020 suspension.

Although the Consolidated Appropriations Act of 2021, signed into law on December 27, 2020, extended the suspension period of the sequestration to March 31, 2021, w e expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures.

In addition to the legislative changes discussed above, the Patient Protection and Affordable Care Act also requires healthcare providers to voluntarily report and return an identified overpayment within 60 days after identifying the overpayment.

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To the extent such legislation is enacted, it could result in increased administrative costs or otherwise exclude us from doing business in a particular state, which would adversely impact our business, financial condition and results of operations.

We face uncertainties that might result from modification or repeal of any of the provisions of the Patient Protection and Affordable Care Act, including as a result of current and future executive orders and legislative actions.

The impact of those changes on us and potential effect on the durable medical equipment industry as a whole is currently unknown.

of those changes on us and potential effect on the durable medical equipment industry as a whole is currently unknown.

But any changes to the Patient Protection and Affordable Care Act are likely to have an impact on our results of operations and may have a material adverse effect on our results of operations.

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We do not maintain large volumes of inventory from most of these suppliers.

For example, our TAV product is sold in some cases with a stationary concentrator produced by another oxygen concentrator manufacturer.

Due to the COVID-19 pandemic and related PHE and related increased demand for stationary oxygen concentrators, we have limited supply of these stationary oxygen concentrators at this time.

This has had and will continue to have an impact on TAV sales until supply is stabilized or we receive regulatory clearance or approval to use the TAV with another oxygen concentrator source.

We may also be affected by other supply limitations during the COVID-19 pandemic and related PHE that could impact our ability to fulfill orders.

If we inaccurately forecast demand or fail to place orders timely enough relative to fluctuating lead time requirements for components or subassemblies, our ability to manufacture and commercialize our products could be delayed and our competitive position and reputation could be harmed.

In addition, if we fail to effectively manage our relationships with these suppliers, we may be required to change suppliers which would be time consuming and disruptive and could adversely affect our business, financial condition and results of operations.

In addition, if we fail to effectively manage our relationships with these suppliers or if our suppliers, in the near term or the long term, are not able to supply sufficient quantities of components or subassemblies needed for our products due to the COVID-19 pandemic and related PHE, we may be required to change suppliers which would be time consuming and disruptive and could adversely affect our business, financial condition and results of operations.

If our manufacturing facilities become unavailable or inoperable, we could be unable to continue manufacturing our products and, as a result, our business, financial condition and results of operations could be adversely affected until we are able to secure a new facility.

We assemble our products at our facilities in Richardson, Texas and Goleta, California and through our contract manufacturer in the Czech Republic.

In the fourth quarter of 2017, we began using a contract manufacturer in the Czech Republic to assemble our Inogen One G3 concentrators for our international customers.

In the first quarter of 2020, we also began using our contract manufacturer in the Czech Republic to manufacture the Inogen One G5 for our international customers.

We manufacture the TAV product in Goleta, California.

No other manufacturing facilities are currently available to us, particularly facilities of the size and scope of our Texas facility.

Our facilities and the equipment we use to manufacture our products would be costly to replace and could require substantial lead time to procure, repair or replace.

Our facilities may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, fire, flood, earthquakes and power outages, which may render it difficult or impossible for us to manufacture our products for some period of time.

Our facilities may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, the COVID-19 pandemic and related PHE related facility shutdowns, fire, flood, earthquakes and power outages, which may render it difficult or impossible for us to manufacture our products for some period of time.

Although we and our contract manufacturer have been able to keep our manufacturing facilities open thus far during the COVID-19 pandemic and related PHE, we cannot assure that we will be able to continue to do so indefinitely.

If any of our facilities become unavailable to us, we cannot provide assurances that we will be able to secure and equip a new manufacturing facility on acceptable terms in a timely manner.

The inability to manufacture our products, combined with delays in replacing parts inventory and manufacturing supplies and equipment, may result in the loss of customers and/or harm our reputation, and we may be unable to reestablish relationships with those customers in the future.

Although we have insurance coverage for certain types of disasters and business interruptions which may help us recover some of the costs of damage to our property, costs of recovery and lost income from the disruption of our business, insurance coverage of certain perils may be limited or unavailable at cost effective rates and may therefore not be sufficient to cover any or all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

Although we have insurance coverage for certain types of disasters and business interruptions which

may help us recover some of the costs of damage to our property, costs of recovery and lost income from the disruption of our business, insurance coverage of certain perils may be limited or unavailable at cost effective rates and may therefore not be sufficient to cover any or all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

If our manufacturing capabilities are impaired, we could not be able to manufacture, store, and ship our products in sufficient quantity or a cost effective or timely manner, which would adversely affect our business, financial condition and results of operations .

We rely upon a third-party contract manufacturer for certain manufacturing operations and our business and results of operations may be adversely affected by risks associated with their business, financial condition and the geography in which they operate.

Beginning in the fourth quarter of 2017, we began utilizing a third-party contract manufacturer located in the Czech Republic for production of a portion of our Inogen One G3 concentrators.

In 2018 and 2019, our contract manufacturer produced the vast majority of the Inogen One G3 concentrators required to support our international demand and we expect this to continue in 2020 until Inogen One G3 production ceases.

We expanded manufacturing at our contract manufacturer to include the Inogen One G5 in the first quarter of 2020.

We utilize a third-party contract manufacturer located in the Czech Republic for production of a portion of our Inogen One G3 and Inogen One G5 concentrators and for repair services for these products.

In 2018, 2019, 2020, our contract manufacturer produced the vast majority of the concentrators required to support our European demand and we expect this to continue in 2021.

There are a number of risks associated with our dependence on a contract manufacturer, including:

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potential uncertainty regarding manufacturing yields and costs;

availability of manufacturing capability and capacity, particularly during periods of high demand;

availability of manufacturing capability and capacity, particularly during periods of high demand and the COVID-19 pandemic and related PHE;

risks and uncertainties associated with the location or country where our products are manufactured, including potential manufacturing disruptions caused by social, geopolitical or environmental factors;

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We must also upgrade our internal business processes and capabilities to create the scalability that a growing business demands.

Going forward, we are hiring additional sales representatives at a more controlled pace across all three facilities to expand sales capacity, but our sales representative headcount was down significantly at year-end 2019 compared to year-end 2018.

Our growth expectations in direct-to-consumer sales are lower given the reduced number of sales representatives.

While we believe we are making the necessary changes to improve sales management infrastructure to support sales representative training and onboarding, it will take more time to evaluate whether these changes are effective in the long term and to the extent they are not effective it may negatively affect our financial condition and results of operations.

We have seen increased productivity of our sales representatives in the third and fourth quarters of 2019 and believe we will see this increase through 2020;

however, we also expect the benefits of this increase productivity to be partially offset by increased marketing spend.

During 2019, we have signed leases to expand our facilities located in Richardson, Texas and Goleta, California, which are expected to commence in 2020 and 2021.

Domestic expansion, combined with our use of a contract manufacturer in Europe to produce a portion of our Inogen One G3 and Inogen One G5 concentrators, is expected to be sufficient to meet our manufacturing needs.

However, our anticipated growth will place additional strain on our supply chain and manufacturing facilities, resulting in an increased need for us to carefully monitor parts inventory, capable staffing and quality assurance.

Going forward, we plan to hire additional sales representatives at a more controlled pace across all three facilities to expand sales capacity, but our sales representative headcount was down significantly at year-end 2019 compared to year-end 2018 and, due to the impact of the COVID-19 pandemic and related PHE, it was also down at year-end 2020 compared to year-end 2019.

Our growth expectations in direct-to-consumer sales are lower given the slowdown of hiring new sales representatives and lower productivity due to the impact of the COVID-19 pandemic and related PHE, including lower consumer travel and consumer confidence.

While we believe we are making the necessary changes to improve sales management infrastructure to support sales representative training and onboarding, it will take more time to evaluate whether these changes are effective in the long term, particularly given the impact of the COVID-19 pandemic and related PHE, and to the extent they are not effective it may negatively affect our financial condition and results of operations.

In addition, our sales expansion and productivity improvements for 2021 may continue to be negatively impacted due to the COVID-19 pandemic and related PHE.

In connection with the COVID-19 pandemic and related PHE, we expect minimal sales representative headcount additions for the first half of 2021, and we expect the COVID-19 pandemic and related PHE may continue to reduce the number of oxygen therapy patients who purchase our products directly through our direct-to-consumer sales channel, and the number of sales generated from physician offices or make it more difficult to get paperwork and testing from physician offices.

The reduction in nonessential travel may also continue to harm our business, particularly for our physician-based sales representatives and business-to-business partners who rely on physician office and hospital visits to drive business, and patients who rely on physicians to prescribe them oxygen therapy after in-office testing.

We also experienced increased demand for our products towards the end of the first quarter of 2020 and towards the end of the fourth quarter of 2020, since physicians may prescribe supplemental oxygen as a treatment for COVID-19.

As a result, in these periods we saw increased demand for our products for applicable patients who may be treated in the home instead of an acute hospital setting.

This demand is mostly being filled through our HME provider partners, who work closely with hospitals to discharge patients into a home treatment program.

If this demand increase resumes and we cannot meet this demand, we may lose market share to competitors or lose customers, which may negatively affect our financial conditions and results of operations.

In addition, even if we are able to meet any such increased demand, such an increase in business-to-business sales mix may negatively impact our gross margin as HME provider purchases have a significantly lower average selling price than direct-to-consumer purchases.

During 2019, we signed leases to expand our facilities located in Richardson, Texas and Goleta, California, which are expected to commence in 2021.

Domestic expansion, combined with our use of a contract manufacturer in Europe to produce a portion of our Inogen One G3 and Inogen One G5 concentrators and perform product repairs, is expected to be sufficient to meet our manufacturing needs provided that these facilities remain operational.

However, our anticipated growth may place additional strain on our supply chain and manufacturing facilities, resulting in an increased need for us to carefully monitor parts inventory, capable staffing and quality assurance.

Any failure by us to manage the scalability of our process or other aspects of our growth effectively could have an adverse effect on our ability to achieve our development and commercialization goals and negatively affect our financial condition and results of operations.

We may expand through acquisitions of, or investments in, other companies, each of which may divert our management’s attention, result in additional dilution to our stockholders, increase expenses, disrupt our operations, and harm our results of operations.

Our business strategy may, from time to time, include acquiring or investing in complementary services, technologies or businesses, such as our acquisition of MedSupport in 2017 and our acquisition of New Aera in August 2019.

Our business strategy may, from time-to-time, include acquiring or investing in complementary services, technologies or businesses, such as our acquisition of MedSupport in 2017 and our acquisition of New Aera in 2019.

We do not have an extensive history of acquiring other companies and cannot assure you that we will successfully identify suitable acquisition candidates, integrate or manage disparate technologies, lines of business, personnel and corporate cultures, realize our business strategy or the expected return on our investment, or manage a geographically dispersed company.

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We may issue equity securities which could dilute current stockholders’ ownership, incur debt, assume contingent or other liabilities and expend cash in acquisitions, which could negatively impact our financial condition, stockholder equity, and stock price.

We completed our acquisition of New Aera in August 2019 and have begun the integration process.

The acquisition and integration process is complex, expensive and time-consuming, and may cause an interruption of, or loss of momentum in, product development and sales activities and operations of both companies, and we may incur substantial cost and expense, as well as divert the attention of management.

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the inability to maintain uniform standards, controls, policies, and procedures.

Any acquisition or investment, including our acquisition of New Aera, could expose us to unknown liabilities.

Any acquisition or investment could expose us to unknown liabilities.

Moreover, we cannot assure you that we will realize the anticipated benefits of any acquisition or investment.

In addition, our inability to successfully operate and integrate newly acquired businesses appropriately, effectively, and in a timely manner could impair our ability to take advantage of future growth opportunities and other advances in technology, as well as on our revenues, gross margins, and expenses.

As part of our ongoing efforts to advance patient preference and maintain our technology leadership position, we acquired New Aera in August 2019.

We have made certain assumptions relating to the acquisition, which assumptions may be inaccurate, including the failure to realize the expected benefits of the acquisition, failure to realize expected revenue, higher than expected operating, transaction and integration costs, as well as general economic and business conditions that adversely affect the combined company following the acquisition.

As part of our ongoing efforts to advance patient preference and maintain our technology leadership position, we acquired New Aera in 2019 and have completed our integration process.

We have made certain assumptions relating to the New Aera acquisition, which assumptions may be inaccurate, including the failure to realize the expected benefits of the acquisition, failure to realize expected revenue, higher than expected operating, transaction and integration costs, as well as general economic and business conditions that adversely affect the combined company following the acquisition.

If our assumptions relating to the acquisition are inaccurate, we may not be able to realize anticipated synergies and opportunities as a result of the acquisition, and the business may not perform as planned as a result of many of the risks and uncertainties that apply to the acquisition and to the rest of our business.

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our planned sales, marketing, and research and development activities;

interruptions or delays in the supply of components or materials for, or manufacturing of, our products, which in certain cases are purchased through sole and single source suppliers;

interruptions or

delays in the supply of components or materials for, or manufacturing of, our products, which in certain cases are purchased through sole and single source suppliers;

seasonal variations in customer operations;

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Our products are manufactured using complex parts and processes, sophisticated equipment and strict adherence to design specifications and quality standards.

Any unforeseen manufacturing problems, such as contamination of our facility, equipment malfunction or miscalibration, supply chain shortages, regulatory findings, or failure to strictly follow procedures or meet design specifications, could result in delays or shortfalls in production of our products.

Any unforeseen manufacturing problems, such as disruption related to the COVID-19 pandemic and related PHE, contamination of our facility, equipment malfunction or miscalibration, supply chain shortages, regulatory findings, or failure to strictly follow procedures or meet design specifications, could result in delays or shortfalls in production of our products.

Identifying and resolving the cause of any such manufacturing issues could require substantial time and resources.

If we are unable to keep up with demand for our products by successfully manufacturing and shipping our products in a timely and quality manner, our operating results could be impaired, market acceptance for our products could be adversely affected and our customers might instead purchase our competitors’ products.

For example, in July 2019 we experienced unforeseen manufacturing challenges with respect to a battery issue on the Inogen One G3 and a motherboard issue on the Inogen One G5.

For example, in December 2019 through February 2020, we experienced unforeseen manufacturing challenges with respect to a column sub-assembly manufacturing supplier on the Inogen One G5, which led to a significant backlog of orders and some cancellation of orders.

The ongoing servicing costs associated with these issues, or other manufacturing issues we may experience in the future may increase our cost of goods sold, adversely affect our operating results and harm our reputation.

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We sell our products to certain HME providers, distributors, private label partner and resellers on unsecured credit, with terms that vary depending upon the customer’s credit history, solvency, cash flow, credit limits and sales history, as well as prevailing terms with similarly situated customers and whether sufficient credit insurance can be obtained.

In particular, two customers each represented more than 10% of our net accounts receivable balance with accounts receivable balances of $10.7 million and $5.2 million, respectively, as of December 31, 2019, and accounts receivable balances of $16.2 million and $4.2 million, respectively, as of December 31, 2018.

Challenging economic conditions may impair the ability of our customers to pay for products they have purchased, and as a result, our reserve for doubtful accounts could increase and, even if increased, may turn out to be insufficient.

In particular, two customers each represented more than 10% of our net accounts receivable balance with accounts receivable balances of $8.4 million and $7.0 million, respectively, as of December 31, 2020, and two customers each with an accounts receivable balance of $10.7 million and $5.2 million, respectively, as of December 31, 2019.

Challenging economic conditions, including those associated with the COVID-19 pandemic and related PHE, may impair the ability of our customers to pay for products they have purchased, and as a result, our reserve for doubtful accounts could increase and, even if increased, may turn out to be insufficient.

Moreover, even in cases where we have insolvency risk insurance to protect against a customer’s bankruptcy, insolvency or liquidation, this insurance typically contains a significant deductible and co-payment obligation and does not cover all instances of non-payment.

Our exposure to credit risks of our business partners may increase if our business partners and their end customers are adversely affected by global or regional economic conditions.

Our exposure to credit risks of our business partners may increase if our business partners and their end customers are adversely affected by global or regional economic conditions, including those associated with the COVID-19 pandemic and related PHE.

One or more of these business partners could delay payments or default on credit extended to them, either of which could adversely affect our business, financial condition and results of operations.

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potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements, and other trade barriers;

any other government actions, by the United States, China or other countries, that impose barriers or restrictions that would impact our ability to sell or ship products to customers;

difficulties protecting or procuring intellectual property rights.

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and other European Union countries, and the formal process for leaving the European Union has taken years to complete.

formally left the European Union on January 31, 2020, and is now in a transition period through December 31, 2020.

formally left the European Union on January 31, 2020 and began a transition period which expired on December 31, 2020.

In December 2020, the U.K.

and the European Union agreed on a trade and cooperation agreement, under which the U.K.

and the European Union will now form two separate markets governed by two distinct regulatory and legal regimes.

The trade and cooperation agreement covers the general objectives and framework of the relationship between the U.K.

and the European Union, including as it relates to trade, transport and visas.

Notably, under the trade and cooperation agreement, U.K.

service suppliers no longer benefit from automatic access to the entire European Union single market, U.K.

goods no longer benefit from the free movement of goods and there is no longer the free movement of people between the U.K.

and the European Union.

Depending on the application of the terms of the trade and cooperation agreement, we could face new regulatory costs and challenges.

Adverse consequences concerning Brexit or the future of the European Union could include deterioration in global economic conditions, instability in global financial markets, political uncertainty, volatility in currency exchange rates or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

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dollar increases relative to foreign currencies, our products could become more costly to the international consumer and therefore less competitive in international markets.

Our results of operations and cash flows are, therefore,

subject to fluctuations due to changes in foreign currency exchange rates.

Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates.

The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.

We have experienced and will continue to experience fluctuations in our net income or loss as a result of transaction gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded.

For example, for the years ended December 31, 2019 and December 31, 2018, we experienced net foreign currency losses of approximately $ 0.2 million and $0.7 million, respectively, and for the year ended December 31, 2017, we experienced a net foreign currency gain of $1.3 million.

For example, for the year ended December 31, 2020 we experienced a net foreign currency gain of $0.6 million, and for the years ended December 31, 2019 and

December 31, 2018, we experienced net foreign currency losses of $0.2 million and $0.7 million, respectively .

Fluctuations in currency exchange rates could have an adverse impact on our financial results in the future.

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In addition, currency hedging may result in a reduction or increase in revenue should the currency strengthen or decline during the contract period.

A discussion of the hedging program is contained in Item 7A, Quantitative and Qualitative Disclosures about Market Risk in our Annual Report on Form 10-K for the year ended December 31, 201 9 .

Additional information on our hedging arrangements is also contained in Note 4 – Fair value measurements in the notes to our audited consolidated financial statements in this Annual Report on Form 10- K .

A discussion of the hedging program is contained in Item 7A.

Quantitative and Qualitative Disclosures about Market Risk in this Annual Report on Form 10-K for the year ended December 31, 20 20 .

Additional information on our hedging arrangements is also contained in Note 4 – Fair value measurements and Item 3 – Quantitative and Qualitative Disclosures About Market Risk in the condensed notes in our consolidated financial statements in this Annual Report on Form 10- K .

We rely on shipping providers to deliver products to our customers globally.

Labor, tariff, or World Trade Organization-related disputes, piracy, physical damage to shipping facilities or equipment caused by severe weather or terrorist incidents, congestion at shipping facilities, inadequate equipment to load, dock, and offload our products, energy-related tie-ups, or other factors could disrupt or delay shipping or offloading of our products domestically and internationally.

Labor, tariff, or World Trade Organization-related disputes, piracy, physical damage to shipping facilities or equipment caused by severe weather or terrorist incidents, congestion at shipping facilities, inadequate equipment to load, dock, and offload our products, energy-related tie-ups, shipping delays associated with the COVID-19 pandemic and related PHE, or other factors could disrupt or delay shipping or offloading of our products domestically and internationally.

Such disruptions or delays may have an adverse effect on our financial condition and results of operations.

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We provide training to all employees, including management, to ensure compliance with the FCPA.

As such, we intend to continue to implement an FCPA/anti-corruption compliance program to ensure compliance with such laws but cannot assure you that all of our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which we have to defend ourselves and may be ultimately held responsible.

As such, we intend to continue to implement an FCPA/anti-corruption compliance program to ensure compliance with such laws, but we face the risk that individual actions of our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which we have to defend ourselves and may be ultimately held responsible.

Any violation of the FCPA, other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S.

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In particular, we have secured annual export licenses from the U.S.

Treasury Department’s Office of Foreign Assets Control to sell our products to a distributor and hospital and clinic end-users in Iran.

Treasury Department’s Office of Foreign Assets Control to sell our products to a distributor and hospital and clinic end-

users in Iran.

The use of this license requires us to observe strict conditions with respect to products sold, end-user limitations and payment requirements.

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Our success depends upon the skills, experience and efforts of our senior executives and other key technical personnel, including certain members of our engineering, accounting and compliance staff as well as our sales and marketing personnel.

Much of our corporate expertise is concentrated in relatively few employees, the loss of which for any reason could negatively affect our business.

Our President and Chief Executive Officer, Nabil Shabshab, joined us in February 2021, and our Executive Vice President, Sales, Arron Retterer, joined us in August 2020.

As new employees gain experience in their roles, we could experience inefficiencies or a lack of business continuity due to loss of historical knowledge and a lack of familiarity of new employees with business processes, operating requirements, policies and procedures, and we may experience additional costs as new employees gain necessary experience.

It is important to our success that these key employees quickly adapt to and excel in their new roles.

If they are unable to do so, our business and financial results could be materially adversely affected.

In addition, much of our corporate expertise is concentrated in relatively few employees, the loss of which for any reason could negatively affect our business.

Competition for our highly skilled employees is intense and we cannot prevent the resignation of any employee.

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In addition, cybersecurity risks and data security incidents could lead to potential unauthorized access to or acquisition of confidential information (including protected health information), and data loss and corruption.

There is no assurance that we will not experience service interruptions, security breaches, cyber security risks and data security incidents, or other information technology failures in the future.

There is no assurance that we will not experience service interruptions, security breaches, cybersecurity risks and data security incidents, or other information technology failures in the future.

Due to the COVID-19 pandemic and related PHE, we have an increased number of employees working remotely.

As a result, we may have increased cybersecurity or data security risks, due to increased use of home wi-fi networks and virtual private networks, as well as increased disbursement of physical machines.

While we implement IT controls to reduce the risk of a cybersecurity and data security breach, there is no guarantee that these measures will be adequate to safeguard all systems with an increased number of employees working remotely.

The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time.

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We must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the U.S., Europe and elsewhere.

For example, the European Union adopted the GDPR, which became effective on May 25, 2018.

For example, the European Union adopted the General Data Protection Regulation (GDPR), which

became effective on May 25, 2018.

The GDPR imposes additional obligations on companies regarding the processing of personal data and provides certain individual privacy rights to natural persons whose data is stored.

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companies similar to the requirements reflected in the GDPR.

In 2018, California passed a privacy law (the “CCPA”), which gives consumers significant rights over the use of their personal information, including the right to object to the “sale” of their personal information.

In 2018, California passed the California Consumer Privacy Act (CCPA), which gives consumers significant rights over the use of their personal information, including the right to object to the “sale” of their personal information.

These rights may restrict our ability to use personal information in connection with our business operations.

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seasonal cycles in consumer spending;

HME providers’ ability to adopt and finance portable oxygen concentrator purchases and restructure their businesses to remove delivery expenses;

HME providers’ ability to adopt and finance POC purchases and restructure their businesses to remove delivery expenses;

our ability to design, manufacture and deliver products to our consumers in a timely and cost-effective manner;

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and fluctuations in foreign currency exchange rates.

As more HME providers adopt portable oxygen concentrators in their businesses, we expect that this could change our historical seasonality in the domestic business-to-business channel as well, which was previously influenced mainly by consumer buying patterns.

In particular, due to the COVID-19 pandemic and related PHE, we have seen and expect to continue to see a disruption in our normal seasonal trends, as, due to the mandates and behaviors emanating from the COVID-19 pandemic and related PHE, including shelter-in-place orders, reduced travel, and lower consumer confidence, we did not see the typical seasonal increases in direct-to-consumer sales in 2020 that we have seen in prior years.

As more HME providers adopt POCs in their businesses, we expect that this could change our historical seasonality in the domestic business-to-business channel as well, which was previously influenced mainly by consumer buying patterns.

The foregoing factors are difficult to forecast, and these, as well as other factors, could materially and adversely affect our quarterly and annual results of operations.

We have experienced significant revenue growth in the past, but we may not achieve similar growth rates, profit margins and/or net income in future periods.

We have experienced significant revenue growth in the past, but we may not achieve similar growth rates, profit margins and/or net income (loss) in future periods.

You should not rely on our operating results for any prior quarterly or annual period as an indication of our future operating performance.

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Our results of operations may not meet the expectations of research analysts or investors, in which case the price of our common stock could decrease significantly.

Given our levels of stock-based compensation, our tax rate may vary significantly depending on our stock price.

The tax effects of the accounting for share-based compensation may significantly impact our effective tax rate from period to period.

In periods in which our stock price is higher than the grant price of the stock-based compensation vesting in that period, we will recognize excess tax benefits that will decrease our effective tax rate.

For example, in the year ended December 31, 2019 excess tax benefits recognized from stock-based compensation decreased our provision for income taxes by $0.5 million and our effective tax rate by 2.0% as compared to the tax rate without such benefits.

However, in periods in which our stock price may be lower than the grant price of the stock-based compensation vesting in that period, our effective tax rate may increase.

The amount and value of stock-based compensation issued relative to our earnings in a particular period will also affect the magnitude of the impact of stock-based compensation on our effective tax rate.

These tax effects are dependent on our stock price and employee stock option exercises, which we do not control, and a decline in our stock price could significantly increase our effective tax rate and adversely affect our results of operations.

If the market opportunities for our products are smaller than we believe they are, our revenues may be adversely affected and our business may suffer.

Our projections regarding (i) the size of the oxygen therapy and NIV markets, both in the United States and internationally, (ii) the size and percentage of the long-term oxygen therapy market and NIV market that is subject to competitive bidding in the United States, (iii) the number of oxygen therapy and NIV patients, (iv) the number of patients requiring ambulatory and stationary oxygen, (v) the number of patients who rely on the delivery model, (vi) the percentage of the long-term oxygen therapy and NIV markets serviced by Medicare, Medicare Advantage, and other third party-payors, (vii) the size of the retail long-term oxygen therapy market and how the opportunity may change as portable oxygen concentrator penetration increases, (viii) the share of portable oxygen concentrators as a percentage of the total oxygen therapy spend, and (ix) the size of the early-stage COPD market and the interest and clinical benefit of NIV technology to this patient population are based on estimates that we believe are reliable.

serviced by Medicare, Medicare Advantage, and other third party-payors, (vii) the size of the retail long-term oxygen therapy market and how the opportunity may change as POC penetration increases, (viii) the share of POCs as a percentage of the total oxygen therapy spend, (ix) the size of the early-stage COPD market and the interest and clinical benefit of NIV technology to this patient population, and (x) the impact of the COVID-19 pandemic and related PHE on our business and our markets generally are based on estimates that we believe are reliable.

These estimates may prove to be incorrect, new data or studies may change the estimated incidence or prevalence of patients requiring long-term oxygen therapy or NIV therapy, or the type of long-term oxygen therapy patients.

The COVID-19 pandemic and related PHE may also reduce the number of oxygen therapy patients worldwide due to the higher risk of mortality of elderly patients with existing respiratory diseases if they are exposed to the virus.

The number of patients in the United States and internationally may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our products, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.

An adverse outcome of a sales and use tax audit could have a material adverse effect on our results of operations and financial condition.

An adverse outcome of a sales and use tax audit or change in U.S.

tax laws could have a material adverse effect on our results of operations and financial condition.

We operate in multiple taxing jurisdictions and certain revenue streams may be subject to sales and use tax.

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As a result of the audit, the California State Board of Equalization confirmed that our sales are not subject to California sales and use tax.

We believe that our sales in three states may be subject to sales and use tax, but in other states they should be exempt from sales and use tax.

We believe that our sales of concentrators and accessories may be subject to sales and use tax, but in other states they should be exempt from sales and use tax.

There can be no assurance, however, that other states may agree with our position and we may be subject to an audit that may not be resolved in our favor.

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Changes in accounting principles, or interpretations thereof, could have a significant effect on our financial condition and results of operations.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, referred to as U.S.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S.

These principles are subject to interpretation by the Securities and Exchange Commission (SEC) and various bodies formed to interpret and create appropriate accounting principles.

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Additionally, the adoption of new or revised accounting principles may require that we make significant changes to our systems, processes and controls.

For example, the U.S.-based Financial Accounting Standards Board, referred to as FASB, is currently working together with the International Accounting Standards Board, referred to as IASB, on several projects to further align accounting principles and facilitate more comparable financial reporting between companies who are required to follow U.S.

For example, the U.S.-based Financial Accounting Standards Board (FASB) is currently working together with the International Accounting Standards Board (IASB) on several projects to further align accounting principles and facilitate more comparable financial reporting between companies who are required to follow U.S.

GAAP under SEC regulations and those who are required to follow International Financial Reporting Standards outside of the United States.

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Additionally, significant changes to U.S.

resulting from the FASB’s and IASB’s efforts may require that we change how we process, analyze and report financial information and that we change financial reporting controls.

GAAP resulting from the FASB’s and IASB’s efforts may require that we change how we process, analyze and report financial information and that we change financial reporting controls.

It is not clear if or when these potential changes in accounting principles may become effective, whether we have the proper systems and controls in place to accommodate such changes and the impact that any such changes may have on our financial condition and results of operations.

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Such annual limitations could result in the expiration of our net operating losses and tax credit carryforwards before their utilization.

Changes in tax laws or tax rulings could materially affect our financial condition, results of operations, and cash flows.

The adoption and interpretation of new tax legislation , tax rulings, or exposure to additional tax liabilities, could materially affect our financial condition, results of operations, and cash flows.

We are subject to income and other taxes in the U.S.

and other foreign jurisdictions in which we do business.

As a result, our provision for income taxes is derived from a combination of applicable tax rates in the various places we operate.

Significant judgment is required for calculating our income tax provision.

Current economic and political conditions make tax laws and regulations, or their interpretation and application, in any jurisdiction subject to significant change.

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tax laws enacted in December 2017 had a significant impact on our deferred tax assets, income tax provision and effective tax rate for the year ended December 31, 2017.

The new Administration and Congress could make changes to existing tax law, including an increase in the corporate tax rate or the tax rate on foreign earnings.

In addition, many countries in Europe, as well as a number of other countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could significantly increase our tax obligations in many countries where we do business or require us to change the manner in which we operate our business.

Changes to existing tax law in the U.S.

or other foreign jurisdictions could adversely affect our financial condition and results of operations .

The Medicare Fee-For-Service (FFS) sequestration reduction has and may continue to negatively affect our revenue and profits.

Medicare FFS claims with dates of service on or after April 1, 2013 are subject to a 2% sequestration reduction in Medicare payments, including claims for DMEPOS, including in competitive bidding areas.

The claims payment adjustment is applied to all claims after determining co-insurance, any applicable deductible, and any applicable Medicare secondary payment adjustments.

These reductions are included in rental revenue adjustments.

This sequestration reduction was scheduled to continue until further notice.

However, a provision in the CARES Act temporarily eliminated the 2% Medicare sequestration reduction for claims dated from May 1, 2020 through December 31, 2020 and the CARES Act also extends the end date of the Medicare sequestration reduction by one year, through 2030, in order to offset the 2020 suspension.

The Consolidated Appropriations Act of 2021 was signed into law on December 27, 2020 and extended the suspension period to March 31, 2021.

Once the sequestration reduction is reinstated, this could adversely affect our financial condition and results of operations.

The implementation of prior authorization rules for DMEPOS under Medicare could negatively affect our business and financial condition.

CMS has issued a final rule to require Medicare prior authorization (PA) for certain DMEPOS that the agency characterizes as “frequently subject to unnecessary utilization.” The final rule was published on December 30, 2015 and specified an initial master list of 135 items that could potentially be subject to PA.

Initially stationary oxygen rentals (code E1390) was included on the master list, but it was later removed.

On April 22, 2019, stationary oxygen rentals (E1390) was again added to the list of potential codes that could be subject to PA.

The master list is updated annually and published in the Federal Register.

The presence of an item on the master list does not automatically mean that a PA is required.

CMS will select a subset of these master list items for its “Required Prior Authorization List.” There will be a notice period of at least 60 days prior to implementation.

The ruling does not create any new clinical documentation requirements, instead the same information necessary to support Medicare payment will be required prior to the item being furnished to the beneficiary.

CMS will issue additional sub-regulatory guidance on these timelines in the future.

On April 6, 2020, an IFR was published in the Federal Register for policy and regulatory revisions in response to the COVID-19 PHE, and there was a comment period until June 30 , 2020 .

Pursuant to a temporary regulatory waiver implemented by the administration, CMS has paused the national prior authorization program for certain DMEPOS.

However, in July 2020, CMS released a COVID-19 Provider Burden Relief FAQs that stated that CMS would resume full operations for the national prior authorization program for certain DMEPOS effective August 3, 2020.

As a result, this could adversely affect our business, financial conditions and results of operations.

Risks related to the regulatory environment

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The federal government and all states in which we currently operate regulate various aspects of our business.

In particular, our operations are subject to state laws governing, among other things, distribution of medical equipment and certain types of home health activities, and we are required to obtain and maintain licenses in many states to act as a durable medical equipment supplier.

In particular, our operations are subject to state laws governing, among other things, distribution of medical equipment and certain types of home health

activities, and we are required to obtain and maintain licenses in many states to act as a durable medical equipment supplier.

Certain of our employees are subject to state laws and regulations governing the professional practices of respiratory therapy.

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To ensure compliance with Medicare, Medicaid and other regulations, government agencies or their contractors often conduct routine audits and request customer records and other documents to support our claims submitted for payment of services rendered.

Government agencies or their contractors also periodically open investigations and obtain information from healthcare providers.

Government agencies or their contractors also periodically open investigations and audits and obtain information from healthcare providers.

Violations of federal and state regulations can result in severe criminal, civil and administrative fines, penalties and sanctions, including debarment, suspension or exclusion from Medicare, Medicaid and other government reimbursement programs, any of which would have a material adverse effect on our business.

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product import and export.

Before we can market or sell a medical device in the United States, we must obtain either 510(k) clearance from the FDA, clearance under the de novo process or approval of a pre-market approval application from the FDA, unless an exemption applies.

Before we can market or sell a medical device in the United States, we must obtain either 510(k) clearance, clearance under the de novo process or approval of a pre-market approval application from the FDA, unless an exemption applies.

In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing.

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In addition, the FDA may determine that future products will require the more costly, lengthy and uncertain pre-market approval process.

Although we do not currently market any devices under a pre-market approval, the FDA may demand that we obtain a pre-market approval prior to marketing certain future products.

Although we do not currently market any devices subject to pre-market approval, the FDA may demand that we obtain a pre-market approval prior to marketing certain future products.

In addition, if the FDA disagrees with our determination that a product we currently market is subject to an exemption from pre-market review, the FDA may require us to submit a 510(k), de novo application or pre-market approval application in order to continue marketing the product.

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Regulatory enforcement or inquiries, or other increased scrutiny on us, could affect the perceived safety and performance of our products and dissuade our customers from using our products.

If we modify our FDA cleared devices, we may need to seek additional clearances or approvals, which, if not granted, would prevent us from selling our modified products.

Any modification we make to our products that could significantly affect their safety or effectiveness, or would constitute a major change in intended use, manufacture, design, materials, labeling, or technology requires the submission and clearance of a new 510(k) pre-market notification, a de novo application or, possibly, pre-market approval.

If we modify our FDA cleared devices, we may need to seek additional clearances or approvals, which, if not granted, would prevent us from selling such modified products.

Any modification we make to our products that could significantly affect their safety or effectiveness, or would constitute a material change in intended use, manufacture, design, materials, labeling, or technology requires the submission and clearance of a new 510(k) pre-market notification, a de novo application or, possibly, pre-market approval.

The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review and disagree with any manufacturer’s decision.

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We have modified some of our 510(k) cleared products and have determined that in certain instances new 510(k) clearances or pre-market approval are not required.

FDA disagrees with our determination and requires us to submit new 510(k) notifications or pre-market approval for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or pre-market approval for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

The FDA issued a new Final Guidance titled Enforcement Policy for Ventilators and Accessories and Other Respiratory Devices During the Coronavirus Disease 2019 (COVID-19) Public Health Emergency (PHE) in March 2020.

The intent of the guidance is to help address the urgent COVID-19 PHE.

It may expand the availability of devices that support patients with respiratory insufficiency due to COVID-19.

The guidance allows certain modifications to applicable FDA-cleared respiratory devices without requiring compliance with the pre-market requirements such as submitting a new 510(k).

Manufacturers must ensure the device is safe and effective prior to placing the modified device on the market.

This guidance and any future guidance or enforcement policy be the FDA may introduce new competitive products that could compete with our products with an easier regulatory pathway which could harm our business, financial condition and results of operations.

If Inogen uses this guidance to introduce devices that do not have the FDA clearance, these products will have to go through FDA 510(k) clearance in the future, and may not be granted such clearance, which would mean we would have to withdraw these products from the market when the FDA terminates or revokes such guidance or enforcement policy, which could harm our business, financial condition and results of operations.

If we fail to comply with FDA or state regulatory requirements, we can be subject to enforcement action.

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If we fail to obtain and maintain regulatory approval in foreign jurisdictions, our market opportunities will be limited.

Approximately 21.5% and 21.6%, and 22.3% of our total revenue was from sales outside of the United States for the years ended December 31, 2019, 2018, and 2017, respectively.

Approximately 20.1%, 21.5% and 21.6% of our total revenue was from sales outside of the United States for the years ended December 31, 2020, 2019, and 2018, respectively.

We sell our products in 58 countries outside of the United States through our wholly owned subsidiary, distributors or directly to large “house” accounts.

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The time required to obtain approval abroad may be longer than the time required to obtain FDA clearance.

For example, the European Union requires that manufacturers of medical devices obtain the right to bear the “CE” conformity marking which designates compliance with existing directives and standards regulating the design, manufacture and distribution of

medical devices in member countries of the European Union.

In 2017, the European Union adopted the EU Medical Device Regulation (Council Regulations 2017/745) which imposes stricter requirements for the marketing and sale of medical devices, including new clinical evaluation, quality system, and post-market surveillance requirements.

The regulation has a three-year implementation period, with full application of the regulation to occur in May 2021 and will replace the existing directives on medical devices in the European Union.

After May 2020, medical devices marketed in the European Union will require certification according to these new requirements, except that devices with valid CE certificates, issued pursuant to the Medical Device Directive before May 2020, may be placed on the market until May 2024.

Only medical devices that comply with certain conformity requirements of the Medical Device Directive are allowed to be marketed within the European Union .

The company's products will be required to comply with the European Medical Device Regulation (MDR).

Products that fail to be certified with the MDR may not be marketed or sold in the European Union.

After May 2021, medical devices marketed in the European Union will require certification according to these new requirements, except that devices with valid CE certificates, issued pursuant to the Medical Device Directive before May 2021, including our oxygen therapy products with CE Marks issued under the Medical Device Directive, may be placed on the market until May 2024.

Only medical devices that comply with certain conformity requirements of the Medical Device Directive are currently allowed to be marketed within the European Union and our products will be required to comply with the European Medical Device Regulation (MDR).

New products that fail to be certified with the MDR by May 2021 may not be marketed or sold in the European Union.

Similarly, existing products with CE Marks issued under the Medical Device Directive may not be placed on the market in the European Union after May 2024.

The foreign regulatory approval process, including with respect to MDR, includes many of the risks associated with obtaining FDA clearance and we may not obtain foreign regulatory approvals on a timely basis, if at all.

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If we do not obtain or maintain necessary approvals to commercialize our products in markets outside the United States, we may be required to discontinue sales in those countries which would negatively affect our overall market penetration, revenues, results of operations and financial condition.

We are subject to burdensome and complex billing and record-keeping requirements in order to substantiate our claims for payment under federal, state and commercial healthcare reimbursement programs, and our failure to comply with existing requirements, or changes in those requirements or interpretations thereof, could adversely affect our business, financial condition and results of operations.

We are subject to burdensome and complex billing and record-keeping requirements in order to substantiate our claims for payment under federal, state and commercial healthcare reimbursement programs.

We are subject to complex billing and record-keeping requirements in order to substantiate our claims for payment under federal, state and commercial healthcare reimbursement programs, and our failure to comply with existing requirements, or changes in those requirements or interpretations thereof, could adversely affect our business, financial condition and results of operations.

We are subject to complex billing and record-keeping requirements in order to substantiate our claims for payment under federal, state and commercial healthcare reimbursement programs.

Our records also are subject to routine and other reviews by third-party payors, which can result in delays in payments or refunds of paid claims.

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The Federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce the referral of an individual to a person for the furnishing of, or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federal healthcare programs.

Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and any remuneration to or from a prescriber or purchaser of healthcare products or services may be subject to scrutiny if it does not qualify for an exception or safe harbor.

Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common financial arrangements from prosecution, the exceptions and safe harbors are drawn narrowly, and any remuneration to or from a prescriber or purchaser of healthcare products or services may be subject to scrutiny if it does not qualify for an exception or safe harbor.

Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability.

Failure to meet all requirements of a safe harbor is not determinative of a kickback issue but could subject the practice to increased scrutiny by the government.

The Physician Self-Referral Law, commonly known as the “Stark Law,” prohibits a physician from referring a patient to an entity with which the physician (or an immediate family member) has a financial relationship, for the furnishing of certain designated health services (DHS) for which payment may be made by Medicare, unless an exception applies.

The Physician Self-Referral Law, commonly known as the “Stark Law,” prohibits a physician from referring a patient to an entity with which the physician (or an immediate family member of the physician) has a financial relationship, for the furnishing of certain designated health services (DHS) for which payment may be made by Medicare or Medicaid, unless an exception applies.

Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a non-compliant arrangement, civil penalties, and exclusion from Medicare, Medicaid or other federal healthcare programs.

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The Federal False Claims Act prohibits any person from knowingly presenting or causing to be presented a false claim for payment to the federal government, or knowingly making or causing to be made a false statement to get a false claim paid.

The majority of states also have statutes or regulations similar to the federal anti-kickback and self-referral laws and false claims laws, which apply to items or services, reimbursed under Medicaid and other state programs, or, in several states, apply regardless of payor.

These false claims statutes allow any person to bring suit in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statutes) and to share in any amounts paid by the entity to the government in fines or settlement.

The Federal False Claims Act allows any person to bring suit in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statute) and to share in any amounts paid by the entity to the government in fines or settlement.

Such suits, known as qui tam actions, have increased significantly in the healthcare industry in recent years.

Sanctions under these federal and state laws may include civil monetary penalties, exclusion from federal and state healthcare programs, criminal fines and imprisonment.

Sanctions under this federal law may include civil monetary penalties, exclusion from federal and state healthcare programs, criminal fines and imprisonment.

In addition, the recently enacted Patient Protection and Affordable Care Act, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes.

A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it.

A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it.

In addition, the Patient Protection and Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statutes.

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Such a challenge, regardless of the outcome, could have a material adverse effect on our business, business relationships, reputation, financial condition and results of operations.

The Patient Protection and Affordable Care Act also imposes annual public reporting and disclosure requirements on device and drug manufacturers for “transfers of value” made or distributed to licensed physicians and teaching hospitals.

Device and drug manufacturers are also required to report and disclose annually any investment interests held by physicians and their immediate family members during the preceding calendar year.

Failure to submit required ownership and investment interest information may result in civil monetary penalties of up to an aggregate of $0.17 million per year (and up to an aggregate of $1.128 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests not reported in an annual submission.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians.

Certain states, mandate implementation of compliance programs and/or the tracking and reporting of gifts, compensation and other remuneration to physicians.

The majority of states also have statutes or regulations similar to the federal anti-kickback, physician self-referral, and false claims laws, which apply to items or services, reimbursed under Medicaid and other state programs, or in several states, apply regardless of payor.

Penalties under these state laws can be comparable to those under their federal equivalents.

The Patient Protection and Affordable Care Act also created the federal Physician Payments Sunshine Act, which requires applicable manufacturers of drugs, devices, biologicals, and medical supplies covered under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to CMS, information related to payments or other transfers of value made to physicians, as defined, and teaching hospitals, as well as ownership and investment interests in such manufacturer held by physicians and their immediate family members.

Additionally, the Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for

Patients and Communities Act enacted in 2018, extends the reporting and transparency requirements for physicians under the Physician Payments Sunshine Act to physician assistants, nurse practitioners and other mid-level practitioners, with reporting requirements going into effect in 2022 for payments made in 2021.

Failure to submit the required information under the federal Physician Payment Sunshine Act may result in civil monetary penalties of up to an aggregate of $0.18 million per year (and up to an aggregate of $1.177 million per year for “knowing failures”), subject to an annual adjustment for inflation.

In addition, there has been a recent trend of increased federal and state regulation of payments and other transfers of value made to applicable recipients, including physicians.

Certain states mandate implementation of compliance programs and/or the tracking and annual reporting of gifts, compensation and other remuneration to physicians and other applicable recipients.

The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company many violate one or more of the requirements.

The Federal Civil Monetary Penalties Law grants authority to the U.S.

Department of Health & Human Services Office of Inspector General (OIG) to seek civil monetary penalties (CMPs) against an individual or entity based on a wide variety of conduct including violations of the Anti-Kickback Statute, Stark Law, and False Claims Act.

The Federal Civil Monetary Penalties Law grants authority to the HHS Office of Inspector General (OIG) to seek civil monetary penalties (CMPs) against an individual or entity based on a wide variety of conduct including violations of the Anti-Kickback Statute, Stark Law, and False Claims Act.

An entity that offers to or transfers remuneration to any individual eligible for benefits under Medicare or Medicaid that such entity knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any Medicare or Medicaid payable item or service may be liable for CMPs .

This is commonly known as a beneficiary inducement.

We sometimes offer customers various discounts and other financial incentives in connection with the sales of our products.

While it is our intent to comply with all applicable laws, the federal government may find that our marketing activities

violate the l aw.

If we are found to be in non-compliance, we could be subject to CMPs of up to $0.02 million for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the federal or state healthcare programs.

On February 3, 2017, the Department of Justice (DOJ) published a final rule that applies an inflation adjustment to civil monetary penalty (CMP) amounts, as mandated by the Bipartisan Budget Act of 2015.

The maximum CMP for False Claims Act violations is $0.02 million for civil penalties assessed after August 1, 2016 and whose violations occurred after November 2, 2015.

The Bipartisan Budget Act of 2018 increases the CMP and criminal fines and sentences for various fraud and abuse violations under the Medicare and Medicaid programs for violations committed after February 9, 2018.

The 2020 inflation adjusted CMP for a False Claims Act violation is approximately $0.021 million for each false claim.

While it is our intent to comply with all applicable laws, including the safe harbor regulation for discounts, the federal government may find that our marketing activities violate the law.

If we are found to be in non-compliance, we could be subject to CMPs of up to $0.022 million (subject to annual adjustment for inflation) for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the federal or state healthcare programs.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations.

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Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove costly.

HHS makes annual inflation-related increases to the civil monetary penalties in its regulations pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.

The HHS Annual Civil Monetary Penalties Inflation Adjustment Final Rule issued on January 17, 2020, sets forth adjusted civil monetary penalty amounts that apply to penalties assessed on or after January 17, 2020, if the violation occurred on or after November 2, 2015.

We are also exposed to the risks of fraud, misconduct, or other illegal activity by our employees and third parties who act for us or on our behalf, such as our independent contractors, consultants, commercial partners, and vendors.

It is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with federal and state healthcare fraud and abuse laws.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Foreign governments tend to impose strict price controls, which may adversely affect our future profitability.

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Our research and development programs as well as our manufacturing operations involve the controlled use of hazardous materials.

Accordingly, we are subject to international, federal, state and local laws governing the use, handling and disposal of these materials.

Accordingly, we are subject to international, federal, state and local laws governing the use, handling and disposal of these

Although we believe that our safety procedures for handling and disposing of these materials comply in all material respects with the standards prescribed by state and federal regulations of each country in which we conduct business, we cannot completely eliminate the risk of accidental contamination or injury from these materials.

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If our patent claims are rendered invalid or unenforceable, or narrowed in scope, the patent coverage afforded our products could be impaired, which could make our products less competitive.

As of December 31, 2019, we have thirteen pending U.S.

patent applications and fifteen pending international patent applications, forty-six issued patents relating to the design and construction of our oxygen concentrators, our intelligent delivery technology and our non-invasive ventilator, including its proprietary nasal interface.

As of December 31, 2020, we have twenty-nine pending U.S.

and international patent applications, forty-four issued U.S.

patents, and fifteen issued foreign patents relating to the design and construction of our oxygen concentrators, our intelligent delivery technology and our non-invasive ventilator, including its proprietary nasal interface.

We cannot specify which of these patents individually or as a group will permit us to gain or maintain a competitive advantage.

Patents may be subject to reexamination, inter partes review, post-grant review, and derivation proceedings in the U.S.

Patent and Trademark Office or comparable proceedings in other patent offices worldwide.

Foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent offices.

Patent and Trademark Office or comparable proceedings in other patent offices worldwide, or challenges to inventorship in court.

Foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent offices and courts.

Any of these proceedings could result in loss of the patent or denial of the patent application, or loss or reduction in the scope of one or more of the claims of the patent or patent application.

Changes in either patent laws or in interpretations of patent laws may also diminish the value of our intellectual property or narrow the scope of our protection.

Interference, reexamination, inter partes review, defense, opposition and derivation proceedings may be costly and time consuming, and we, or the other parties from whom we might potentially license intellectual property, may be unsuccessful in defending against such proceedings.

Interference, reexamination, inter partes review, post grant review, defense, opposition, inventorship, and derivation proceedings may be costly and time consuming, and we, or the other parties from whom we might potentially license intellectual property, may be unsuccessful in defending against such proceedings.

Thus, any patents that we own or might license may provide limited or no protection against competitors.

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Even if any of our pending or future applications are issued, they may not provide us with any competitive advantage or adequate protection from allegations of infringement, whether valid or frivolous, which may result in the incurrence of material defense costs.

Our patents and patent applications are directed to particular aspects of our products.

Our patents and patent applications are directed to

particular aspects of our products.

Other parties may develop and obtain patent protection for more effective technologies, designs or methods for oxygen therapy or non-invasive ventilation therapy.

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The medical device industry in general has been characterized by extensive litigation and administrative proceedings regarding patents and other intellectual property rights.

Our competitors hold a significant number of patents relating to respiratory therapy

devices and products.

Our competitors hold a significant number of patents relating to respiratory therapy devices and products.

Third parties have in the past asserted and may in the future assert that we are employing their proprietary technology without authorization.

For example, Breathe Technologies, Inc.

(Breathe), a subsidiary of Hill-Rom Holdings, filed a lawsuit against us , New Aera , Inc.

, Silverbow Development LLC, and one of our employees on November 21, 2019 in the United States District Court for the Northern District of California.

The lawsuit allege d, among other things, w i llful infringe ment on certain patents, declar ed that inventorship was incorrectly assigned and their rights to certain patents filed by New Aera , Inc.

and Silverbow Development LLC , breach of contract , induc ing breach of contract, interfere nce with contract, and violat ion of California business and professional code section 17200.

I f we fail in defending against lawsuits or claims brought against us in the future, we could be subject to substantial monetary damages , i njunctive relief, and loss of valuable intellectual property rights, and we cannot predict the outcome of any lawsuit.

(Breathe), a subsidiary of Hill-Rom Holdings, filed a lawsuit against us, New Aera, Inc., Silverbow Development LLC, and one of our employees on November 21, 2019 in the United States District Court for the Northern District of California.

The lawsuit alleged, among other things, willful infringement of a patent assigned to Breathe, that inventorship was incorrectly assigned and that Breathe has rights to certain patents filed by New Aera, Inc.

and Silverbow Development LLC, breach of contract, inducing breach of contract, interference with contract, and violation of California Business and Professional Code section 17200.

While we settled our lawsuit with Breathe, if we fail in defending against lawsuits or claims brought against us in the future, we could be subject to substantial monetary damages, injunctive relief, and loss of valuable intellectual property rights, and we cannot predict the outcome of any lawsuit.

An adverse determination or protracted defense costs of such lawsuits could have a material effect on our business and operating results.

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As the number of competitors in the market for respiratory products and the number of patents issued in this area grows, the possibility of patent infringement claims against us increases.

In certain situations, we may determine that it is in our best interests to voluntarily challenge a party’s patents in litigation or other proceedings, including declaratory judgment actions, patent reexaminations, or inter partes reviews.

In certain situations, we may determine that it is in our best interests to voluntarily challenge a party’s patents in litigation or other proceedings, including declaratory

judgment actions, patent reexaminations, post grant reviews, or inter partes reviews.

As a result, we may become involved in unwanted protracted litigation that could be costly, result in diversion of management’s attention, require us to pay damages and/or licensing royalties and force us to discontinue selling our products.

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We also have taken precautions to initiate reasonable safeguards to protect our information technology systems.

However, these measures may not be adequate to safeguard our proprietary intellectual property and conflicts may, nonetheless, arise regarding ownership of inventions.

However, these measures may not be adequate to safeguard our proprietary intellectual property and conflicts may, nonetheless, arise regarding ownership of inventions and other intellectual property.

Such conflicts may lead to the loss or impairment of our intellectual property or to expensive litigation to defend our rights against competitors who may be better funded and have superior resources.

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As a result, other parties may be able to use our proprietary technology or information, and our ability to compete in the market would be harmed.

“Inogen,” “Inogen One,” “Inogen One G2,” “Inogen One G3,” “G4,” “G5,” “Oxygenation,” “Live Life in Moments, not Minutes,” “Never Run Out of Oxygen,” “Oxygen Therapy on Your Terms,” “Oxygen.Anytime.Anywhere,” “Reclaim Your Independence,” “Intelligent Delivery Technology,” “Inogen At Home,” the Inogen design, “TIDAL ASSIST,” “TAV,” and “SIDEKICK” are registered trademarks with the United States Patent and Trademark Office of Inogen, Inc.

We own pending applications for “Inogen,” “MOMENTUM TRANSFER” and “SONIC BLADE” with the United States Patent and Trademark Office.

We own trademark registrations for the mark “Inogen” in Australia, Canada, South Korea, Mexico, Europe (European Union registration), Iceland, India, Israel, Japan, New Zealand, Norway, Peru, Turkey, and Singapore, and Switzerland.

We own pending applications for the mark “Inogen” in Argentina, Brazil, Chile, China, Colombia, Ecuador, Kuwait, Malaysia, Paraguay, South Africa, and Uruguay.

“Inogen,” “Inogen One,” “Inogen One G2,” “Inogen One G3,” “G4,” “G5,” “Live Life in Moments, not Minutes,” “Never Run Out of Oxygen,” “Oxygen Therapy on Your Terms,” “Oxygen.Anytime.Anywhere,” “Reclaim Your Independence,” “Intelligent Delivery Technology,” “Inogen At Home,” the Inogen design, “TIDAL ASSIST,” “TAV,” and “SIDEKICK” are registered trademarks with the United States Patent and Trademark Office of Inogen, Inc.

We own a pending application for “Inogen” with the United States Patent and Trademark Office.

We own trademark registrations for the mark “Inogen” in Argentina, Australia, Canada, Chile, China, Columbia, Ecuador, South Korea, Mexico, Europe (European Union registration), the United Kingdom, Iceland, India, Israel, Japan, Kuwait, New Zealand, Norway, Paraguay, Peru, Turkey, Singapore, and Switzerland.

We own pending applications for the mark “Inogen” in Brazil, India, Malaysia, South Africa, and Uruguay.

We own a trademark registration for the mark “イノジェン” in Japan.

We own trademark applications for the marks “印诺真” and “艾诺根” in China.

We own trademark registrations for the marks “印诺真” and “艾诺根” in China.

We own trademark registrations for the mark “Inogen One” in Australia, Canada, China, South Korea, Mexico, and Europe (European Union registration).

We own a trademark registration for the mark “Satellite Conserver” in Canada.

We own a trademark registration for the mark “Inogen At Home” in Europe (European Union Registration).

We own a trademark registration for the mark “Inogen At Home” in Europe (European Union Registration) and the United Kingdom.

We own trademark registrations for the mark “G4” in Europe (European Union registration) and the United Kingdom.

We own trademark registrations for the mark “G5” in Europe (European Union Registration) and the United Kingdom.

We own trademark applications for the Inogen design in Bolivia and China.

We own a trademark application for the Inogen design in Bolivia.

We own a trademark registration for the Inogen design in China.

We own a trademark registration for the mark “إنوجن” in Saudi Arabia.

Other service marks, trademarks, and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.

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If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.

In addition, the State of California has put regulations in place to prioritize board diversity.

If we are unable to implement these requirements to find the level of talent and skills in diverse candidates within the timeframes of the regulation, we may face penalties, poor investor perception of the Company, or harm to our reputation.

Failure to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our common stock.

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failure to complete significant sales;

manufacturing disruptions that could occur if we were unable to successfully expand our production in our current or an alternative facility;

manufacturing disruptions that could occur if we were unable to successfully expand our production in our current or an alternative facility or due to any other reason;

any future sales of our common stock or other securities;

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As of December 31, 2020, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock and their respective affiliates beneficially owned or controlled approximately 67.9% of the outstanding shares of our common stock.

Accordingly, these executive officers, directors and stockholders who owned more than 5% of our outstanding common stock and their respective affiliates, acting as a group, have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transactions.

These stockholders may also delay or prevent a change of control of us, even if

such a change of control would benefit our other stockholders.

requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transactions.

These stockholders may also delay or prevent a change of control of us, even if such a change of control would benefit our other stockholders.

The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

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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-K

Item 1A. Risk Factors