What changed in this filing

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Item 1A. Risk Factors

2024-02-09 compared with 2023-02-10 · 189 added, 144 removed, 813 unchanged (29% of the section changed)

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You should carefully consider the risks described below, together with the other information included or incorporated by reference in this Annual Report on Form 10-K.

The realization of any of the following risks could have a significant adverse effect on our reputation, business, financial condition, results of operations, growth, and our ability to accomplish our strategic

In that event, the trading price of our common stock could decline.

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Risks Related to Our Business

We have incurred significant operating losses since inception, we expect to incur operating losses in the future and we may not be able to achieve or sustain profitability.

We have incurred significant operating losses since inception, we may incur operating losses in the future and we may not be able to achieve or sustain profitability.

We have incurred net losses since our inception in 2007.

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Since 2011, our revenue has been derived, and we expect it to continue to be derived, primarily from sales of our Inspire system.

Because of its recent commercial introduction, in particular in Singapore, our Inspire system has limited product and brand recognition, particularly in new markets.

Because of its recent commercial introduction, in particular in Hong Kong, our Inspire system has limited product and brand recognition, particularly in new markets.

In addition, demand for our Inspire system may decline or may not increase as quickly as we expect.

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We expect that our operating expenses will continue to increase as we continue to build our commercial infrastructure, invest in research and development, and develop, enhance, and commercialize new products.

As a result, we expect to continue to incur operating losses for the foreseeable future and may never achieve profitability.

As a result, we may continue to incur operating losses for the foreseeable future and may never achieve profitability.

Furthermore, even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis.

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Our revenue is primarily generated from sales of our Inspire system and we are, therefore, highly dependent on it for our success.

We began selling our Inspire system in 2011 in certain European countries, in 2014 in the U.S., in 2021 in Japan, and in 2022 in Singapore.

We began selling our Inspire system in 2011 in certain European countries, in 2014 in the U.S., and in 2021 in certain Asia Pacific regions.

Sales of our Inspire system accounted for primarily all of our revenue for the years ended December 31, 2023, 2022, and 2021.

We expect that sales of our Inspire system will continue to account for the substantial majority of our revenue going forward.

Our ability to execute our growth strategy and become profitable will therefore depend upon the adoption by patients, physicians, and sleep centers, among others, of our Inspire therapy to treat moderate to severe OSA in patients who are unable to use or get consistent benefit from CPAP.

Our ability to execute our growth strategy and become profitable will therefore depend upon the adoption by patients, physicians, and sleep centers, among others, of

our Inspire therapy to treat moderate to severe OSA in patients who are unable to use or get consistent benefit from CPAP.

We cannot ensure that our Inspire therapy will achieve or maintain broad market acceptance among physicians and patients.

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• perceived inadequacy of evidence supporting clinical benefits or cost-effectiveness of our Inspire therapy over existing alternatives;

• challenges in obtaining prior authorization;

• a perception among some physicians of patients’ inability to tolerate the surgical procedure required to implant our Inspire system;

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Further, any decline in the amount payors are willing to reimburse our customers could make it difficult for existing customers to continue using or to adopt our products and could create additional pricing pressure for us.

If we are forced to

lower the price we charge for our products, our gross margins will decrease, which could have a material adverse effect on our business, financial condition, and results of operations, and impair our ability to grow our business.

If we are forced to lower the price we charge for our products, our gross margins will decrease, which could have a material adverse effect on our business, financial condition, and results of operations, and impair our ability to grow our business.

Several third-party payors do not currently cover our products and the related procedures because they have determined that our products and the related procedures are experimental or investigational.

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We consider our primary competition to be other neurostimulation technologies designed to treat OSA.

Though we are currently the only such technology approved for commercialization in the U.S.

Though we are currently the only such technology approved for commercialization in the

by the FDA, we currently compete outside the U.S.

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In addition, our Inspire therapy is approved for use as a second-line therapy in the treatment of moderate to severe OSA in patients who cannot use or obtain consistent benefit from CPAP.

If one or more CPAP device manufacturers successfully develop a CPAP device that is more effective, better tolerated or otherwise results in better compliance by patients, or if improvements in other second-line therapies make them more effective, cost effective, easier to use or otherwise more attractive than our Inspire therapy, sales of our Inspire system could be

significantly and adversely affected, which could have a material adverse effect on our business and financial condition and results of operations.

If one or more CPAP device manufacturers successfully develop a CPAP device that is more effective, better tolerated or otherwise results in better compliance by patients, or if improvements in other first or second-line therapies make them more effective, cost effective, easier to use or otherwise more attractive than our Inspire therapy, sales of our Inspire system could be significantly and adversely affected, which could have a material adverse effect on our business and financial condition and results of operations.

In addition, if other companies are successful in developing neurostimulation devices that are approved for a broader range of indications than our Inspire system, we will be at a further competitive disadvantage, which could also affect our business, financial condition and results of operations.

During 2023, glucagon-like peptide 1 ("GLP-1s"), a class of drug indicated for diabetes and obesity, continued to gain popularity as a weight-loss drug.

Use of GLP-1s, or similar treatments, for these clinical indications may directly or indirectly treat OSA.

Additionally, GLP-1s are currently being clinically evaluated as a potential treatment for OSA.

Although we believe that there could be a benefit to our business as a result of GLP-1s, there can be no assurance of such benefit.

If GLP-1s are successful in treating OSA in an indication for which Inspire therapy is approved, demand for our Inspire system could be reduced.

Many of the companies against which we compete may have competitive advantages with respect to primary competitive factors in the OSA treatment market, including, for example:

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Any of these companies may also have the competitive advantages described above.

Our business, financial condition, results of operations and growth has been and could in the future be significantly harmed by the effects of the COVID-19 pandemic or other pandemics.

The COVID-19 pandemic has negatively impacted our business, results of operations and financial condition by significantly decreasing and delaying the number of Inspire therapy procedures performed and patients screened for eligibility for Inspire therapy, and the COVID-19 pandemic may continue to negatively impact our business, results of operations and financial condition.

The number of Inspire therapy procedures performed, similar to other elective surgical procedures, decreased in 2020 and early 2021 compared to pre-pandemic levels as health care organizations in the U.S.

and globally have prioritized the treatment of patients with COVID-19.

Resurgences of COVID-19 in various U.S.

and European regions, Japan, and Singapore have, and may in the future, negatively

impact our procedure volumes.

The COVID-19 pandemic continues to rapidly evolve and its impact on our business will depend on several factors that are highly uncertain and unpredictable.

The COVID-19 pandemic may adversely impact our procedure volumes.

These measures and challenges may continue for the duration of the pandemic, which is uncertain, and may reduce our revenue and negatively impact our business, results of operations and financial condition while the pandemic continues.

Further, if there are additional or reinstated government mandated or recommended cancellations of elective surgical procedures, this could create in the future a substantial backlog of patients seeking appointments with physicians and surgeries to be performed at hospitals and ambulatory surgery centers, and as a result, patients seeking Inspire therapy procedures to be performed may have to navigate limited provider capacity which could have a significant adverse effect on our business, results of operations and financial condition.

Other future pandemics may lead to similar impacts.

Numerous foreign, state, and local jurisdictions have imposed, and others in the future may impose orders and restrictions to control the spread of COVID-19.

These disruptions have included, and future disruptions may also include, restrictions on our personnel and personnel of partners to travel and access customers for training and case support;

inability of our suppliers to manufacture and test our Inspire therapy and its components and to deliver these on a timely basis, or at all;

inventory shortages or obsolescence;

delays in approvals or certifications by regulatory authorities or notified bodies;

delays in ongoing preclinical studies;

delays in operations at insurance agencies, which may impact timelines for the issuance of insurance coverage policies;

diversion of or limitations on employee resources that would otherwise be focused on the operations of our business, delays in growing or reductions in our sales team, and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’ capacity to manufacture our Inspire system.

The extent to which the COVID-19 pandemic or other future pandemics cause disruptions to our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity and spread of COVID-19, future waves of infection, and the actions to contain COVID-19 or treat its impact, among others.

The disruption to global financial markets or a recession or market correction resulting from the COVID-19 pandemic or other future pandemics could materially affect our business.

We are involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect our business, financial condition, and results of operations.

We are, and may in the future become, party to litigation, regulatory proceedings or other disputes.

In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time-consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations.

These potential claims may include but are not limited to personal injury and class action lawsuits, intellectual property claims and regulatory investigations relating to the advertising and promotional claims about our products and services and employee claims against us based on, among other things, discrimination, harassment or wrongful termination.

Any one of these claims, even those without merit, may divert our financial and management resources that would otherwise be used to benefit the future performance of our operations.

Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.

Additionally, securities class action litigations are often brought against companies following periods of volatility in the overall market and in the market price of a company’s securities.

On December 22, 2023, we and certain of our executive officers were named in a putative class action lawsuit.

The complaint was filed on behalf of a potential group of similarly situated investors who purchased our common stock between May 3, 2023 and November 7, 2023.

The complaint alleges that we and/or our executive officers made false and/or misleading statements regarding the effectiveness of our Acceleration Program, a program designed to facilitate customers’ receiving prior authorizations from doctors with the goal of increasing demand for our Inspire therapy.

This lawsuit and any future lawsuits to which we may become a party are subject to inherent uncertainties and could result in very substantial costs, divert our management’s attention and resources and materially harm our business, operating results and financial condition.

Our business, financial condition, results of operations and growth have been and could in the future be significantly harmed by the effects of public health crises, such as pandemics.

The occurrence or reoccurrence of regional epidemics, a global pandemic or other public health crises, such as COVID-19, may adversely affect our operations, financial condition, and results of operations.

The extent to which such health crises impact our business going forward will depend on factors such as the duration and scope;

governmental, business, and individuals' actions in response to such public health crises;

and the impact on economic activity, including the possibility of recession or financial market instability.

The disruption to global financial markets or a recession or market correction resulting from a public health crisis could materially affect our business.

The occurrence of any such events may lead to reduced disposable income and access to health insurance which could adversely affect the number of Inspire systems sold.

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Our quarterly and annual financial results may fluctuate as a result of a variety of factors, many of which are outside our control and, as a result, may not fully reflect the underlying performance of our business.

Such factors may include, for example, seasonal variations in our sales or required postponements of elective surgical procedures effected during a health crisis, as was the case with the COVID-19 pandemic.

Such factors may include, for example, seasonal variations in our sales or required postponements of elective surgical procedures effected during a health crisis, as was the case with COVID-19.

We generally experience and may in the future experience higher sales in the U.S.

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• changes in coverage policies by third-party payors that affect the reimbursement of procedures using our products;

• challenges experienced by patients in obtaining positive coverage and reimbursement decisions from payers, including necessary prior authorization approvals in advance of treatment;

• timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;

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To ensure adequate inventory supply, we must forecast inventory needs and place orders with our suppliers based on our estimates of future demand for our Inspire system.

Our ability to accurately forecast demand for our

Inspire system could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our Inspire system or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions.

Our ability to accurately forecast demand for our Inspire system could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our Inspire system or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters, and weakening of economic conditions or consumer confidence in future economic conditions.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would cause our gross margin to be adversely affected and could impair the strength of our brand.

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As a result, we are subject to the risk that a portion of our inventory will become obsolete or expire, which could have a material adverse effect on our earnings and cash flows due to the resulting costs associated with the inventory impairment charges and costs required to replace such inventory.

We have experienced and continue to experience supply disruptions which began during the COVID pandemic, and our efforts to maintain higher levels of inventory to protect ourselves from supply interruptions may not be successful in avoiding significant supply and inventory issues or delay in implant procedures.

We have experienced and continue to experience supply disruptions which began during the COVID-19 pandemic and have continued as a result of not having received certification of silicone-based leads under the EU Medical Devices Regulation (See Part I., "Item 1A.

Risk Factors — We may not receive the necessary approvals or certifications for our future products or expanded indications, and failure to timely obtain necessary approvals or certifications for our future products or expanded indications would adversely affect our ability to grow our business.”).

Our efforts to maintain higher levels of inventory to protect ourselves from supply interruptions may not be successful in avoiding significant supply and inventory issues or delay in implant procedures.

As a result, we are subject to the risk of inventory obsolescence and expiration, which could lead to inventory impairment charges.

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Our ability to supply our products commercially and to develop any future products depends, in part, on our ability to obtain these materials, components, and products in accordance with regulatory requirements and in sufficient quantities for commercialization and clinical testing.

While our suppliers and contract manufacturers have generally met our demand for their products and services on a timely basis in the past, we cannot guarantee that they will in the future be able to meet our demand for their products or prevent delays in the delivery of their products, which could be adversely affected due to, for example, natural and man-made disasters, public health emergencies such as the COVID-19 pandemic, product quality issues, other catastrophic events, the macroeconomic environment including supply chain constraints, higher inflation and interest rates, the nature of our agreements with our contract manufacturers, our relative importance to such manufacturers as a customer or a contract manufacturer's decision to discontinue or reduce the level of business they conduct with us.

While our suppliers and contract manufacturers have generally met our demand for their products and services on a timely basis in the past, we cannot guarantee that they will in the future be able to meet our demand for their products or prevent delays in the delivery of their products, which could be adversely affected due to, for example, natural and man-made disasters, public health emergencies such as COVID-19, product quality issues, other catastrophic events, the macroeconomic environment including supply chain constraints, higher inflation and interest rates, the nature of our agreements with our contract manufacturers, our relative importance to such manufacturers as a customer or a contract manufacturer's decision to discontinue or reduce the level of business they conduct with us.

If we are required to change contract manufacturers due to any change in or termination of our relationships with these third parties, or if our manufacturers are unable to obtain the materials they need to produce our products at consistent prices or at all, we may lose sales, experience manufacturing or other delays, incur increased costs or otherwise experience impairment to our customer relationships.

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Establishing additional or replacement suppliers for any of these materials, components or services, if required, could be time-consuming and expensive, may result in interruptions in our operations and product delivery, may affect the performance specifications of our Inspire system or could require that we modify its design.

are able to find replacement suppliers or third-party contract manufacturers, we will be required to verify that the new supplier or third-party manufacturer maintains facilities, procedures, and operations that comply with our quality expectations and applicable regulatory requirements.

Even if we are able to find replacement suppliers or third-party contract manufacturers, we will be required to verify that the new supplier or third-party manufacturer maintains facilities, procedures, and operations that comply with our quality expectations and applicable regulatory requirements.

Furthermore, our contract manufacturers could require us to move to another one of their production facilities or use alternative materials or components.

Any of these events could require that we obtain a new regulatory authority approval before we implement the change, which could result in further delay and which may not be obtained at all.

Any of these events could require that we obtain a new regulatory authority approval or notified body certification before we implement the change, which could result in further delay and which may not be obtained at all.

While we seek to maintain sufficient levels of inventory as discussed above, those inventories may not fully protect us from supply interruptions.

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If we are unable to expand, manage and maintain our direct sales and marketing organization we may not be able to generate revenue growth.

We currently sell our Inspire system through a direct sales force that targets ENT physicians and sleep centers in the U.S.

and Europe, and also utilize various direct-to-consumer marketing initiatives, including paid online search, radio, television, social media, and online videos.

In Japan and Singapore, we sell our products through a distributor.

We currently sell our Inspire system through a direct sales force that targets ENT physicians and sleep centers in the U.S., Europe, and Japan, and also utilize various direct-to-consumer marketing initiatives, including paid online search, radio, television, social media, and online videos.

In certain Asia Pacific markets, we sell our products through distributors.

As of December 31, 2023, our direct sales and marketing organization, including reimbursement personnel, consisted of 728 employees, having increased from 129 employees as of December 31, 2018 .

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Additionally, our future success will depend largely on our ability to continue to hire, train, retain, and motivate skilled sales and reimbursement personnel with significant industry experience and technical knowledge of implantable devices and related products.

competition for their services is high, we cannot ensure that we will be able to hire and retain additional personnel on favorable or commercially reasonable terms, if at all.

Because the competition for their services is high, we cannot ensure that we will be able to hire and retain additional personnel on favorable or commercially reasonable terms, if at all.

Failure to hire or retain qualified sales and reimbursement personnel would prevent us from expanding our business and generating revenue.

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accounted for approximately 3.0%, 3.2%, and 5.3% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively.

Our strategy is to increase our international presence in Europe, including Germany and the Netherlands, as well as other international markets, such as Japan, Singapore, Hong Kong, and Australia.

Our strategy is to increase our international presence in Europe, including Germany and the Netherlands, as well as other international markets, such as Japan, Singapore, and Hong Kong.

This strategy is subject to a number of risks, including:

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We primarily rely on our own direct sales force, which as of December 31, 2023, covered 287 territories in the U.S.

and 12 in Europe, to market and sell our Inspire system.

and 19 outside of the U.S., to market and sell our Inspire system.

Some of our competitors rely predominantly on independent sales agents and third-party distributors.

A direct sales force has in the past and may in the future subject us to higher fixed costs than those of companies that market competing products through independent third parties, due to the costs that we bear associated with employee benefits, training, and managing sales

As a result, we could be at a competitive disadvantage.

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Integrating any business, product or technology we acquire could be expensive and time-consuming, disrupt our ongoing business and distract our management.

If we are unable to integrate any acquired businesses, products or technologies effectively, our business will be adversely affected.

we are unable to integrate any acquired businesses, products or technologies effectively, our business will be adversely affected.

In addition, any amortization or charges resulting from the costs of acquisitions could increase our expenses.

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Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.

The global financial crisis caused extreme volatility and disruptions in the capital and credit markets.

Factors such as geopolitical events (including the ongoing war in Ukraine), inflationary pressures, impacts from the COVID-19 pandemic, and the U.S.

election cycles have contributed to this volatility.

Factors such as geopolitical events (including the ongoing wars in Ukraine and Israel), inflationary pressures, impacts from COVID-19, and U.S.

election cycles have caused extreme volatility and disruptions in the capital and credit markets.

These global economic conditions could result in a variety of risks to our business, including weakened demand for our Inspire system, and adversely impact our ability to raise additional capital when needed on acceptable terms, if at all.

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Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the economic climate and financial market conditions could adversely affect our business.

Failure of a key information technology system, process or site could have an adverse effect on our business.

We rely extensively on information technology systems to conduct our business.

Failure of a key information technology system, process or site, cyberattacks, or other deficiencies in our cybersecurity could have an adverse effect on our business and operations.

We rely extensively on information technology systems to conduct our business and collect, store and transmit confidential information, including personal information of customers and our employees and contractors.

These systems affect, among other things, ordering and managing materials from suppliers, shipping products to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, data security and other processes necessary to manage our business.

Our information technology systems and those of our third-party service providers, vendors, strategic partners and other contractors or consultants are vulnerable to damage or interruption from computer viruses and malware (e.g.

degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

ransomware), natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, malicious code, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our information technology systems and information.

The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased and evolved.

As a result of the COVID-19 pandemic, we and our third-party service providers and partners may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

We and our third-party service providers and partners may also face increased cybersecurity risks due to our reliance on internet technology and employees who work remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

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Our third-party service providers and partners are also subject to these heightened risks.

If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may experience interruptions in our operations, which could have an adverse effect on our business.

We and certain of our service providers are from time to time subject to cyberattacks and security incidents.

While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an event were to occur, it could lead to unauthorized access, disclosure and use of non-public information, including information from our ADHERE patient registry or other patient information we create, receive, maintain or transmit, including with respect to our Inspire Cloud, SleepSync™, or the Inspire Sleep app, which are governed by HIPAA and other laws.

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

including personal information from our ADHERE patient registry or other patient information we create, receive, maintain or transmit, including with respect to our Inspire Cloud, SleepSync™ platform, or the Inspire Sleep app, which may be governed by HIPAA and other laws.

If a security breach or other incident were to result in the unauthorized access to or unauthorized use, disclosure, release or other processing of personal information, it may be necessary to notify individuals, governmental authorities, supervisory bodies, the media and other parties pursuant to privacy and security laws.

Any such access, disclosure, or other loss of information could result in regulatory action or investigation, legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation.

In addition, we accept payments for our sales through credit and debit card transactions, which are handled through a third-party payment processor.

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If we or our third-party credit card payment processor fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our customers, and there may be an adverse effect on our business.

Further, our insurance coverage may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems.

If our facilities are damaged or become inoperable, we may be unable to continue to research, develop, and supply our Inspire system and, as a result, there could be an adverse effect on our business until we are able to secure a new facility and rebuild our inventory.

We do not have redundant facilities.

We perform substantially all of our research and development and back-office activity at a single location in Golden Valley, Minnesota.

We perform substantially all of our research and development and back-office activity at two locations in Golden Valley, Minnesota.

The majority of our finished goods inventory is maintained at a third-party location in Tennessee.

Our facility, equipment and inventory would be costly to replace and could require substantial lead time to repair or replace.

These facilities may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, tornadoes, flooding, fire, power outages, and public health crises, which may render it difficult or impossible for us to perform our research, development and commercialization activities for some period of time.

These facilities may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, tornadoes, flooding, fires and other events, including climate change-related severe weather or disasters, power outages, and public health crises, which may render it difficult or impossible for us to perform our research, development and commercialization activities for some period of time.

The inability to perform those activities, combined with the time it may take to rebuild our inventory of finished product, may result in the loss of customers or harm to our reputation.

Although we possess insurance for damage to our property and the disruption of our business, this

insurance may not be sufficient to cover all of our potential losses and this insurance may not continue to be available to us on acceptable terms, or at all.

Although we possess insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and this insurance may not continue to be available to us on acceptable terms, or at all.

We rely on third-party distributors to effectively distribute our products in certain markets.

We depend or expect to depend in the future on qualified distributors for the marketing and selling of our products in certain markets.

Currently, the markets in which we market and sell our products through distributors include Japan, Singapore, and Hong Kong.

Currently, the markets in which we market and sell our products through distributors include Singapore and Hong Kong.

If our distributors fail to effectively market and sell our Inspire system in full compliance with applicable laws, our operating results and business may suffer.

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Further, if our relationship with a distributor in a given market terminates, we may be unable to replace that distributor without disruption to our business, or we may decide to transition to a direct sales force in that market.

If we fail to develop or maintain positive relationships with our distributors, including in new markets, fail to manage, train or incentivize these distributors effectively, or fail to provide distributors with competitive products on attractive terms, or if these distributors are not successful in their sales efforts, or if we are unable to successfully transition to a direct sales force in markets previously served by distributors, we may not achieve expected revenues or may have a reduction in revenue and our operating results, reputation and business would be harmed.

efforts, or if we are unable to successfully transition to a direct sales force in markets previously served by distributors, we may not achieve expected revenues or may have a reduction in revenue and our operating results, reputation and business would be harmed.

We are subject to anti-bribery, anti-corruption, and anti-money laundering laws, including the U.S.

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As we grow our international presence and global operations, we will have increasing obligations to comply with trade and economic sanctions and other restrictions imposed by the U.S., the EU, and other governments and organizations.

During the year ended December 31, 2022, approximately 3.2% of our total sales were made in EU member states, Japan, and Singapore.

During the year ended December 31, 2023, approximately 3.0% of our total sales were made in EU member states and certain Asia Pacific regions.

Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the U.S.

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Our existing cash, cash equivalents, short-term investments and revenue will be sufficient to meet our capital requirements and fund our operations for at least 12 months.

However, we have based these estimates on assumptions that may prove to be incorrect, and we could spend our available financial resources much faster than we currently expect.

However, we have based these estimates on

assumptions that may prove to be incorrect, and we could spend our available financial resources much faster than we currently expect.

Any future funding requirements will depend on many factors, including:

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In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses ("NOLs") and its research and development credit carryforwards to offset future taxable income.

We are currently performing a detailed analysis to determine whether an ownership change has occurred and if a limitation exists.

Based on the preliminary results of the analysis, we believe there is no evidence that this limitation would hinder the utilization of our net operating loss carryforwards or R&D credit carryforwards in the future.

During 2023, we finalized a detailed analysis to determine whether an ownership change has occurred through December 31, 2022, and if a limitation exists.

It was determined that December 11, 2018 was the only date that we experienced an ownership change.

The study concluded that none of the federal net operating losses nor the federal R&D credits that were accumulated on December 11, 2018 will expire unused solely due to the limitations under Sections 382 and 383 of the Code.

We are in the process of updating the analysis through December 31, 2023.

Although unexpected, if we experienced an ownership change during 2023, the timing of our ability to utilize the tax attributes may be affected.

As of December 31, 2023, our gross federal NOL carryforward was $226.1 million.

Our existing NOLs and research and development credit carryforwards may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs and research and development credit carryforwards could be further limited by Sections 382 and 383 of the Code.

In addition, our ability to deduct net interest expense may be limited if we have insufficient taxable income for the year during which the interest is incurred, and any carryovers of such disallowed interest would be subject to the limitation rules similar to those applicable to NOLs and other attributes.

Future changes in our stock ownership, some of which might be beyond our control, could result in an ownership change under Section 382 of the Code.

For these reasons, in the event we experience a change of control, we may not be able to utilize a material portion of the NOLs, research and development credit carryforwards or disallowed interest expense carryovers, even if we attain profitability.

For these reasons, in the event we experience a change of ownership within the definition of Section 382 of the Code, we may not be able to utilize a material portion of the NOLs, research and development credit carryforwards or disallowed interest expense carryovers, even if we attain profitability.

If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.

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However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.

The increasing and evolving focus on sustainability and environmental, social, and governance initiatives from regulators and stakeholders could increase our costs, harm our reputation and adversely impact our financial results.

The increasing and evolving focus on sustainability and environmental, social, and governance initiatives from regulators and stakeholders could increase our costs, expose us to new risks, harm our reputation and adversely impact our financial results.

There has been increasing and evolving public focus by investors, customers, environmental and social activists, the media, politicians, and governmental and nongovernmental organizations and other stakeholders on a variety of environmental, social, and governance (“ESG”) matters.

We experience pressure to make commitments relating to ESG matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to ESG.

If we are not effective in addressing ESG matters relevant to business, including

meeting stakeholder expectations regarding relevant ESG goals, practices, initiatives, commitments, performance and/or public disclosures, our reputation and financial results may suffer.

If we are not effective in addressing ESG matters relevant to business, including meeting stakeholder expectations regarding relevant ESG goals, practices, initiatives, commitments, performance and/or public disclosures, our reputation and financial results may suffer.

We may experience increased costs in order to execute upon our ESG goals, initiatives, and commitments and measure achievement of those goals, initiatives, and commitments which could have an adverse impact on our business and financial condition.

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This emphasis on ESG matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements.

For example, the SEC has announced proposed rules that, among other matters, would establish a framework for reporting climate-related risks.

To the extent the proposed rules impose additional reporting obligations, we could face increased costs.

Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege our existing climate disclosures are misleading or deficient.

As we continue to focus on our ESG goals, initiatives, commitments, performance, and disclosures, and as ESG-related laws, regulations, and voluntary and required disclosure standards and frameworks continue to evolve, we have expanded our public disclosures in these areas.

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In addition, the impacts of climate-related events on the global economy and our industry are rapidly evolving.

Physical impacts of climate-related events (including but not limited to floods, droughts, more frequent and/or intense storms and wildfires), may disrupt our operations, as well as the operations of our suppliers and customers.

Physical impacts of climate-related events (including but not limited to floods, droughts, more frequent and/or intense storms and wildfires), or chronic changes (such as droughts, heat waves or sea level changes) in climate patterns can adversely impact our operations, as well as the operations of our suppliers and customers.

Our facilities and offices may be adversely impacted by natural disasters, including those intensified by climate change.

Our locations, and those of our customers and suppliers, can be disrupted by droughts, extreme temperatures, fires, flooding and other climate change-related risks, as well as earthquakes, actions by utility providers, and other catastrophic events such as an actual or threatened public health emergency.

If a catastrophic event occurs at or near any of our offices, or utility providers or public health officials take certain actions (e.g., shut off power to our facilities), our operations may be interrupted, which could adversely impact our business and results of operations.

If a catastrophic event impacts a significant number of our suppliers or customers, or our ability to provide services to our customers, our business and results of operations could be adversely impacted.

Longer term physical impacts may also result in changing consumer preferences, which may adversely impact demand for certain of our products.

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The regulations to which we are subject are complex and have tended to become more stringent over time.

Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than

anticipated costs or lower than anticipated sales.

The FDA, foreign regulatory authorities, and notified bodies enforce these regulatory requirements through periodic unannounced inspections.

Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales.

The FDA, foreign regulatory authorities, and notified bodies enforce these regulatory requirements through periodic unannounced inspections or audits.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as:

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refusal to grant future clearances, approval, or certifications;

withdrawals or suspensions of current approvals, resulting in prohibitions on sales of our products;

withdrawals or suspensions of current approvals or certifications, resulting in prohibitions on sales of our products;

and in the most serious cases, criminal penalties.

We may not receive the necessary approvals or certifications for our future products or expanded indications, and failure to timely obtain necessary approvals or certifications for our future products or expanded indications would adversely affect our ability to grow our business.

An element of our strategy is to continue to upgrade our products, add new features and expand the indications and uses for our current products.

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The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices.

Modifications to products that are approved through a PMA application generally require FDA approval.

PMA can be expensive, lengthy and uncertain.

The process of obtaining a PMA is costly and more uncertain than the 510(k) clearance process used for lower risk devices.

The process of obtaining a PMA is costly and more uncertain and time consuming than the 510(k) clearance process used for lower risk devices.

Despite the time, effort and cost, a device may not be approved by the FDA.

Any delay or failure to obtain necessary regulatory approvals could harm our business.

Any delay or failure to obtain necessary regulatory approvals could harm our business and results of operations.

Furthermore, even if we are granted regulatory approval, it may include significant limitations on the indicated uses for the device, which may limit the market for the device.

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• the potential for approval policies or regulations of the FDA or applicable foreign regulatory authorities to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance, approval or certification.

In addition, the FDA may change its approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval of our future products under development or impact our ability to modify our currently cleared products on a timely basis.

Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new approvals, increase the costs of compliance or restrict our ability to maintain our current approval.

In addition, the FDA or other regulatory authorities or notified bodies outside the U.S.

may change their approval or certification policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or certification of our future products under development or impact our ability to modify our currently cleared or certified products on a timely basis.

Such policy or regulatory changes could

impose additional requirements or time delays upon us that could delay our ability to obtain new approvals or certifications, increase the costs of compliance and our operating expenses, adversely impact our revenues or inventory forecasting or restrict our ability to maintain our current approval or certification.

The timing of FDA approval of a next generation product could have a significant impact on the carrying value of the inventory of our previous generation product, and therefore our results of operations.

Subject to the transitional provisions, in order to sell our products in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation, which repeals and replaces EU Medical Devices Directive and the AIMDD.

Compliance with these requirements is a prerequisite to be able to affix the European Conformity (“CE”) mark to our products, without which they cannot be sold or marketed in the EU.

See — Government Regulation.

To demonstrate compliance with the general safety and performance requirements, we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.

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The aforementioned EU rules are generally applicable in the EEA, and non-compliance with the above requirements would also prevent us from selling our products in these three countries.

We must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and the EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked.

Once devices are certified under the EU Medical Devices Regulation, we must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and the EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked.

The notified body will then assess the planned changes and verify whether they affect the products’ ongoing conformity with the EU Medical Devices Regulation.

If the assessment is favorable, the notified body will issue a new certificate of conformity or an addendum to the existing certificate attesting compliance with the general safety and performance requirements and quality system requirements laid down in the Annexes to the EU Medical Devices Regulation.

The notified body may disagree with our proposed changes or take more time than anticipated to review and assess applications resulting in regulatory delays.

See Part I., "Item 1A.

Risk Factors — Risks Related to Government Regulation”.

For example, we applied for certification of silicone-based leads under the EU Medical Devices Regulation in December 2021 in order to replace the polyurethane-based leads, two components of the Inspire system currently used only in the European market.

However, designated notified bodies currently have severe capacity constraints, and review times have lengthened significantly, including for our certification application.

As a result of these delays, we have experienced inventory shortages and related adverse impacts on our results of operations that are expected to continue.

Modifications to our products may require us to obtain new PMAs or approvals of a PMA supplement or certification, and if we market modified products without obtaining necessary approvals or certifications, we may be required to cease marketing or recall the modified products until required approvals are obtained.

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If the FDA disagrees with our determination and requires us to submit a new PMA or PMA supplement for modifications to our previously approved products, we may be required to cease marketing or to recall the modified product until we obtain approval, and we may be subject to significant regulatory fines or penalties.

In addition, the FDA may not approve our products for the indications that are necessary or desirable for successful commercialization or could require clinical studies to support any modifications.

In addition, the FDA may not approve

our products for the indications that are necessary or desirable for successful commercialization or could require clinical studies to support any modifications.

Similar requirements may apply in foreign jurisdictions where we market our products.

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Failure to submit such reports, or failure to submit the reports in a timely manner, could result in enforcement action by the FDA.

Following its review of the periodic reports, the FDA might ask for additional

information or initiate further investigation.

Following its review of the periodic reports, the FDA might ask for additional information or initiate further investigation.

Similar requirements may apply in foreign jurisdictions where we market our products.

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Any of these actions could significantly and negatively affect supply of our products.

If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and experience reduced sales and increased costs.

If any of these events occur, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and experience reduced sales and increased costs.

The misuse or off-label use of our Inspire system may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

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If our Inspire system is misused or used with improper technique, we may become subject to costly litigation by our customers or their patients.

Similarly, in an effort to decrease costs, physicians may also reuse our Inspire system despite it being intended for a single use or may purchase reprocessed Inspire systems from third-party reprocessors in lieu of purchasing a new Inspire system from us, which could result in product failure and liability.

Similarly, in an effort to decrease costs, physicians may also reuse our Inspire system despite it being intended for

a single use or may purchase reprocessed Inspire systems from third-party reprocessors in lieu of purchasing a new Inspire system from us, which could result in product failure and liability.

As described above, product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us that may not be covered by insurance.

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The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.

reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.

We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA and foreign regulatory authorities when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury.

The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event.

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In addition, the FDA regulates exports of medical devices from the U.S.

While the regulations of some countries may not impose barriers to marketing and selling our products or only require notification, others require that we obtain the approval of or certification by a specified body (e.g., notified bodies in Europe).

While the regulations

of some countries may not impose barriers to marketing and selling our products or only require notification, others require that we obtain the approval of or certification by a specified body (e.g., notified bodies in Europe).

Complying with foreign regulatory requirements, including obtaining registrations, approvals or certifications, can be expensive and time-consuming, and we may not receive regulatory approvals or certifications in each country in which we plan to market our products or we may be unable to do so on a timely basis.

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However, a failure or delay in obtaining registration, regulatory clearance, approval or certification in one country may have a negative effect on the regulatory process in others.

The FDA may modify its enforcement policies with respect to medical software products, and our software products may become subject to extensive regulatory requirements, which may increase the cost of conducting, or otherwise harm, our business.

We develop and offer certain software applications in connection with our business, including our SleepSync™ cloud-based patient management platform, which is designed to function as a medical device data system (“MDDS”).

For its part, the FDA may regulate medical or health-related software, including machine learning functionality and predictive algorithms, if such software falls within the definition of a “medical device” under the FDCA.

However, historically, the FDA has exercised enforcement discretion for certain low-risk software functions, and has issued several guidance documents that establish enforcement discretion policies and/or otherwise outline the FDA’s approach to the regulation of software as a medical device.

For example, in September 2022 the FDA issued a guidance entitled:

“Medical Device Data Systems, Medical Image Storage Devices, and Medical Image Communications Devices,” which among other things, announced the FDA’s intent not to enforce compliance with certain FDCA requirements with respect to medical device MDDS functions, including those requirements relating to registration and listing, premarket review, post-market reporting and compliance with the QSR.

In addition, the 21st Century Cures Act ("Cures Act”) amended the FDCA to exclude from the definition of “medical device” certain medical-related software, including certain software used for administrative support functions at a healthcare facility, software intended for maintaining or encouraging a healthy lifestyle, software designed to store electronic health records, certain clinical decision support software, and software for transferring, storing, or displaying medical device data or in vitro diagnostic data, including certain MDDS functionality.

We believe our currently marketed applications, including the SleepSync™ platform, provide functionality that either qualifies for FDA enforcement discretion under the September 2022 policy for device MDDS, or is otherwise exempt from the FDCA’s definition of a “medical device” pursuant to the Cures Act amendments, and therefore that our products are subject to the FDA’s current enforcement discretion policy applicable to MDDS software functions or otherwise provide functions that are not currently regulated by the FDA as a medical device.

However, there is a risk that the FDA could disagree with our determinations, or that the FDA could alter its enforcement discretion policies, and in either case, subject our software to more stringent medical device regulations.

If the FDA determines that any of our current or future software applications, including the SleepSync™ platform, are regulated as medical devices and not otherwise subject to enforcement discretion, we would become subject to various requirements under the FDCA and the FDA’s implementing regulations.

If this occurs, we may be required to cease marketing or to recall our software products until we obtain the requisite clearances or approvals, and we may be subject to enforcement action.

In addition, as we continue to update and improve our SleepSync™ platform, we are also continuing to integrate certain software functions we utilize for compliance,

quality oversight and product surveillance into the SleepSync™ platform.

As such, any enforcement action with respect to our SleepSync™ software platform, or any requirements for us to obtain clearances or approvals for our software applications would also affect the speed at which we could update and modify these systems, and in any case, would entail significant cost and could harm our reputation, business, financial condition, and results of operations.

Legislative or regulatory reforms in the U.S.

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or additional record keeping.

In addition, legislation in the U.S.

and the EU may impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise create competition that may negatively affect our business.

For example, in February 2024, the FDA issued a final rule to amend and replace the Quality System Regulation, or QSR, which sets forth the FDA’s current good manufacturing practice requirements for medical devices, to align more closely with the International Organization for Standardization standards.

Specifically, this final rule, which the FDA expects to go into effect on February 2, 2026, establishes the “Quality Management System Regulation,” or QMSR, which among other things, incorporates by reference the quality management system requirements of ISO 13485:2016.

Although the FDA has stated that the standards contained in ISO 13485:2016 are substantially similar to those set forth in the QSR, and although our quality system is currently designed to comply with ISO standards in connection with our device certifications outside the United States, it is unclear the extent to which this final rule, once effective, could impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business.

If we are unable to comply with QMSR, once effective, or with any other changes in the laws or regulations enforced by FDA or comparable regulatory authorities, we may be subject to enforcement action, which could have an adverse effect on our business, financial condition and results of operations.

Similarly, the EU landscape concerning medical devices recently evolved.

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To enforce compliance with the healthcare regulatory laws, certain enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

Responding to

investigations can be time-and resource-consuming and can divert management’s attention from the business.

Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business.

Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

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If our operations are found to be in violation of any of the healthcare laws or regulations described above or any other healthcare regulations that apply to us, we may be subject to penalties, including administrative, civil and criminal penalties, damages, fines, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, contractual damages, reputational harm, disgorgement and the curtailment or restructuring of our operations.

We are subject to U.S.

federal, state, and foreign laws and regulations imposing obligations on how we collect, store and process health-related and other personal information.

Our actual or perceived failure to comply with such obligations could harm our business.

We are or may be subject to U.S.

federal, state, and foreign laws and regulations which impose obligations on how we collect, store and process health-related and other personal information.

Our actual or perceived failure to comply with such obligations could harm our business, operations, and financial condition.

Ensuring compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue.

In the conduct of our business, we process health-related and other personal information.

federal government and various states have adopted or proposed laws, regulations, guidelines and rules for the collection, distribution, use and storage of personal information of individuals.

federal government, various states, and foreign governments have adopted or proposed laws, regulations, guidelines and rules for the collection, distribution, use and storage of personal information of individuals.

For example, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder (collectively "HIPAA"), imposes privacy, security and breach notification obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information for or on behalf of such covered entities, and their covered subcontractors.

HIPAA requires covered entities and business associates to develop and maintain policies with respect to the protection of, use and disclosure of PHI, including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a breach of unsecured PHI.

HIPAA requires covered entities and business associates to develop and maintain policies with respect to the protection of, use and disclosure of protected health information ("PHI"), including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a breach of unsecured PHI.

Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by the U.S.

Department of Health and Human Services, or HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations.

Department of Health and Human Services ("HHS"), may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations.

HIPAA also authorizes state Attorneys General to file suit on behalf of their residents.

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For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information

it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

We may also be subject to U.S.

federal rules, regulations, and guidance concerning data security for medical devices, including guidance from the FDA.

State privacy and security laws vary from state to state and, in some cases, can impose more restrictive requirements than U.S.

State privacy and security laws which govern the privacy, processing and protection of health-related and other personal information vary from state to state and, in some cases, can impose more restrictive requirements than U.S.

Where state laws are more protective, we must comply with the stricter provisions.

In addition to fines and penalties that may be imposed for failure to comply with state law, some states also provide for private rights of action to individuals for misuse of personal information.

In addition to fines and penalties that may be imposed for failure to comply with state law, some states also provide for private rights of action to individuals for certain misuses of personal information.

For example, the California Consumer Privacy Act of 2018 (the "CCPA") went into effect on January 1, 2020.

The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.

Further, the California Privacy Rights Act (the "CPRA") went into effect on January 1, 2023 and imposes additional data protection obligations on covered

businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

Similar laws have passed in Virginia and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the U.S.

The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that has increased the likelihood of, and risks associated with data breach litigation.

Further, the California Privacy Rights Act (the "CPRA") generally went into effect on January 1, 2023 and significantly amends the CCPA.

The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It also created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

Similar laws have passed in other states, and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the U.S.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging and additional compliance investment and potential business process changes may be required.

In Europe, we are subject to the requirements of the GDPR (and national laws implementing the GDPR) because we are “established” in certain EU countries and we are processing personal data of individuals located in the EU and EEA in the context of these establishments, as well as offering of goods to, and/or monitoring the behavior of, individuals in the EU and EEA in connection with our clinical investigations.

We also expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions.

For example, Washington State enacted a broadly applicable law to protect the privacy of personal health information known as the “My Health My Data Act,” which generally requires affirmative consent for the collection, use, or sharing of any “consumer health data.” Consumer health data is defined to include personal information that is linked or reasonably linkable to a consumer and that identifies a consumer’s past, present, or future physical or mental health status;

consumer health data also includes information that is derived or extrapolated from non-health information, such as algorithms and machine learning.

Other states, including Connecticut and Nevada, have also passed consumer health data laws, and given the increased focus on the use of health data by entities that are not subject to HIPAA, additional states are expected to pass consumer health privacy laws.

In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

We are also or may become subject to rapidly evolving data protection laws, rules and regulations in foreign jurisdictions.

For example, in Europe, we are subject to the requirements of the GDPR (and national laws implementing the GDPR) because we are “established” in certain EU countries and we are processing personal data of individuals located in the EU and EEA in the context of these establishments, as well as offering of goods to, and/or monitoring the behavior of, individuals in the EU and EEA in connection with our clinical investigations.

The GDPR, which went into effect in May 2018, imposes strict requirements for processing the personal data subject to the GDPR.

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Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States.

Recent legal developments in Europe have created complexity and uncertainty regarding such transfers, in particular in relation to transfers to the United States.

On July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-US Privacy Shield Framework, or Privacy Shield, under which personal information could be transferred from the EEA (and the UK) to relevant self-certified U.S.

The CJEU further noted that reliance on the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism and potential alternative to the Privacy Shield) alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.

European court and regulatory decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers.

Recent legal developments in Europe have created complexity and uncertainty regarding such transfers, in particular in relation to transfers to the United States, and the efficacy and longevity of current transfer mechanisms between the EEA, and the United States remains uncertain.

Case law from the Court of Justice of the European Union (“CJEU”) states that reliance on the standard contractual clauses (SCCs) (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism) alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.

We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contract clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

Further, from January 1, 2021, we have to comply with both the GDPR and the GDPR as incorporated into United Kingdom national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover.

The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which may expose us to further compliance risk.

Further, from January 1, 2021, we have to comply with both the GDPR and the GDPR as incorporated into United Kingdom national law, under the United Kingdom General Data Protection Regulation and Data Protection Act 2018 (collectively, the “UK GDPR”) which imposes separate but similar fines up to the greater of £17.5 million or 4% of global turnover.

On October 12, 2023, the UK Extension to the DPF came into effect (as approved by the UK Government), as a UK GDPR data transfer mechanism to U.S.

entities self-certified under the UK Extension to the DPF.

We are also subject to evolving EU and EEA privacy laws on cookies and e-marketing.

In the EU and the UK, informed consent is required for the placement of a cookie or similar technologies on an individual’s device and for direct electronic marketing.

In the EU and the UK, informed consent is required for the placement of certain cookie or similar technologies on an individual’s device and for direct electronic marketing.

The GDPR also imposes conditions on obtaining valid consent for cookies, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology.

Recent European court and regulator decisions are driving increased attention to cookies and tracking technologies.

Recent European court and regulator decisions and guidance are driving increased attention to cookies and tracking technologies.

If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions continues, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities.

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In the U.S., there have been and continue to be a number of legislative initiatives to contain healthcare costs.

In March 2010, the Affordable Care Act (the "ACA") was enacted in the U.S., which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers.

In 2010, the Affordable Care Act (the "ACA") was enacted in the U.S., which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers.

Among other ways in which it may affect our business, the ACA:

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In the event of an accident, state or federal or other applicable authorities may curtail our manufacturers’ use of these materials and interrupt their business operations which could adversely affect our business.

Environmental laws and regulations could change or become more stringent over time, imposing greater compliance costs, and increasing risks and penalties associated with violations.

We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes.

The expense associated with environmental regulation and remediation could harm our business, financial condition, and results of operations.

The clinical study process required to obtain regulatory approvals or certifications is lengthy and expensive with uncertain outcomes.

If clinical studies of our future products do not produce results

necessary to support regulatory clearance or approval in the U.S.

If clinical studies of our future products do not produce results necessary to support regulatory clearance or approval in the U.S.

or foreign approval or certification, with respect to our current or future products, elsewhere, we will be unable to expand the indications for or commercialize these products and may incur additional costs or experience delays in completing, or ultimately be unable to complete, the commercialization of those products.

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Our failure to adequately demonstrate the safety and efficacy of our system or any product we may develop in the future would prevent receipt of regulatory clearance, approval or certification and, ultimately, the commercialization of that product or indication for use.

Even if our future products are cleared or approved in the U.S., commercialization of our products in foreign countries would require approval by

regulatory authorities or certification by notified bodies in those countries.

Even if our future products are cleared or approved in the U.S., commercialization of our products in foreign countries would require approval by regulatory authorities or certification by notified bodies in those countries.

Approval and certification procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the U.S., including additional preclinical studies or clinical studies.

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For example, over the last several years, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

government has shut down several times and certain regulatory

agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

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In the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.

While several notified bodies have been designated, the COVID-19 pandemic has significantly slowed down the designation process.

Currently designated notified bodies have severe capacity constraints and are facing a large amount of requests for recertification of products under the MDR as a consequence of which review times have lengthened.

This situation could significantly impact our ability to grow our business in the EU and EEA.

Their designation process, which is significantly stricter under the new Regulation, has experienced considerable delays in recent years.

Despite a recent increase in designations, the current number of notified bodies designated under the new Regulation remains significantly lower than the number of notified bodies designated under the previous regime.

The current designated notified bodies are therefore facing a backlog of requests as a consequence of which review times have lengthened.

This situation may impact the way we are conducting our business in the EU and the EEA and the ability of our notified body to timely review and process our regulatory submissions and perform its audits.

Separately, in response to the global COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.

Any resurgence of the virus or emergence of new variants may lead to further inspectional delays.

Regulatory authorities outside the U.S.

have adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA, other regulatory authorities and notified bodies from conducting their regular inspections or audits, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, other regulatory authorities or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Any resurgence of the virus or emergence of new variants may lead to further inspectional or administrative delays.

If a prolonged government shutdown occurs, or if global health concerns prevent the FDA, other regulatory authorities and notified bodies from conducting their regular inspections or audits, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, other regulatory authorities or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Risks Related to Intellectual Property Matters

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and elsewhere and protecting our proprietary technology.

If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our

technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

Some of our intellectual property rights depend on a licensing agreement with a third party, and our patent coverage includes protection provided by licensed patents.

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Other parties may have developed technologies that may be related or competitive to our system, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position.

The patent positions of medical device companies, including our patent position, may involve complex legal and factual questions, and, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty.

The patent positions of medical device companies, including our patent position, may involve complex legal and factual

questions, and, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty.

Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented.

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In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us.

If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.

If any of our confidential or proprietary

information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.

We may be unable to enforce our intellectual property rights throughout the world.

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We employ individuals who previously worked with other companies, including our competitors or potential competitors.

Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property or personal data, including trade secrets or other proprietary information, of a former employer or other third party.

Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property or personal information, including trade secrets or other proprietary information, of a former employer or other third party.

Litigation may be necessary to defend against these claims.

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The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, which became effective on March 16, 2013.

The first to file provisions limit the rights of an inventor to patent an invention if not the first to file an application for patenting that invention, even if such invention was the first invention.

The first to file provisions limit the rights of an inventor to patent an invention

if not the first to file an application for patenting that invention, even if such invention was the first invention.

Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business.

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• our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We have designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

and forms of the SEC.

We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

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In addition, if one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Unresolved Staff Comments.

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