What changed in this filing

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Item 1A. Risk Factors

2025-02-10 compared with 2024-02-09 · 195 added, 146 removed, 856 unchanged (28% of the section changed)

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Risks Related to Our Business

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.

For the years ended December 31, 2023, 2022, and 2021, we had net losses of $21.2 million, $44.9 million, and $42.0 million, respectively.

As of December 31, 2023, we had an accumulated deficit of $345.4 million.

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

The year ended December 31, 2024, was the first year we recorded net income, which was $53.5 million.

Prior to this and since inception, we incurred net losses.

For the years ended December 31, 2023 and 2022, we had net losses of $21.2 million and $44.9 million, respectively.

As of December 31, 2024, we had an accumulated deficit of

$291.9 million.

To date, we have financed our operations primarily through sales of our Inspire system, private placements of our convertible preferred securities, amounts borrowed under our credit facility, the initial public offering of our common stock that closed in May 2018 ("IPO"), and the three follow-on offerings of our common stock that closed in December 2018, April 2020, and August 2022.

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

Our ability to generate revenue from sales of our Inspire system, or from any products we may develop in the future, may not be sufficient to enable us to transition to profitability and generate positive cash flows.

Our ability to generate revenue from sales of our Inspire system, or from any products we may develop in the future, may not be sufficient to enable us to sustain profitability and generate positive cash flows.

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 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.

If we do not achieve or sustain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which would have a material adverse effect on our business, financial condition, results of operations, and cause the market price of our common stock to decline.

As a result, even though we achieved profitability for the year ended December 31, 2024, we may not be able to sustain or increase profitability on an ongoing basis.

If we do not sustain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which would have a material adverse effect on our business, financial condition, results of operations, and cause the market price of our common stock to decline.

In addition, failure of our Inspire system to significantly penetrate existing or new markets would negatively affect our business, financial condition, and results of operations.

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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 remain 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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Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs.

In addition, no uniform policy of coverage and reimbursement for procedures using our products exists among third-party payors.

In addition, no uniform policy of coverage and

reimbursement for procedures using our products exists among third-party payors.

Therefore, coverage and reimbursement for procedures using our products can differ significantly from payor to payor.

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We currently compete and will in the future continue to compete against other companies, some of which have longer operating histories, more established products or greater resources than we do, which may prevent us from achieving increased market penetration and improved operating results.

The medical technology industry is highly competitive, subject to change and significantly affected by new product introductions and other activities of industry participants.

Our competitors have historically dedicated and will continue to dedicate significant resources to promoting their products or developing new products or methods to treat moderate to severe OSA.

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

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

with LivaNova, which produces an open-loop neurostimulation device and is currently conducting clinical trials of its device in the U.S.

We also compete outside the U.S.

with Nyxoah, which markets a bilateral hypoglossal nerve stimulation device in certain countries outside the U.S., and is conducting its first pivotal trial as it seeks FDA approval in the U.S.

We believe other emerging businesses are in the early stages of developing neurostimulation devices designed to treat OSA.

In addition, we also compete, both within and outside of the U.S., with invasive surgical treatment options such as UPPP and MMA and, to a lesser extent, oral appliances, which are primarily used in the treatment of mild to moderate OSA.

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.

The medical technology and pharmaceutical industries are highly competitive, subject to change and significantly affected by new product introductions and other activities of industry participants.

Our competitors have historically dedicated and will continue to dedicate significant resources to promoting their products or drugs or developing new products, drugs or methods to treat moderate to severe OSA.

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 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.

We compete with providers of CPAP or other types of PAP devices, which include, among others, ResMed Inc., Philips BV, Fisher & Paykel Healthcare Corporation Limited, and various regional and new-entrant manufacturers.

Additionally, we compete with various other second-line therapies to treat OSA, including invasive surgical treatment options such as UPPP, MMA, robotic tongue reduction surgery, and, to a lesser extent, oral appliances, which are primarily used in the treatment of mild to moderate OSA.

Pharmaceutical therapies to treat OSA are also emerging.

Though we are currently the only neurostimulation technology designed to treat OSA that is approved for commercialization in the U.S.

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

with LivaNova, which markets an open-loop neurostimulation device, recently announced completion of clinical trials of its device in the U.S.

We also compete outside the U.S.

with Nyxoah, which markets an open-loop bilateral hypoglossal nerve stimulation device in certain countries outside the U.S., and is seeking FDA approval in the U.S.

In 2023 and 2024, glucagon-like peptide 1 ("GLP-1s"), a class of drug indicated for diabetes and obesity, continued to gain popularity as a weight-loss drug.

In December 2024, the FDA approved the GLP-1 drug Zepbound (tirzepatide) for the treatment of moderate to severe OSA in adults with obesity, and other GLP-1s are currently being clinically evaluated as a potential treatment for OSA.

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

Although we believe that there could be a benefit to our business as a result of GLP-1s reducing the BMI of our prospective patients and increasing the number of eligible patients for our Inspire therapy, there can be no assurance of such benefit.

In addition, a drug candidate produced by Apnimed is undergoing a Phase 3 clinical trial to assess the viability of its pharmaceutical to treat OSA.

We may in the future face competition from pharmaceutical companies that develop similar therapies (other than GLP-1s).

We expect to experience increased competition in the future as other companies develop and commercialize competing neurostimulation devices and alternative OSA treatment therapies.

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

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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We also compete with other medical technology companies to recruit and retain qualified sales, training, and other personnel, including members of our in-house prior authorization team.

In addition, though there are currently no pharmacologic therapies approved to treat OSA, we may in the future face competition from pharmaceutical companies that develop such therapies.

We also expect to experience increased competition in the future as other companies develop and commercialize competing neurostimulation devices.

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

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.

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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.

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.

On January 17, 2025, we received a civil investigative demand (“CID”) from the Department of Justice U.S.

Attorney’s Office for the District of Minnesota pursuant to the False Claims Act in the course of the government’s investigation concerning allegations of false claims, including false claims arising from violations of the Anti-Kickback Statute, submitted to government payors in connection with our implant.

The CID requests information relating to the marketing, promotion and reimbursement practices associated with our products.

We are cooperating with the investigation.

No assurance can be given as to the timing or outcome of the government’s investigation.

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.

The plaintiff filed an amended complaint on April 19, 2024, which alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5, which alleged violations relate to certain prior disclosures of Inspire about the effectiveness of a program intended to help certain customers establish independence in seeking prior authorization from payors for our Inspire therapy.

The plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired Inspire common stock between May 3, 2023 and November 7, 2023.

The plaintiff seeks damages and other relief, including attorneys' fees and costs.

The defendants are vigorously defending this lawsuit.

On June 28, 2024, the defendants moved to dismiss the amended complaint in its entirety.

The motion was argued in November 2024.

On July 16, 2024, a stockholder derivative lawsuit was filed in the United States District Court for the District of Minnesota, purportedly on behalf of Inspire against certain of our present and former officers and directors and Inspire (as a nominal defendant), captioned Lawrence Hollin v.

Herbert, et al., Court File No.

0:24-cv-02716 (the “Hollin Lawsuit”).

The Hollin Lawsuit arose out of the same subject matter as the City of Hollywood Lawsuit and alleged the following claims under common law and the Exchange Act:

(1) breach of fiduciary duty;

(2) unjust enrichment;

(3) waste of corporate assets;

and (4) as against the officer defendants, contribution under Sections 10(b) and 21D of the Exchange Act.

The lawsuit sought unspecified damages.

On September 5, 2024, counsel for Mr.

Hollin filed a motion for voluntary dismissal of the Hollin Lawsuit, which motion remains pending.

For additional information, see Note 11, Commitments and Contingencies to the consolidated financial statements included elsewhere in this Form 10-K.

These lawsuits 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 long-term growth depends on our ability to enhance our Inspire system, expand our indications, and develop and commercialize additional products.

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• avoid infringing upon the intellectual property rights of third parties;

• demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical studies;

• demonstrate, if required, the safety and efficacy of new or modified products with data from preclinical studies and clinical studies;

• obtain the necessary regulatory clearances, approvals or certifications for expanded indications, new products or product modifications;

• be fully FDA-compliant with marketing of new devices or modified products and be fully compliant with foreign requirements to market our new devices or modified products;

• be fully FDA-compliant with marketing of new or modified devices and be fully compliant with foreign requirements to market our new or modified devices;

• provide adequate training to potential users of our products;

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

• patients opting to delay implants of our devices in advance of the commercial launch of new products or product generations;

• unanticipated pricing pressure;

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Our results of operations could be materially harmed if we are unable to accurately forecast customer demand for our Inspire system and manage our inventory.

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.

So that we have 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, for example, 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, customer preferences for new products or new generation 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-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.”).

We have experienced in the past and may experience again in the future supply disruptions.

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.

For example, during the three months ended September 30, 2022, we recorded a charge of $2.8 million for obsolete inventory and component parts related to product introductions which were completed in October 2022, including the new silicone leads and the Bluetooth®-enabled patient remote.

We rely on a limited number of third-party suppliers and contract manufacturers for the manufacture and assembly of our products, and a loss or degradation in performance of these suppliers and contract manufacturers could have a material adverse effect on our business, financial condition, and results of operations.

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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 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.

We cannot guarantee that our suppliers and contract manufacturers will continue to meet our demand for their products and services on a timely basis 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, 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.

we may lose sales, experience manufacturing or other delays, incur increased costs or otherwise experience impairment to our customer relationships.

We cannot guarantee that we will be able to establish alternative relationships on similar terms, without delay or at all.

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

If our third-party suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of our Inspire system, the supply of our products to customers, and the development of any future products will be delayed, limited or prevented, which could have material adverse effect on our business, financial condition, and results of operations.

If our third-party suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the continued commercialization of our Inspire system, the supply of our products to customers, and the development of any future products will be delayed, limited or prevented, which could have a material adverse effect on our business, financial condition, and results of operations.

Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our services on a timely basis.

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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 .

As of December 31, 2024, our direct sales and marketing organization, including reimbursement personnel, consisted of 896 employees, having increased from 129 employees as of

December 31, 2018 .

Our operating results are directly dependent upon the efforts of these employees.

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• trade export restrictions, trade regulations, and foreign tax laws;

• changing tariffs and trade barriers, including potential changes in tariffs that may be proposed by the Trump administration and any retaliatory tariffs by other countries;

• fluctuations in currency exchange rates;

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We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result.

Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.

Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk

when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.

Although we have product liability and clinical study liability insurance, this insurance is subject to deductibles and coverage limitations.

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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.

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

If 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.

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.

Factors such as geopolitical events (including the ongoing wars in Ukraine and Israel), inflationary pressures, public health crises, and U.S.

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

Uncertainty or unfavorable global economic conditions could result in a variety of impacts to our business, including weakening demand for our Inspire system, and adversely impacting our ability to raise additional capital when needed on acceptable terms, if at all.

A weak or declining economy has strained in the past and may in the future strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services.

Further, the Trump administration has proposed or enacted tariffs and substantial changes to trade policies, which could adversely affect our business.

For example, the Trump administration has imposed tariffs on certain foreign products, including most recently from Canada, Mexico and China, that in the past have resulted in and may

result in future retaliatory tariffs on U.S.

goods and products.

We cannot predict whether these policies will continue, or if new policies will be enacted, or the impact, if any, that any policy changes could have on our business.

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.

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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.

These systems affect, among other things, ordering and managing materials from suppliers, shipping products to customers, processing transactions, summarizing and reporting results of operations, patient marketing, 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.

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

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.

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 confidential information, 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.

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As a result, we are subject to a number of risks related to credit and debit card payments.

As a result of these transactions, we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our Inspire system or experience an increase in our costs and expenses.

As a result of these transactions, we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our Inspire system or experience an

increase in our costs and expenses.

In addition, as part of the payment processing process, we transmit our customers’ credit and debit card information to our third-party payment processor.

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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 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.

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.

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.

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

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During the year ended December 31, 2024, approximately 4.0% 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.

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.

Foreign Corrupt Practices Act ("FCPA") and other federal statutes and regulations, including those established by the Office of Foreign Assets Control ("OFAC").

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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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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 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.

Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis.

Treasury debt securities and cash items) on an unconsolidated basis.

We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act.

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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.

There has been increasing and evolving public focus by investors, customers, environmental and social activists, the media, politicians, 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.

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Moreover, the increasing attention to corporate ESG initiatives could also result in reduced demand for products, reduced profits, and increased investigations and litigation.

In addition, both advocates for and opponents of ESG matters are increasingly resorting to a range of activism forms, including media campaigns, shareholder proposals, and litigation, to advance their perspectives.

There has similarly been an increase in activism, litigation and government enforcement alleging that corporate diversity, equity and inclusion programs may discriminate against certain groups.

To the extent we are subject to such activism or enforcement, it may require us to incur costs or otherwise adversely impact our business.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on ESG matters.

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To the extent ESG matters negatively impact our reputation, we may also not be able to compete as effectively to recruit or retain employees.

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.

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

For example, the SEC previously enacted and then stayed rules that, among other matters, would establish a framework for reporting climate-related risks.

Additionally, the State of California adopted broad climate reporting laws that require certain businesses to report on information including greenhouse gas emissions and climate-related financial risk.

To the extent the SEC rules are enacted, or we become subject to these or similar federal, state, or local rules, we could face increased costs.

have expanded our public disclosures in these areas.

Such disclosures may reflect goals, aspirations, commitments, and other expectations and assumptions, which are necessarily uncertain and may not be realized.

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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.

If a catastrophic event impacts a significant number of our suppliers or customers, or our customers' ability to perform DISE procedures, implant our Inspire system, or perform related procedures, our business and results of operations could be adversely impacted.

For example, in the wake of recent hurricanes, our customers experienced delays and shortages of certain products that were necessary to complete DISE procedures and the implant procedure for our Inspire system.

These disruptions caused some customers to limit or postpone surgical procedures or elective procedures performed at their facilities, including DISE procedures and implantations of our Inspire system.

Our customers have experienced similar disruptions as result of the recent wildfires in California.

These disruptions have caused some customers to limit or postpone surgical procedures or elective procedures at their facilities, including DISE procedures and implantations of our Inspire system.

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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Risks Related to Government Regulation

Our products and operations are subject to extensive government regulation and oversight both in the U.S.

Our products and operations are subject to extensive and changing laws, government regulation and oversight both in the U.S.

and abroad, and our failure to comply with applicable requirements could harm our business.

We and our products are subject to extensive regulation in the U.S.

We and our products are subject to extensive and changing laws, governmental mandates (such as executive orders) and regulation in the U.S.

and elsewhere, including by the FDA and its foreign counterparts.

The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices:

Compliance with these laws, regulations and governmental mandates executive orders may be onerous and expensive.

New and changing laws, regulations, and governmental mandates could adversely affect our business by increasing our costs, limiting the Company’s ability to pursue or offer a product or product candidate, or by requiring changes to our business.

New and changing laws, regulations, and governmental mandates could also create uncertainty about how such laws and regulations will be interpreted and applied.

Regulatory changes and other actions that materially adversely affect our business may be announced with little or no advance notice, and we may be unable to timely or successfully mitigate all adverse impacts from such measures.

Differing interpretations of such legal obligations could also expose us to significant fines, government investigations, litigation and reputational harm.

Currently, the FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices:

design, development and manufacturing;

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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 or audits.

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and in the most serious cases, criminal penalties.

If we are found to have violated laws, regulations, or governmental mandates, it could materially and adversely affect our business, reputation, results of operations and financial condition.

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 and our results of operations.

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• the manufacturing process or facilities we use may not meet applicable requirements;

• 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.

• the potential for 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 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.

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.

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

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.

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.

Certain modifications to a PMA-approved device may require approval of a new PMA or a PMA supplement, or alternatively a notification or other submission to the FDA.

The FDA may not agree with our decisions regarding whether a new PMA or PMA supplement is necessary.

We may make modifications to our approved devices in the future that we believe do not require approval of a new PMA or PMA supplement.

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.

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

Any delay or failure in obtaining required approvals or certifications would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.

In the EU, both (i) devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 and (ii) legacy devices lawfully placed on the market after May 26, 2021 in accordance with the transitional provisions of the EU Medical Devices Regulation may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled.

In particular,

no substantial change must be made to the device as such a modification would trigger the obligation to obtain a new certification under the EU Medical Devices Regulation and therefore to have a notified body conducting a new conformity assessment of the devices.

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.

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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.

Certain modifications to a PMA-approved device may require approval of a new PMA or a PMA supplement, or alternatively a notification or other submission to the FDA.

The FDA may not agree with our decisions regarding whether a new PMA or PMA supplement is necessary.

We may make modifications to our approved devices in the future that we believe do not require approval of a new PMA or PMA supplement.

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.

We only received EU Medical Devices Regulation certification of our silicone leads in July 2024.

As a result of these delays, we have experienced inventory shortages and related adverse impacts on our results of operations in 2023 and early 2024, most of which we believe was recovered during the first half of 2024.

Failure to comply with post-marketing regulatory requirements could subject us to enforcement actions, including substantial penalties, and might require us to recall or withdraw a product from the market.

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Though we believe we have complied with these conditions to date, any failure to comply with the conditions of approval could result in the withdrawal of PMA and the inability to continue to market the device.

Failure to conduct the required studies in accordance with institutional review board ("IRB") and informed consent requirements, or adverse findings in these studies, could also be grounds for withdrawal of approval of the PMA.

Failure to conduct the required studies in accordance with IRB and informed consent requirements, or adverse findings in these studies, could also be grounds for withdrawal of approval of the PMA.

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

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There may be increased risk of injury to patients if physicians attempt to use our Inspire system off-label.

Furthermore, the use of our Inspire system for indications other than those approved by the FDA, approved by any foreign regulatory authority or certified by a notified body, may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

Furthermore, the use of our Inspire system for indications other than those approved by the FDA, approved by any foreign regulatory

authority or certified by a notified body, may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

If the FDA or any foreign regulatory authority determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties.

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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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Seeking such approvals may delay our ability to replace the recalled devices in a timely manner.

Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA or foreign regulatory authority warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Moreover, if we do not adequately address problems associated with our

devices, we may face additional regulatory enforcement action, including FDA or foreign regulatory authority warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA or foreign regulatory authorities.

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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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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.

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.

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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.

On May 25, 2017, the EU Medical Devices Regulation entered into force, which repeals and replaces the EU Medical Devices Directive and the AIMDD.

Similarly, the EU landscape concerning medical devices recently evolved, and continues to undergo legislative changes.

On May 25, 2017, the EU Medical Devices Regulation entered into force, which repeals and replaces

the EU Medical Devices Directive and the AIMDD.

See Part I, Item I, “Business – Government Regulation” for additional information on these reforms.

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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.

For example, on January 17, 2025, we received a CID from the Department of Justice U.S.

The CID requests information relating to the marketing, promotion and reimbursement practices associated with our products.

We are cooperating with the investigation.

No assurance can be given as to the timing or outcome of the government’s investigation.

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

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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.

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 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.

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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.

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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.

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.

For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act (collectively, the "CCPA") requires covered businesses that process the personal information of California residents to, among other things:

(i) provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information;

(ii) receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information;

and (iii) enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf.

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.

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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.

In the event that we

are subject to or affected by new and/or existing 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.

For example, in Europe, we are subject to the requirements of the General Data Protection Regulation ("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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violations of such laws could result in regulatory investigations, fines, orders to cease/ change our use of such technologies, as well as civil claims including class actions, and reputational damage.

Any actual or perceived failure by us, our employees or contractors, our partners, our service providers, or the third parties with whom we work, to comply with privacy or security laws, policies, legal obligations or industry standards, or any security incident that results in the unauthorized release or transfer of personal information, may result in governmental enforcement actions and investigations including by EU regulators and U.S.

result in governmental enforcement actions and investigations including by EU regulators and U.S.

federal and state regulatory authorities as well as fines and penalties, litigation, including by consumer advocacy groups, and/or adverse publicity and could cause our customers, their patients and other healthcare professionals to lose trust in us, which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

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We have obtained PMA for our Inspire system.

In order to obtain PMA for a device, the sponsor must conduct well-controlled clinical studies designed to assess the safety and efficacy of the product candidate.

In order to obtain PMA for a device or to obtain approval of certain PMA supplements, the device sponsor must conduct well-controlled clinical studies designed to assess the safety and efficacy of the product candidate.

Conducting clinical studies is a complex and expensive process, can take many years, and outcomes are inherently uncertain.

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• regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical studies may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply;

• approval policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval or certification;

• policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval or certification;

• our current or future products may have undesirable side effects or other unexpected characteristics.

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Failure can occur at any stage of clinical testing.

Our clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and non-clinical testing in addition to those we have planned.

Our clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and non-clinical testing in

addition to those we have planned.

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.

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Disruptions at the FDA and other agencies or notified bodies may also slow the time necessary for new medical devices and modifications to cleared or approved medical devices to be reviewed and/or cleared, approved or certified by necessary government agencies or notified bodies, which would adversely affect our business.

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.

For example, in recent 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.

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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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 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.

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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Moreover, we may become party to future adversarial proceedings regarding our patent portfolio or the patents of third parties.

Such proceedings could include supplemental examination or contested post-grant proceedings such as review, reexamination, inter partes review, interference or derivation proceedings before the USPTO and challenges in U.S.

challenges in U.S.

District Court.

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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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Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Recent changes in U.S.

patent laws may limit our ability to obtain, defend and/or enforce our patents.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Changes in U.S.

and foreign patent laws may limit our ability to obtain, defend and/or enforce our patents.

Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents in the U.S.

The Leahy-Smith America Invents Act ("the Leahy-Smith Act") includes a number of significant changes to U.S.

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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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For example, the Leahy-Smith Act provides that an administrative tribunal known as the Patent Trial and Appeals Board ("PTAB") provides a venue for challenging the validity of patents at a cost that is much lower than district court litigation and on timelines that are much faster.

Although it is not clear what, if any, long-term impact the PTAB proceedings will have on the operation of our business, the initial results of patent challenge proceedings before the PTAB since its inception in 2013 have resulted in the invalidation of many U.S.

patent claims.

The availability of the PTAB as a lower-cost, faster and potentially more potent tribunal for challenging patents could increase the likelihood that our own patents will be challenged, thereby increasing the uncertainties and costs of maintaining and enforcing them.

In addition, implementation of the European Patent Package, or EU Patent Package, occurred on June 1, 2023.

Under a new European Unified Patent Court, or the UPC, all European patents, including those issued prior to ratification of the European Patent Package, will by default automatically fall under the jurisdiction of the UPC.

The UPC will provide parties with a new forum to centrally revoke our European patents, and allow for the possibility of a competitor to obtain pan-European injunctions.

Such a loss of patent protection could have a material adverse impact on our business and our ability to commercialize our technology and product candidates and, resultantly, on our business, financial condition, prospects and results of operations.

Under the EU Patent Package as currently proposed, we will have the right to opt our patents out of the UPC over the first seven years of the court’s existence, but doing so may preclude us from realizing the benefits of the new unified court.

Moreover, if we do not meet all of the formalities and requirements for opt-out under the UPC, our future European patents could remain under the jurisdiction of the UPC.

Risks Related to Our Common Stock

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These provisions provide, among other things, that:

• our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

• our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

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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.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law ("DGCL"), 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.

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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However, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.

Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation

to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

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Changes in tax laws in one or more jurisdictions, as well as other factors, could cause us to experience fluctuations in our tax obligations and effective tax rates in the future and otherwise adversely affect our tax positions and/or our tax liabilities.

In particular in the United States, the Trump administration has proposed a number of changes to the U.S.

Many aspects of these proposals are unclear or undeveloped, and we are unable to predict which, if any, U.S.

tax reform proposals will be enacted into law, and what effects any enacted legislation might have on our tax liabilities.

In addition, the Trump administration has indicated that the United States may impose retaliatory measures with respect to jurisdictions that have, or are likely to, put in place tax rules that are extraterritorial or disproportionately affect U.S.

The likelihood of these changes being enacted or implemented is unclear.

We are currently unable to predict what changes will occur and, if so, the ultimate impact on our business.

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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.

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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We do not control these analysts.

If any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline.

If any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price

could decline.

If one or more of the analysts covering our business downgrade our stock or change their opinion of our stock, our stock price would likely decline.

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

What changed 10-K

Item 1A. Risk Factors