What changed in this filing

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Item 1A. Risk Factors

2023-08-11 compared with 2022-08-12 · 191 added, 187 removed, 427 unchanged (47% of the section changed)

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

• Our business, financial condition and results of operations could continue to be harmed by the effects of the COVID-19 pandemic or similar public health crises.

• Global macroeconomic conditions, including inflation, supply chain disruptions, and fluctuations in foreign currency exchange rates, could continue to adversely affect our operations and profitability.

• Our business, financial condition and results of operations could continue to be harmed by the effects of outbreaks of COVID-19 or similar public health crises.

• We are subject to various risks relating to international activities that could affect our overall profitability.

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• Our intellectual property may not protect our products, and/or our products may infringe on the intellectual property rights of third parties.

• If we fail to attract, develop and retain key employees our business may suffer.

• If we fail to source, develop and retain key employees our business may suffer.

• Our leverage and debt service obligations could adversely affect our business.

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• We are increasingly dependent on information technology systems and infrastructure.

• Actual or attempted breaches of security, unauthorized disclosure of information, denial of service attacks or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

• Actual or attempted breaches of security, unauthorized disclosure of information, attacks such as denial of service, or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

• We may not be able to realize the anticipated benefits from acquisitions, which could adversely affect our operating results.

• If we are unable to support our continued growth, our business could suffer.

• Our business depends on our ability to market effectively to dealers of home healthcare products and sleep clinics.

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Any decline in our customer renewals, upgrades or expansions could adversely affect our future operating results.

• If our SaaS products fail to perform properly or if we fail to develop enhancements, we could lose customers, become subject to service performance or warranty claims and our market share could decline.

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• If there are interruptions or performance problems associated with our technology or infrastructure, our existing SaaS customers may experience service outages, and our new customers may experience delays in the deployment of our platforms.

• If we are unable to support our continued growth, our business could suffer.

• Climate change and related natural disasters, or other events beyond our control, could negatively impact our business operations and financial condition.

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• Government and private insurance plans may not adequately reimburse our customers for our products, which could result in reductions in sales or selling prices for our products.

• Failure to comply with anti-kickback and fraud regulations could result in substantial penalties and changes in our business operations.

• We are subject to various risks relating to our compliance with fraud and abuse laws and transparency laws relating to our interactions with our customers, health care providers, and patients, which could subject us to government investigation, litigation, or other penalties to the extent our activities or relationships are found not to comply, and could result in changes in our business operations that could harm our ability to successfully market and sell our products and services.

• Our use and disclosure of personal information, including health information, is subject to federal, state and foreign privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm.

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• We are subject to tax audits by various tax authorities in many jurisdictions.

• Environmental, social, and corporate governance (ESG) issues may have an adverse effect on our business, financial condition and results of operations and reputation.

Risks Related to the Securities Markets and Ownership of Our Common Stock

• Our results of operations may be materially affected by global economic conditions generally, including conditions in the financial markets.

• Our quarterly operating results are subject to fluctuation for a variety of reasons.

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The markets for our products, which encompass Sleep and Respiratory Care products and SaaS offerings, are highly competitive and are characterized by frequent product improvements and evolving technology.

Our ability to compete successfully depends, in part, on our ability to develop, manufacture and market innovative new products.

Our ability to compete successfully depends, in part, on our ability to develop, manufacture and market innovative new products and enhance existing products.

For our Sleep and Respiratory Care business, the development of innovative new products by our competitors or the discovery of alternative treatments or potential cures for the conditions that our products treat could make our products noncompetitive or obsolete.

Current competitors, new entrants, academics, and others are trying to develop new devices, alternative treatments or cures, and pharmaceutical solutions to the conditions our products treat.

Current competitors, new entrants, academics, and others currently may be developing, or may develop, new devices, alternative treatments or cures, and targeted or indirect pharmaceutical solutions to the conditions our products treat that could provide better features, clinical outcomes or economic value than those that we currently offer or subsequently develop.

For SaaS, the market for business management software is highly competitive, rapidly evolving, subject to changing technology, with low barriers to entry, shifting customer needs and frequent introductions of new products and services.

Many prospective customers have invested substantial personnel and financial resources to implement and integrate their current business management software into their operations and, therefore, may be reluctant or unwilling to change from their current solution or provider to one of our platforms or products.

Many prospective customers have invested substantial personnel and financial resources to create, implement and integrate their current business management software into their operations and, therefore, may be reluctant or unwilling to change from their current in-house solution or provider to one of our platforms or products.

Additionally, some of our competitors have greater financial, research and development, manufacturing and marketing resources than we do.

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Industry consolidation could result in greater competition if our competitors combine their resources, if our competitors are acquired by other companies with greater resources than ours, or if our competitors become affiliated with customers of ours.

This competition could increase pressure on us to reduce the selling prices of our products or could cause us to increase our spending on research and development and sales and marketing.

If we are unable to develop innovative new products, maintain competitive pricing, and offer products that consumers perceive to be as good as those of our competitors, our sales and gross margins could decrease which would harm our business.

Conversely, the health care space is attractive to many companies, particularly new entrants interested in developing digital health models to compete with offerings of more established companies like us.

Additionally, one of our competitors, Philips, has an ongoing product recall.

We cannot predict the timing or nature of their substantial return to the market or the impact to our business, financial condition, and results of operations.

Continuing competition could increase pressure on us to reduce the selling prices of our products or could cause us to increase our spending on research and development and sales and marketing.

If we are unable to develop innovative new products, maintain competitive pricing, enhance existing products, and offer products that consumers perceive to be as good as those of our competitors, our sales and gross margins could decrease which would harm our business.

Consolidation in the health care industry could have an adverse effect on our revenues and results of operations.

Many home health care dealers and out-of-hospital health providers are consolidating, which may result in greater concentration of purchasing power.

Numerous initiatives and reforms by legislators, regulators, and third-party payers to curb the rising cost of healthcare have catalyzed a consolidation of aggregate purchasing power within the markets in which we sell our products.

As the health care industry consolidates, competition to provide goods and services to industry participants may become more intense.

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If we are forced to reduce our prices because of consolidation in the health care industry, our revenues may decrease and our consolidated earnings, financial condition, and/or cash flows may suffer.

Our business, financial condition and results of operations could continue to be harmed by the effects of the COVID-19 pandemic or similar public health crises.

We are subject to risks associated with public health threats, including the global COVID-19 pandemic, which have had and may continue to have an adverse impact on certain aspects of our business.

The extent to which the COVID-19 pandemic and measures taken in response thereto impact our business, results of operations, and financial condition will depend on future developments which are highly uncertain and are difficult to predict.

These developments include, but are not limited to, future resurgences of the virus and its variants, actions taken to contain the virus or address its impact, and the timing, distribution, and efficacy of vaccines and other treatments.

Although there is still substantial uncertainty associated with the COVID-19 pandemic, we believe the global demand for ventilators and other respiratory support devices used to treat COVID-19 patients has largely been met.

In most markets, diagnostic pathways for sleep apnea treatment, including physician practices, HME distributors, and sleep clinics have largely recovered towards pre-pandemic levels.

Likewise, within our SaaS business we have observed stabilizing patient flow in out-of-hospital care settings impacted by COVID-19.

The COVID-19 pandemic has continued to impact the global supply chain, primarily through constraints on raw materials and electronic components.

These constraints on raw materials and electronic components are also impacting companies outside of our direct industry, which is resulting in a competitive supply environment causing higher costs, requiring us to commit to minimum purchase obligations as well as make upfront payments to our suppliers.

Further, we are being allocated certain components from our suppliers, particularly semiconductor chips, and we are thus being forced to allocate our outbound products to our customers.

These disruptions have impacted and may continue to impact our ability to

Global macroeconomic conditions, including inflation, supply chain disruptions, and fluctuations in foreign currency exchange rates, could continue to adversely affect our operations and profitability.

The global decline in economic conditions, geopolitical instability, and other macroeconomic factors, including inflation, supply chain disruptions, interest rate and foreign currency rate fluctuations, and volatility in the capital markets could continue to negatively impact our business, financial condition, and results of operations.

The growth of our business and demand for our products are affected by changes in the health of the overall global economy.

Deterioration in the global economic environment may cause decreased demand for our products which could result in lower product sales, lower prices for our products, and reduced reimbursement rates by third-party payers, while increasing the cost of operating our business.

Macroeconomic conditions have impacted our global supply chain, primarily through constraints on raw materials and electronic components.

These constraints on raw materials and electronic components are also impacting companies outside of our direct industry, which has and continues to result in a competitive supply environment causing higher costs, requiring us to commit to minimum purchase obligations as well as make upfront payments to our suppliers.

These disruptions have impacted and may continue to impact our ability to produce and supply products in quantities necessary to

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produce and supply products in quantities necessary to satisfy customer demand, which could negatively impact our results of operations.

Additionally, we have observed a reduction in both inbound and outbound transportation capacity as a result of port closures and delays associated with the pandemic, which is causing longer lead times in receiving raw materials into and distributing finished goods out of our manufacturing facilities, as well as increased freight costs.

satisfy customer demand, which could negatively impact our results of operations.

These highly competitive and constrained supply chain conditions are increasing our cost of sales, which has and may continue to adversely impact our profitability.

Given the ongoing uncertainty regarding the duration and extent of the COVID-19 pandemic, we are uncertain as to the duration and extent of constraint on our supply chain.

While we expect COVID-19 may continue to negatively impact certain aspects of our business, given the rapid and evolving nature of the virus and the uncertainty about its impact on society and the global economy, we cannot predict the extent to which it will affect our global operations.

Furthermore, future public health crises are possible and could involve some or all of the risks discussed above.

Global economic conditions have also impacted foreign currency exchange rates relative to the U.S.

Although the majority of our net sales and cash generation have been made in the U.S., as our business in markets outside of the U.S.

continues to increase, our exposure to foreign currency exchange risk related to our foreign sales and operations will increase.

Fluctuations in the rate of exchange between the U.S.

dollar and foreign currencies, primarily the Australian Dollar, Singapore Dollar, Euro, Chinese Yuan, and Canadian Dollar, have had and could continue to have an adverse effect on our financial results, including our net sales, margins, gains and losses, as well as on the values of our assets and liabilities.

Our business, financial condition and results of operations could continue to be harmed by the effects of outbreaks of COVID-19 or similar public health crises.

We are subject to risks associated with public health threats, including outbreaks associated with COVID-19 and its variants, which have had and may continue to have an adverse impact on certain aspects of our business.

While most countries have removed or reduced the restrictions initially implemented in response to COVID-19, the extent to which the COVID-19 pandemic or another public health crisis impact our business, results of operations, and financial condition will depend on future developments which are highly uncertain and are difficult to predict.

These developments include, but are not limited to, future resurgences of the virus and its variants, actions taken to contain the virus or address its impact, the timing, distribution, and efficacy of vaccines and other treatments, and the imposition of government lockdowns, quarantine and physical distancing requirements.

We are subject to various risks relating to international activities that could affect our overall profitability.

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• inability to obtain import licenses;

• the impact of public health epidemics/pandemics on the global economy, such as COVID-19 that has spread globally;

• the impact of public health epidemics/pandemics on the global economy;

• the impact of global geopolitical tensions and/or conflicts;

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and other governments against Russia and has caused significant volatility and disruptions to the global markets.

While we are not presently aware of any direct impacts these restrictions have had on our suppliers’ supply chains, disruptions resulting from the conflict in Ukraine and the UFLPA may materially and negatively impact our suppliers’ ability to obtain a sufficient supply of raw materials necessary to meet the quantity and/or timing of our product demands.

Further, it is not possible to predict the short- and long-term implications of this conflict, which could include but are not limited to further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, cyber-attacks, supply chain challenges and adverse effects on currency exchange rates and financial markets.

We are continuing to monitor the situation in China, Ukraine, and globally as well as assess its potential impact on our business.

Although our sales into Russia and Ukraine did not constitute a material portion of our total revenue in 2022, further escalation of geopolitical tensions, or new geopolitical tensions, could have a broader impact that expands into other markets where we

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do business, which could adversely affect our business and/or our supply chain, business partners or customers in the broader region.

Any of the above factors may have a material adverse effect on our ability to increase or maintain our non-U.S.

a sufficient supply of raw materials necessary to meet the quantity and/or timing of our product demands.

We are continuing to monitor the situation in China, Ukraine, and globally as well as assess its potential impact on our business.

Although our sales into Russia and Ukraine did not constitute a material portion of our total revenue in fiscal year 2023, further escalation of geopolitical tensions, or new geopolitical tensions, could have a broader impact that expands into other markets where we do business, which could adversely affect our business and/or our supply chain, business partners or customers in the broader region.

Any of the above factors may have a material adverse effect on our ability to increase or maintain our sales or otherwise have a material adverse impact on our business, financial condition, and results of operations.

Our products are the subject of clinical trials conducted by us, our competitors, or other third parties, the results of which may be unfavorable, or perceived as unfavorable, and could have a material adverse effect on our business, financial condition, and results of operations.

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Our intellectual property may not protect our products, and/or our products may infringe on the intellectual property rights of third parties.

We rely on a combination of patents, trade secrets and non-disclosure agreements to protect our intellectual property.

We rely on a combination of owned and licensed patents, trade secrets and non-disclosure agreements to protect our intellectual property.

Our success depends, in part, on our ability to obtain and maintain U.S.

and foreign patent protection for our products, their uses and our processes to preserve our trade secrets and to operate without infringing on the proprietary rights of third-parties.

We have in the past and may in the future be required to license patents and other intellectual property rights owned by other parties.

We have a number of pending patent applications, and we do not know whether any patents will issue from any of these applications.

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Legal standards regarding the validity of patents and the proper scope of their claims are still evolving, and there is no consistent law or policy regarding the valid breadth of claims.

Additionally, there may be third-party patents, patent applications and other intellectual property relevant to our products and technology which are not known to us and that block or compete with our products.

Additionally, there may be third-party patents, patent applications and other intellectual property held by entities much larger than us, that are relevant to our products and technology which are not known to us and that block or compete with our products.

We face the risks that:

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• third-parties will infringe our intellectual property rights;

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• third-parties will be issued patents that may prevent the sale of our products or require us to license and pay fees or royalties in order for us to be able to market some of our products;

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• third-parties may assert patents and other intellectual property rights against our suppliers, causing interruption in supply of components or other essential inputs.

Litigation may be necessary to enforce patents issued to us, to protect our proprietary rights, or to defend third-party claims that we have infringed on proprietary rights of others.

If the outcome of any litigation or proceeding brought against us were adverse, we could be subject to significant liabilities to third-parties, could be required to obtain licenses from third-parties, could be forced to design around the patents at issue or could be required to cease sales of the affected products.

A license may not be available at all or on commercially viable terms, and we may not be able to redesign our products to avoid infringement.

Additionally, the laws regarding the enforceability of patents vary from country to country, and we cannot assure you that any patent issues we face will be uniformly resolved, or that local laws will provide us with consistent rights and benefits.

If we fail to attract, develop and retain key employees our business may suffer.

Our ability to compete effectively depends on our ability to attract and retain key employees, including people in senior management, sales, marketing, technology, and research and development positions.

If the outcome of any litigation, proceeding or claim brought against us were adverse, we could be subject to significant liabilities to third-parties, could be required to obtain licenses from third-parties, could be forced to design around the patents at issue or could be required to cease sales of the affected products.

If we become involved in any intellectual property litigation, we may be required to pay substantial damages, including but not limited to treble damages, attorneys’ fees and costs, for past infringement if it is ultimately determined that our products infringe a third party’s intellectual property rights.

Even if infringement claims against us are without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from other business matters.

In addition, a license may not be available at all or on commercially viable terms, and we may not be able to redesign our products to avoid infringement.

Additionally, the laws regarding the enforceability of patents vary from country to country, and we cannot provide assurance that any patent issues we face will be uniformly resolved, or that local laws will provide us with consistent rights and benefits.

If we fail to source, develop and retain key employees our business may suffer.

Our ability to compete effectively depends on our ability to source and retain key employees, including people in senior management, sales, marketing, technology, and research and development positions.

Competition for top talent in the healthcare, technology and SaaS industries can be intense.

Our ability to recruit and retain such talent will depend on a number of factors, including hiring practices of our competitors, compensation and benefits, work location, work environment and industry economic conditions.

Our ability to recruit and retain such talent will depend on a number of factors, including hiring practices of our competitors, compensation and benefits, flexibility regarding virtual and hybrid work arrangements, work location, work environment, industry economic conditions, and corporate culture.

If we cannot effectively recruit, develop and retain qualified employees to drive our strategic goals, our business could suffer.

Our leverage and debt service obligations could adversely affect our business.

As of June 30, 2022, our total consolidated debt was $0.8 billion and we may incur additional indebtedness in the future, including as a result of our pending acquisition of MEDIFOX DAN, which is expected to close during our fiscal year 2023.

As of June 30, 2023, our total consolidated debt was $1.4 billion and we may incur additional indebtedness in the future.

Our indebtedness could have adverse consequences, including:

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We purchase configured components for our devices from various suppliers, including some who are single-source suppliers for us.

Disruptions to our suppliers, including disruptions in connection with COVID-19 and its variants, may limit our ability to manufacture our devices in a timely or cost-effective manner, which could result in a significant reduction in sales and profitability.

Disruptions to our suppliers may limit our ability to manufacture our devices in a timely or cost-

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effective manner, which could result in a significant reduction in sales and profitability.

We cannot assure you that a replacement supplier would be able to configure its components for our devices on a timely basis or, in the alternative, that we would be able to reconfigure our devices to integrate the replacement part.

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We cannot assure you that our inventories would be adequate to meet our production needs during any prolonged interruption of supply.

In particular, a global semiconductor supply shortage is having wide-ranging effects across multiple industries, and it has impacted suppliers that incorporate semiconductors into the parts they supply to us.

High demand and shortages of supply have adversely affected and could materially adversely affect our ability to obtain sufficient quantities of semiconductors

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and electronic components on commercially reasonable terms or at all.

In particular, a global semiconductor supply shortage has had and continues to have wide-ranging effects across multiple industries, and it has impacted suppliers that incorporate semiconductors into the parts they supply to us.

High demand and shortages of supply have adversely affected and could materially adversely affect our ability to obtain sufficient quantities of semiconductors and electronic components on commercially reasonable terms or at all.

While we have entered into agreements for the supply of many components, there can be no assurance we will be able to extend or renew these agreements on similar terms or that suppliers will fulfill their commitments under existing agreements.

Furthermore, in order to secure such necessary components, we may be obligated to purchase them at prices that are higher than those available in the current market and/or may incur significant price increases from these suppliers in the future.

In addition, we may be required to commit to greater purchase volumes and/or make prepayments to our suppliers.

Extended lead times and decreased availability of key components may also cause an adverse effect on our financial condition or results of operations.

In addition, we have and may continue to be required to commit to greater purchase volumes and/or make prepayments to our suppliers.

Purchase obligations, extended lead times, and decreased availability of key components may also cause an adverse effect on our financial condition or results of operations.

Delays in our ability to produce and deliver our devices could cause our customers to purchase alternative products from our competitors.

In response to the global semiconductor supply shortage, we have recently expanded our global offering of devices to include Card-to-Cloud (C2C) versions of our prior model AirSense 10 and AirCurve 10 offerings that do not incorporate a communications module.

We introduced C2C models to address the growing backlog of patients waiting for therapy with ResMed devices.

Because C2C devices do not include communications capability they involve a more manual workflow for our customers, and may face resistance in the market as the backlog of patients waiting for treatment is reduced.

The C2C offering, while appropriate in the short term, also may not be consistent with our long term strategy of connecting all devices with AirView.

Additionally, increases in product demand, including in response to a product recall by one of our competitors, Philips, have resulted and could continue to result in shipment delays, higher costs for materials and components, and increased expenditures for freight and other expenses, which have and could continue to negatively impact our profit margins.

If supply constraints continue, our ability to meet demand and our corresponding ability to sell affected products may be materially reduced.

We have and may continue to be required to allocate or prioritize orders for our devices, and our failure to timely deliver desirable products to meet demand may harm relationships with our customers.

In response to the global semiconductor supply shortage, we expanded our global offering of devices to include Card-to-Cloud (C2C) versions of our prior model AirSense 10 and AirCurve 10 offerings that do not incorporate a communications module.

We introduced C2C models to address the growing backlog of patients waiting for therapy with our devices during and after the COVID-19 pandemic.

Because C2C devices do not include communications capability they are not as appealing to our customers creating a risk that we will be forced to liquidate inventory of those devices as communications modules become available for our AirSense 10 and AirSense 11 devices.

Additionally, substantial increases in product demand, including in response to a product recall by one of our competitors, Philips, have resulted and could continue to result in higher costs for materials and components, and increased expenditures for freight and other expenses, which have and could continue to negatively impact our profit margins.

If supply constraints continue, our ability to meet increased demand and our corresponding ability to sell affected products may be materially reduced.

Alternatively, the reintroduction of products by Philips could lead to reduced demand for our products.

We are increasingly dependent on information technology systems and infrastructure.

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In addition, significant implementation issues may arise as we continue to consolidate and outsource certain computer operations and application support activities.

Actual or attempted breaches of security, unauthorized disclosure of information, denial of service attacks or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

Actual or attempted breaches of security, unauthorized disclosure of information, attacks such as denial of service, or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

Despite the implementation of security measures, our internal computer and information technology systems and those of our vendors and customers are vulnerable to attack and damage from computer viruses, malware, denial of service attacks, unauthorized access, or other harm, including from threat actors seeking to cause disruption to our business.

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Cyberattacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information.

A material cyberattack or security incident could cause interruptions in our operations and could result in a material disruption of our business operations, damage to our reputation, financial condition, results of operations, cash flows and prospects.

A material cyberattack or security incident could

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cause interruptions in our operations and could result in a material disruption of our business operations, damage to our reputation, financial condition, results of operations, cash flows and prospects.

We receive, collect, process, use and store a large amount of information from our clients, our patients and our own employees, including personal information, protected health and other sensitive and confidential information.

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We have implemented security measures, technical controls and contractual precautions designed to identify, detect and prevent unauthorized access, alteration, use or disclosure of our clients’, patients’ and employees’ data.

However, the techniques used in these attacks change frequently and may be difficult to detect for periods

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of time and we may face difficulties in anticipating and implementing adequate preventative measures.

However, the techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.

We may 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.

Beyond external criminal activity, systems that access or control access to our services and databases may be compromised as a result of human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure.

Because the techniques used to circumvent security systems can be highly sophisticated and change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible techniques or implement adequate preventive measures for all situations.

If someone is able to circumvent or breach our security systems, they could steal any information located therein or cause serious and potentially long lasting disruption to our operations.

Because the techniques used to circumvent security systems can be highly sophisticated and change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible threats or implement adequate preventive measures for all situations.

If threat actors are able to circumvent or breach our security systems, they could steal any information located therein or cause serious and potentially long-lasting disruption to our operations.

Security breaches or attempts thereof could also damage our reputation and expose us to a risk of monetary loss and/or litigation, fines and sanctions.

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In addition, any security breach or attempt thereof could result in liability for stolen assets or information, additional costs associated with repairing any system damage, incentives offered to clients or other business partners to maintain business relationships after a breach, and implementation of measures to prevent future breaches, including organizational changes, deployment of additional personnel and protection technologies, employee training and engagement of third-party experts and consultants.

Additionally, the costs incurred to remediate any data security or privacy incident could be substantial.

We cannot assure you that any of our third-party service providers with access to our, or our clients, patients and/or employees’ personally identifiable and other sensitive or confidential information will maintain appropriate policies and practices regarding data privacy and security in compliance with all applicable laws or that they will not experience data security breaches or attempts thereof, which could have a corresponding effect on our business.

Additionally, the costs incurred to remediate any security incident could be substantial.

In addition, on July 26, 2023, the SEC issued a new proposed rule intended to enhance and standardize disclosures regarding cybersecurity risk management, strategy, governance and cybersecurity incident reporting, which will require us to develop additional policies and procedures to comply with these new rules and provide additional disclosure on our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

We cannot assure you that any of our third-party service providers with access to our, or our clients, patients and/or employees’ personally identifiable and other sensitive or confidential information will not experience security breaches or attempts thereof, which could have a corresponding effect on our business.

We may not be able to realize the anticipated benefits from acquisitions, which could adversely affect our operating results.

Part of our growth strategy includes acquiring businesses consistent with our commitment to innovation in developing products for the diagnosis and treatment of sleep apnea and respiratory care as well as our SaaS business.

For example, we acquired MatrixCare in November 2018, Propeller Health in January 2019, and in June 2022 we signed a definitive agreement to acquire MEDIFOX DAN which is expected to close during our fiscal year 2023.

The MEDIFOX DAN acquisition remains subject to regulatory clearances and other customary closing conditions and should the acquisition fail to close, we will not realize the benefits that we expect to receive from the acquisition.

Moreover, the success of our acquisitions will depend, in part, on our ability to successfully integrate the business and operations of the acquired companies.

For example, we acquired MatrixCare in November 2018, Propeller Health in January 2019, and MEDIFOX DAN in November 2022.

The success of our acquisitions depends, in part, on our ability to successfully integrate the business and operations of the acquired companies.

Additionally, our management may have their attention diverted while trying to integrate these businesses.

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At least on an annual basis, we must evaluate whether facts and circumstances indicate any impairment of the intangible assets’ values.

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The qualitative and quantitative analysis used to test goodwill is dependent upon various considerations and assumptions, including macroeconomic conditions, industry and market characteristics, projections of acquired companies’ future revenue, discount rates, and expectations of future cash flows.

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Consequently, we may be required to record a significant charge to earnings in the financial statements during the period in which any impairment of intangible assets is determined.

If we are unable to support our continued growth, our business could suffer.

As we continue to grow, the complexity of our operations increases, placing greater demands on our management.

Our ability to manage our growth effectively depends on our ability to implement and improve our financial and management information systems on a timely basis and to effect other changes in our business including the ability to monitor and improve manufacturing systems, information technology, and quality and regulatory compliance systems, among others.

Unexpected difficulties during expansion, the failure to attract and retain qualified employees, the failure to successfully replace or upgrade our management information systems, the failure to manage costs or our inability to respond effectively to growth or plan for future expansion could cause our growth to stop.

If we fail to manage our growth effectively and efficiently, our costs could increase faster than our revenues and our business results could suffer.

Our business depends on our ability to market effectively to dealers of home healthcare products and sleep clinics.

We market our products primarily to home healthcare dealers and to sleep clinics that diagnose OSA and other sleep

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disorders, as well as to non-sleep specialist physician practices that diagnose and treat sleep disorders.

We market our products primarily to home healthcare dealers and to sleep clinics that diagnose OSA and other sleep disorders, as well as to non-sleep specialist physician practices that diagnose and treat sleep disorders.

We believe that these groups play a significant role in determining which brand of product a patient will use.

The success of our business depends on our ability to market effectively to these groups to ensure that our products are properly marketed and sold by these third-parties.

We have limited resources to market to the sleep clinics, home healthcare dealer branch locations and to the non-sleep specialists, most of whom use, sell or recommend several brands of products.

We have limited resources to market to physicians, sleep clinics, home healthcare dealer branch locations and to the non-sleep specialists, most of whom use, sell or recommend several brands of products.

We are limited under applicable fraud and abuse laws in the ways in which we market and sell to customers and patients.

In addition, home healthcare dealers have experienced price pressures as government and third-party reimbursement has declined for home healthcare products, and home healthcare dealers are requiring price discounts and longer periods of time to pay for products purchased from us.

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The applications underlying our SaaS products are inherently complex and may contain material defects or errors, which may cause disruptions in availability or other performance problems.

We have from time to time found defects in our products and may discover additional defects in the future that could result in data unavailability, unauthorized access to, loss, corruption or other harm to our customers’ data.

We have from time to time found defects in our

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products and may discover additional defects in the future that could result in data unavailability, unauthorized access to, loss, corruption or other harm to our customers’ data.

While we implement bug fixes and upgrades as part of our regularly scheduled system maintenance, we may not be able to detect and correct defects or errors before implementing our products and solutions.

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We depend on services from various third parties as well as our own technical operations infrastructure to distribute our SaaS products via the Internet.

If a service provider fails to provide sufficient capacity to support our

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platform or otherwise experiences service outages, such failure could interrupt our customers’ access to our service, which could adversely affect their perception of our platform's reliability and our revenues.

If a service provider fails to provide sufficient capacity to support our platform or otherwise experiences service outages, such failure could interrupt our customers’ access to our service, which could adversely affect their perception of our platform’s reliability and our revenues.

Any disruptions in these services, including as a result of actions outside of our control, would significantly impact the continued performance of our SaaS products.

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Any of the above circumstances or events may harm our reputation, cause customers to terminate their agreements with us, impair our ability to obtain contract renewals from existing customers, impair our ability to grow our customer base, result in the expenditure of significant financial, technical and engineering resources, subject us to financial penalties and liabilities under our service level agreements, and otherwise harm our business, results of operations and financial condition.

If we are unable to support our continued growth, our business could suffer.

As we continue to grow, the complexity of our operations increases, placing greater demands on our management.

If we fail to manage our growth effectively and efficiently, our costs could increase faster than our revenues and our business results could suffer.

Climate change and related natural disasters, or other events beyond our control, could negatively impact our business operations and financial condition.

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Although we believe we possess adequate insurance for the disruption of our business from causalities, such insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

In addition, the increasing concern over climate change has resulted and may continue to result in more legal and regulatory requirements designed to mitigate the effects of climate change on the environment, including regulating greenhouse gas emissions, alternative energy policies and sustainability initiatives.

If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet the regulatory obligations.

Further, there may be increasing scrutiny and changing expectations from the market and other stakeholders with respect to Environmental, Social and Governance (ESG) practices.

Any such regulatory changes or increased market expectations could also have a significant effect on our operating and financial decisions, including those involving capital expenditures to reduce emissions and comply with other regulatory requirements or stakeholder expectations.

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If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet the regulatory obligations.

Risks Related to Non-Compliance with Laws, Regulations and Healthcare Industry Shifts

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In March 2010, the ACA was signed into law in the United States.

The ACA made changes that significantly impacted the healthcare industry, including medical device manufacturers.

The ACA made changes, effective over time, that significantly impacted the healthcare industry, including medical device manufacturers.

One of the principal purposes of the ACA was to expand health insurance coverage to millions of Americans who were uninsured.

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The ACA as well as other federal and/or state healthcare reform measures that may be adopted in the future, singularly or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.

Government and private insurance plans may not adequately reimburse our customers for our products, which could result in reductions in sales or selling prices for our products.

Our ability to sell our products depends in large part on the extent to which coverage and adequate reimbursement for our products will be available from government health administration authorities, private health insurers and other organizations.

These third-party payers are increasingly challenging the prices charged for medical products and services and can, without notice, deny coverage for our products or treatments that may include the use of our products.

Therefore, even if a product is approved for marketing, we cannot

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make assurances that coverage and reimbursement will be available for the product, that the reimbursement amount will be adequate or that the reimbursement amount, even if initially adequate, will not be subsequently reduced.

Government and private insurance plans may not adequately reimburse our customers for our products, which could result in reductions in sales or selling prices for our products.

These third-party payers are increasingly challenging the prices charged for medical products and services and can, without notice, deny or reduce coverage for our products or treatments that may include the use of our products.

Therefore, even if a product is approved for marketing, we cannot make assurances that coverage and reimbursement will be available for the product, that the reimbursement amount will be adequate or that the reimbursement amount, even if initially adequate, will not be subsequently reduced.

For example, in some markets, such as Spain, France and Germany, government coverage and reimbursement are currently available for the purchase or rental of our products but are subject to constraints such as price controls or unit sales limitations.

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As we continue to develop new products, those products will generally not qualify for coverage and reimbursement until they are approved for marketing, if at all.

In the United States, we sell our products primarily to home healthcare dealers, hospitals and sleep clinics.

In the United States, we sell our products primarily to home healthcare dealers, health systems and sleep clinics.

Reductions in reimbursement to our customers by third-party payers, if they occur, may have a material impact on our customers and, therefore, may indirectly affect our pricing and sales to, or the collectability of receivables we have from, those customers.

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Under the program, our customers who provide DME must compete to offer products in designated competitive bidding areas, or CBAs.

In addition, under the ACA, in 2016, CMS adjusted the prices in non-competitive bidding areas to match competitive bidding prices.

CMS phased in the new rates beginning January 1, 2016, and were fully effective July 1, 2016.

This program has significantly reduced the Medicare reimbursement to our customers compared with reimbursement in 2011, at the beginning of the program.

The 21st Century Cures Act retroactively adjusted rates in non-bid areas to allow for the higher phase-in rates to be paid for items furnished between July 1, 2016 and December 31, 2016, rather than the lower fully-adjusted rates.

Rules issued by CMS in 2018 resumed the higher phase-in rates in rural and non-contiguous non-competitive bidding areas for items furnished between June 1, 2018 and December 31, 2020.

Pursuant to the CARES Act, these higher phase-in rates were extended through December 31, 2020, or through the end of the COVID-19 public health emergency, and were implemented in areas other than rural areas and noncontiguous areas for the same period.

On March 7, 2019, CMS announced it would initiate a new round of competitive bidding, named Round 2021, with contracts effective on January 1, 2021 through December 31, 2023.

In addition to adopting new bidding processes, CMS expanded the product categories included in competitive bidding to include non-invasive ventilators.

However, due to the COVID-19 pandemic, CMS removed NIVs from Round 2021 of the DMEPOS Competitive Bidding Program.

CPAP, and respiratory assist devices, and related supplies and accessories, which had been included in prior rounds of competitive bidding, were included in the 15 remaining product categories that were bid for in Round 2021.

However, CMS did not award competitive bidding contracts for any product categories other than OTS back and knee braces.

Payment for items where contracts were not awarded – including CPAP and respiratory assist devices – will be based on adjusted fee schedule amounts.

At this time, we cannot predict the full impact the competitive bidding program and the developments in the competitive bidding program will have on our business and financial condition.

We cannot predict the impact the competitive bidding program and the developments in the competitive bidding program will have on our business and financial condition.

If changes are made to this program in the future, it could affect amounts being recovered by our customers.

With respect to Medicare reimbursement, the Protecting Medicare and American Farmers From Sequester Cuts Act was signed into law Dec 10, 2021.

The law extended the 2% Medicare sequester moratorium through March 31, 2022, adjusted the sequester to 1% between April 1, 2022, and June 30, 2022 and reinstated the full 2% sequestration cut beginning July 1, 2022.

The reduction in payment to healthcare providers is to the calculated Medicare payment after the approved amount is determined, and the deductible and coinsurance are applied, and not the 20% coinsurance owed by the patient.

Further, the law eliminated the potential for an additional 4% Medicare sequester in 2022 due to statutory pay-as-you-go (PAYGO) requirement for one year.

These additional cuts will take effect in 2023 after adjournment of the first session of the 117th Congress.

In addition, our products are the subject of periodic studies by third party agencies, including the Agency for Healthcare Research and Quality in the United States, intended to review the comparative effectiveness of different treatments of the same illness.

In addition, our products are the subject of periodic studies by third party agencies, including the Agency for Healthcare Research and Quality (AHRQ) in the United States, intended to review the comparative effectiveness of different treatments of the same illness.

In October 2022, the AHRQ concluded that randomized controlled clinical trials do not provide sufficient evidence that CPAP affects long-term clinically important outcomes.

We believe that the AHRQ methodology was too restrictive, that retrospective and prospective observational studies should have been included, that real world evidence should have been considered, and that CPAP therapy does have long-term positive effects on health outcomes.

Although the results of comparative effectiveness studies are not intended to mandate any reimbursement policies for public or private payers, it is not clear what, if any, effect such research will have on the sales of our products.

To date, the AHRQ assessment has not impacted CMS or private payor reimbursement.

Decreases in third-party reimbursement for our products or a decision by a third-party payer to not cover our products as a result of a third-party study could have a material adverse effect on our sales, results of operations and financial condition.

Failure to comply with anti-kickback and fraud regulations could result in substantial penalties and changes in our business operations.

We are subject to healthcare fraud and abuse regulation and enforcement by federal, state and foreign governments, which could significantly impact our business.

We are subject to various risks relating to our compliance with fraud and abuse laws and transparency laws relating to our interactions with our customers, health care providers, and patients, which could subject us to government investigation, litigation, or other penalties to the extent our activities or relationships are found not to comply, and could result in changes in our business operations that could harm our ability to successfully market and sell our products and services.

We also are subject to foreign fraud and abuse laws, which vary by country.

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In the United States, the laws that may affect our ability to operate include, but are not limited to:

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A person or entity does not need to have actual knowledge of this statute or specific intent to violate the Anti-Kickback Statute itself to have committed a violation.

government has interpreted this law broadly to apply to the marketing and sales activities of manufacturers, distributors and revenue cycle management companies like us.

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government has interpreted this law broadly to apply to the marketing and sales activities of manufacturers and distributors like us.

Violations of the federal Anti-Kickback Statute may result in significant civil monetary penalties for each violation, plus up to three times the remuneration involved.

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A person or entity does not need to have actual knowledge of these statutes or specific intent to violate them to have committed a violation;

• the federal Physician Sunshine Act requirements under the ACA, which impose reporting and disclosure requirements on device and drug manufacturers for any “transfer of value” made or distributed by certain manufacturers of drugs, devices, biologics, and medical supplies to physicians (including doctors, dentists, optometrists, podiatrists and chiropractors), teaching hospitals, and ownership and investment interests held by physicians and their immediate family members.

Beginning in 2022, applicable manufacturers also will be required to report such information regarding payments and transfers of value provided during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse midwives;

• the federal Physician Sunshine Act requirements under the ACA, which impose reporting and disclosure requirements on device and drug manufacturers for any “transfer of value” made or distributed by certain manufacturers of drugs, devices, biologics, and medical supplies to physicians (including doctors, dentists, optometrists, podiatrists and chiropractors), teaching hospitals, non-physician practitioners such as nurse practitioners, physician assistants, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse midwives, and ownership and investment interests held by physicians and their immediate family members;

• federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm customers;

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

Additionally, as a result of these types of investigations, healthcare providers and entities may face litigation or have to agree to

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settlements that can include monetary penalties and onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

Additionally, as a result of these types of investigations, healthcare providers and entities may face litigation or have to agree to settlements that can include monetary penalties and onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental health care programs, additional compliance and reporting obligations, imprisonment and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

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In December 2019, we entered into a settlement agreement with the U.S.

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Our use and disclosure of personal information, including health information, is subject to federal, state and foreign privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm.

The privacy and security of personal information whether stored, maintained, received or transmitted electronically or in paper form is a major issue in the U.S.

The appropriate privacy and security of personal information whether stored, maintained, received or transmitted electronically or in paper form is a key regulatory issue in the United States and abroad.

While we strive to comply with all applicable privacy and security laws and regulations, as well as our own posted privacy policies, legal standards for privacy, including but not limited to “unfairness” and “deception,” as enforced by the FTC and state attorneys general, continue to evolve and any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, or could cause us to lose audience and customers, which could have a material adverse effect on our business.

Recently, there has been an increase in public awareness of privacy issues in the wake of revelations about the activities of various government agencies and in the number of private privacy-related lawsuits filed against companies.

Concerns about our practices with regard to the collection, use, disclosure, security or deletion of personally identifiable information or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business.

Concerns about our practices with regard to the collection, use, disclosure, security or deletion of personal information or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business.

Numerous foreign, federal and state laws and regulations govern collection, dissemination, use and confidentiality of personally identifiable health information, including (i) state privacy and confidentiality laws (including state laws requiring disclosure of breaches);

and (iii) European and other foreign data protection laws, including the EU GDPR and the UK GDPR.

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entities that perform certain services for, or on behalf of, a covered entity that involve creating, receiving, maintaining or transmitting protected health information, as well as their covered subcontractors.

HIPAA establishes a set of national privacy and security standards for the protection of individually identifiable health information, or protected health information, by health plans, healthcare clearinghouses and healthcare providers that submit certain covered transactions electronically, collectively referred to as “covered entities,” and their “business associates,” which are persons or entities that perform certain services for, or on behalf of, a covered entity that involve creating, receiving, maintaining or transmitting protected health information, as well as their covered subcontractors.

Certain portions of our business, such as the cloud-based software digital health applications, are subject to HIPAA as a business associate of our covered entity clients.

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Courts can award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.

While HIPAA does not create a private right of action allowing individuals to sue us in civil court for HIPAA violations, its standards have been used as the basis for a duty of care claim in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

While HIPAA does not create a private

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right of action allowing individuals to sue us in civil court for HIPAA violations, its standards have been used as the basis for a duty of care claim in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

HIPAA further requires business associates like us to notify our covered entity clients “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach.” Covered entities must notify affected individuals “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach” if their unsecured PHI is subject to an unauthorized access, use or disclosure.

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In addition, if we fail to comply with the terms of our business associate agreements with our clients, we are liable not only contractually but also directly under HIPAA.

In addition, the California Consumer Privacy Act of 2018, or CCPA, became effective on January 1, 2020.

In addition, the California Consumer Privacy Act of 2018, or CCPA, as amended by the California Privacy Rights Act (collectively, “CCPA”), became effective on January 1, 2020.

The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt-out of certain sales of personal information.

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Although the law includes limited exceptions, including for “protected health information” maintained by a covered entity or business associate, it may regulate or impact our processing of personal information depending on the context.

The CCPA may increase our compliance costs and potential liability.

Further, the California Privacy Rights Act, or CPRA, which becomes effective on January 1, 2023, superseding the CCPA, will impose 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.

Several additional US states have implemented comprehensive data privacy laws, which will become effective starting in January 1, 2023.

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

A To date, approximately ten additional US states have implemented comprehensive data privacy laws, certain of which became effective starting in January 1, 2023.

Although the majority of these laws are directed to consumer, not business, data, if we are subject to or affected by these state laws, HIPAA, or other domestic privacy and data protection law, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

In addition to these comprehensive data protection laws, to date, at least three states have adopted laws specifically regulating the collection, use, storage, and disclosure of biometrics, and additional states may seek to regulate—and/or restrict the use of—biometrics in the future.

Certain of our products use, or permit the use of, information that could be classified as a biometric under these or other laws.

If we are subject to or affected by these or other laws, we may be required to modify the way in which we make available our product or certain features of our product.

If we are subject to or affected by these or other laws, including potential damages for improper use of biometrics, we may be subject to damages claims, required to modify the way in which we make available our product or certain features of our product.

More recently, the FTC and the Office for Civil Rights (OCR, the agency that enforces HIPAA) have taken interest in the use of online tracking technologies that collect, use, and disclose personal information about users, including use of such online tracking tools to gather information to be used for redirected marketing.

FTC has taken enforcement actions against companies that have used online tracking tools either in a misleading or deceptive manner.

In response to this new area of enforcement, we have been assessing our websites and applications to assess any online tracking and to ensure compliance with privacy and security standards.

We also may be required to implement additional practices or processes or otherwise invest our resources to comply with these and other regulations.

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For example, EU member states, the United Kingdom, and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations.

Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of personal information that identifies or

Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of personal information that identifies or may be used to identify an individual, such as names, contact information, and sensitive personal data such as health data.

These laws and regulations are subject to frequent revisions and differing interpretations and have generally become more stringent over time.

In addition, the EU GDPR and UK GDPR went into effect in May 2018.

The GDPR imposes stringent data protection requirements for the processing of personal data in the EEA or UK.

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may be used to identify an individual, such as names, contact information, and sensitive personal data such as health data.

These laws and regulations are subject to frequent revisions and differing interpretations and have generally become more stringent over time.

In addition, the GDPR went into effect in May 2018.

The GDPR imposes stringent data protection requirements for the processing of personal data in the European Economic Area, or EEA.

The GDPR imposes several stringent requirements for controllers and processors of personal data, and increased our obligations, for example, by imposing higher standards for obtaining consent from individuals to process their personal data, requiring more robust disclosures to individuals, strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and secondary use of information (including for research purposes), increasing requirements pertaining to health data and pseudonymized (i.e., key-coded) data and imposing additional obligations when we contract with third party processors in connection with the processing of the personal data.

The GDPR also imposes strict rules on the transfer of personal data out of the EEA, including to the United States, and recent legal developments in Europe have created complexity regarding such transfers of personal data from the EEA to the United States.

strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and secondary use of information (including for research purposes), increasing requirements pertaining to health data and pseudonymized (i.e., key-coded) data and imposing additional obligations when we contract with third party processors in connection with the processing of the personal data.

The GDPR also imposes strict rules on the transfer of personal data out of the EEA and, including to the United States, and recent legal developments in Europe have created complexity regarding such transfers of personal data from the EEA and UK to the United States.

For example, the European Commission and the United Kingdom have adopted new standard contractual clauses under which entities may transfer personal data from the European Union and the United Kingdom, which we may be required to implement.

We must evaluate such data transfers on a case-by-case basis to ensure continued permissibility under current law and consistent with the new standard contractual clauses.

European data protection law provides that EEA member states may make their own further laws and regulations limiting the processing of genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs to increase, and harm our business and financial condition.

GDPR provides that EEA member states and the UK may make their own further laws and regulations limiting the processing of genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs to increase, and harm our business and financial condition.

Failure to comply with the requirements of GDPR and the applicable national data protection and marketing laws of the EEA member states may result in fines of up to €20.0 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties as well as individual claims for compensation.

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Failure to comply with such laws may subject us to penalties.

The United Kingdom also has adopted its version of the General Data Protection Regulation (“UK GDPR”).

The United Kingdom GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of £17.5 million or 4% of global turnover.

The UK GDPR mirrors the fines under the EU GDPR, i.e., fines up to the greater of £17.5 million or 4% of global turnover.

Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules.

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Certain of our products and services include the use of artificial intelligence (AI), which is intended to enhance the operation of our products and services.

The FTC recently has issued a report expressing a concern regarding AI and bias across industry sectors, including in the healthcare space, and has suggested that such bias could lead to unfair and deceptive practices, among other concerns.

AI innovation presents risks and challenges that could impact our business.

AI algorithms may be flawed.

Datasets may be insufficient or contain biased information.

Ineffective AI development and deployment practices could subject us to competitive harm, regulatory action, increased cyber risks and legal liability, including under new proposed AI regulation in the European Union.

The FTC has issued a report expressing a concern regarding AI and bias across industry sectors, including in the healthcare space, and has suggested that such bias could lead to unfair and deceptive practices, among other concerns.

Any changes to our ability to use AI or concerns about bias could require us to modify our products and services or could have other negative financial impact on our business.

Product sales, introductions or modifications may be delayed or canceled as a result of FDA regulations or similar foreign regulations, which could cause our sales and profits to decline.

Unless a product is exempt, before we can

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market or sell a new medical device in the United States, we must obtain FDA clearance or approval, which can be a lengthy and time-consuming process.

Unless a product is exempt or may be commercialized based on current FDA enforcement discretion policies, before we can market or sell a new medical device in the United States, we must obtain FDA clearance or approval, which can be a lengthy and time-consuming process.

We generally receive clearance from the FDA to market our products in the United States under Section 510(k) of the Federal Food, Drug, and Cosmetic Act or our products are exempt from the Section 510(k) clearance process.

The 510(k) clearance process can be expensive, time-consuming and uncertain.

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

The FDA has a high degree of latitude when evaluating submissions and may determine that a proposed device submitted for 510(k) clearance is not substantially equivalent to a predicate device.

In the 510(k) clearance process, the FDA must determine that a

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proposed device is “substantially equivalent” to a predicate device with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing.

The FDA has a high degree of latitude when evaluating submissions and may seek additional information before clearing a proposed device or may ultimately determine that a proposed device submitted for 510(k) clearance is not substantially equivalent to a predicate device.

After a device receives 510(k) premarket notification clearance from the FDA, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in the intended use of the device, technology, materials, packaging, and certain manufacturing processes may require a new 510(k) clearance or premarket approval.

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Any new product introduction or existing product modification could be subjected to a lengthier, more rigorous FDA examination process.

For example, in certain cases we may need to conduct clinical trials of a new product before submitting a 510(k) notice.

For example, in certain cases we may need to conduct clinical trials of a modified or new product before submitting a 510(k) notice.

We may also be required to obtain premarket approvals for certain of our products.

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or foreign regulatory agencies.

The definition of “device” in the Federal Food, Drug, and Cosmetic Act (FD&C Act) was amended in 2016 to exclude certain software functions.

Our software offerings may include functions that fall under FDA’s jurisdictional definition of a medical device, while there may be software offerings that are considered exempt from the “device” definition even when utilizing data coming from an FDA regulated medical device.

Our determination of the appropriate classification of our digital offerings may lead to regulatory inquiry and the expenditure of time and resources to meet FDA feedback as to the appropriate category for particular digital offerings.

We are subject to substantial regulation related to quality standards applicable to our manufacturing and quality processes.

Our failure to comply with these standards could have an adverse effect on our business, financial condition, or results of operations.

The FDA regulates the approval, manufacturing, and sales and marketing of many of our products in the United States.

Significant government regulation also exists in Canada, Japan, Europe, and other countries in which we conduct business.

As a device manufacturer, we are required to register with the FDA and are

Our failure to comply with these standards could have an adverse effect on our business, financial

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subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures.

condition, or results of operations.

The FDA regulates the approval, manufacturing, and sales and marketing of many of our products in the United States.

Significant government regulation also exists in Canada, Japan, Europe, and other countries in which we conduct business.

As a device manufacturer, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures.

In addition, the federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury.

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Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most foreign inspections of manufacturing facilities, and subsequently, on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities.

Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities.

Regulatory authorities outside the United States adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.

On July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

During the COVID emergency, the FDA issued numerous guidances providing for enforcement discretion or processes for issuance of Emergency Use Authorizations (EUAs) for certain devices that had the effect of relaxing certain regulatory requirements with respect to selected devices during the pendency of the COVID emergency.

Recently, in anticipation of the termination of the COVID emergency effective May 11, 2023, on March 27, 2023, the FDA released two final guidance documents to assist with transitioning medical devices:

(i) that were subject to certain enforcement policies issued during the COVID emergency, and (ii) that were issued emergency use authorizations (EUAs).

These guidance documents finalize the corresponding draft guidance documents that were issued on December 23, 2021.

The guidances call for a “phased transition process” with respect to devices that fell within the expiring COVID enforcement policies.

To the extent our devices have been authorized for market based on COVID-related enforcement discretion or EUAs, we may need to implement a transition plan for such devices, the outcome of which may be uncertain and could potentially affect our ability to market such devices in the post-COVID regulatory environment.

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

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In particular, clearance under Section 510(k) only permits us to market our products for the uses indicated on the labeling cleared by the FDA.

We may request additional label indications for our current products, and the FDA may deny those requests outright, require additional expensive clinical data to support any additional indications or impose limitations on the intended use of any cleared products as a condition of clearance.

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If the FDA determines that we have marketed our products for off-label use, we could be subject to fines, injunctions or other penalties.

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Our use of outbound contacts may be restricted by existing laws, or by laws, regulations, or regulatory decisions that may be adopted in the future.

Similarly, certain data privacy laws, including CCPA, and

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subsequently CPRA, and the GDPR require disclosure of our privacy practices to consumers.

Similarly, certain data privacy laws, including CCPA, and subsequently CPRA, and the GDPR require disclosure of our privacy practices to consumers.

If we are found to have violated these laws or regulations, we may be subjected to substantial fines, penalties, or liabilities to consumers.

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The ATO settlement fully resolved the dispute for all prior years, with no admission of liability and provides clarity in relation to certain future taxation principles.

The final net impact of the ATO settlement was $238.7 million, which represents a gross amount of $381.7 million, including interest and penalties of $48.1 million, and adjustments for credits and deductions of $143.0 million.

The final net impact of the ATO settlement was recorded during the years ended June 30, 2021 and 2022 in the amount of $238.7 million, which represents a gross amount of $381.7 million, including interest and penalties of $48.1 million, and adjustments for credits and deductions of $143.0 million.

As a result of the ATO settlement and due to movements in foreign currencies, we recorded a benefit of $14.1 million within other comprehensive income, and a $4.1 million reduction of tax credits, which was recorded to income tax expense.

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On September 28, 2021, we remitted final payment to the ATO of $284.8 million, consisting of the agreed settlement amount of $381.7 million less prior remittances made to the ATO of $96.9 million.

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Tax years 2018 to 2022 remain subject to future examination by the major tax jurisdictions in which we are subject to tax.

In addition, the taxing authorities of the jurisdictions in which we operate may challenge our positions and methodologies related to transfer pricing, including valuing developed technology, intercompany arrangements and intellectual property transfers.

If challenged by tax authorities, ResMed will vigorously defend our positions and methodologies.

Any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results.

Environmental, social, and corporate governance (ESG) issues may have an adverse effect on our business, financial condition and results of operations and reputation.

There is an increasing focus from certain investors, regulators, legislators, customers, consumers, employees and other stakeholders concerning ESG matters.

Additionally, public interest and legislative pressure related to public companies’ ESG practices continue to grow.

If our ESG practices fail to meet regulatory requirements or stakeholders' evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, Board of Director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand, and employee attraction and retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us.

In addition, a failure to comply with new laws, regulations, or reporting requirements, could negatively impact our reputation and our business.

Our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability.

Risks Related to the Securities Markets and Ownership of Our Common Stock

Our results of operations may be materially affected by global economic conditions generally, including conditions in the financial markets.

Global economic conditions could make it difficult for us, our customers and our suppliers to accurately forecast and plan future business activities.

Adverse economic conditions, including inflation and higher interest rates, could cause customers to reduce or delay their purchases, which could impact our revenue, our ability to manage inventory levels, collect customer receivables, and potentially decrease our profitability.

In addition, prevailing economic conditions could constrain the supply of components used in the manufacturing of our products, which may result in higher costs and impact our ability to meet customer demand.

We cannot predict the timing, strength, or duration of any economic

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slowdown, or the speed of any subsequent economic recovery.

If the economy or markets in which we operate were to deteriorate, our business, financial condition, and results of operations may be adversely affected.

Our quarterly operating results are subject to fluctuation for a variety of reasons.

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• timing of orders by distributors;

• inventory write downs, which may result from maintaining significant inventories of raw materials, components, and finished goods;

• expenditures incurred for research and development;

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• other activities, including product recalls, by our competitors;

• general economic conditions, including rising interest rates, inflationary pressures, recessions, consumer sentiment and demand, global political conflict and industry factors unrelated to our actual performance.

Fluctuations in our quarterly operating results may cause the market price of our common stock to fluctuate.

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In particular, our board of directors has the authority to issue up to 2.0 million shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without further vote or action by the stockholders.

The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The rights of the holders of our common stock

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will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control, may discourage bids for our common stock at a premium over the market price of our common stock and may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock.

ITEM 1B UNRESOLVED STAFF COMMENTS

We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more before the end of our fiscal year 2022 that remain unresolved.

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What changed 10-K

Item 1A. Risk Factors