What changed in this filing

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Item 1A. Risk Factors

2022-03-01 compared with 2021-03-05 · 228 added, 210 removed, 826 unchanged (35% of the section changed)

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Our results of operations may fluctuate significantly from quarter to quarter or year to year.

● We expect that a substantial majority of our future revenue will result from our Commercialization Agreement with Ascensia.

If Ascensia fails to perform satisfactorily under this agreement, including among other things if they are delayed or unsuccessful in growing the adoption of our product, our commercialization efforts and financial results would be directly and adversely affected.

● Our actual operating results may differ significantly from any guidance provided.

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● Our products and operations are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer.

In particular, the FDA regulatory clearance process is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing Eversense and future versions of Eversense.

● We expect that a substantial majority of our future revenue will result from our collaboration and commercialization agreement with Ascensia.

In particular, the FDA and other foreign regulatory clearance, certification, or approval processes are expensive, time-consuming and uncertain, and the failure to maintain required regulatory clearances, certifications and approvals could prevent us from commercializing Eversense and future versions of Eversense.

● The COVID-19 pandemic has, and may continue to, materially affect our operations, including at our headquarters in Maryland and at our clinical trial sites, as well as the business and operations of our manufacturers, distributors or other third parties with whom we conduct business.

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Failure to comply with applicable laws and regulations should harm our business and we may incur significant expenditures related to compliance efforts.

● Holders of the convertible preferred stock and convertible notes may exert substantial influence over us and may exercise their control in a manner adverse to the interests of our common stockholders.

● Holders of convertible notes may exert substantial influence over us and may exercise their control in a manner adverse to the interests of our common stockholders.

Risks Relating to our Business and our Industry

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We have devoted substantially all of our resources to the research and development of our products, including conducting clinical trials, and the commercial launch of Eversense in the United States and Eversense and Eversense XL in Europe, the Middle East, and Africa (EMEA).

To implement our business strategy we need to, among other things, gain regulatory approval in other regions where we intend to sell our products, expand our commercial launch in the United States and Europe, and develop future generations of Eversense.

To implement our business strategy we need to, among other things, gain regulatory approval or certification in other regions where we intend to sell our products, expand our commercial launch in the United States and Europe, and develop future generations of Eversense.

We have never been profitable and do not expect to be profitable for at least the next several years.

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Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our development efforts, obtain regulatory approvals, diversify our product offerings or continue our operations.

Our collaboration and commercialization agreement with Ascensia to market Eversense may not be successful.

We have entered into a collaboration and commercialization agreement with Ascensia, pursuant to which we have granted Ascensia the exclusive right to distribute Eversense worldwide, subject to initial exceptions based on our other current exclusive distribution agreements.

Our Commercialization Agreement with Ascensia to market Eversense may not be successful.

We have entered into a Commercialization Agreement with Ascensia, pursuant to which we have granted Ascensia the exclusive right to distribute Eversense worldwide, subject to initial exceptions based on our other current exclusive distribution agreements.

Pursuant to this agreement, our future success will be dependent on Ascensia effectively marketing and selling Eversense.

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The agreement is terminable by Ascensia under a number of circumstances, including if Eversense 180-day product is not approved in the United States by August 31, 2021 or if we undergo a change of control.

The agreement is terminable by either party if the other party materially breaches its obligations under the agreement;

The Commercialization Agreement is terminable by Ascensia under a number of circumstances, including if we undergo a change of control.

The agreement is terminable by either party if the other party materially breaches its

obligations under the agreement;

provided, however, that if Ascensia is unable to achieve the specified minimum spending or revenue targets described above, then we will only have the right to covert Ascensia’s exclusive rights to nonexclusive rights, which may make it difficult for us to successfully engage with another commercial partner.

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We cannot guarantee this agreement with Ascensia will be successful, that it will continue, or that we will be able to achieve or maintain any particular volume of sales under the agreement or increase the volume of sales at a satisfactory pace or at all from this relationship in the future.

Our collaboration and commercialization agreement with Ascensia and the terms of our recent debt and preferred stock transactions may discourage a change of control of our company.

Our Commercialization Agreement with Ascensia and the terms of our recent debt and preferred stock transactions may discourage a change of control of our company.

The terms of our agreements with Ascensia and PHC may discourage a third party from acquiring, or attempting to acquire, control of our company, even if a change of control was considered favorable by some or all of our stockholders.

For example, because of the exclusivity of the distribution arrangements with Ascensia and the minimum five-year term of that exclusivity (which may be extended under certain circumstances), prospective strategic acquirors may be unwilling to undertake an acquisition of our company.

In addition, under the terms of the PHC Notes

and our convertible preferred stock, we may be required to make significant payments to redeem these notes and to satisfy liquidation preference of our convertible preferred stock upon a change of control.

In addition, under the terms of the PHC Notes, we may be required to make significant payments to redeem these notes upon a change of control.

Our business, product sales and results of operations could be adversely affected by the effects of health epidemics, including the recent COVID-19 outbreak, in regions where we or third parties distribute our products or where we or third parties on which we rely have significant manufacturing facilities, concentrations, clinical trial sites or other business operations.

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Further, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response.

Similarly, the Governor of Maryland has issued an order closing all non-essential businesses, which took effect on March 23, 2020.

Substantially all of our workforce is now working from home either all or substantially all of the time.

Similarly, the Governor of Maryland issued an order closing all non-essential businesses, which took effect on March 23, 2020.

Beginning with the initial outbreak and through 2021, substantially all of our workforce is now working from home either all or substantially all of the time.

The effects of the Maryland order and our work-from-home policies may negatively impact productivity, disrupt our business and delay our clinical programs, regulatory and commercialization timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

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Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain.

In particular, some of our suppliers of certain materials used in the production of our sensors and transmitters are located in Germany, the United Kingdom, China, Japan and the United States.

In particular, some of our suppliers of certain materials used in the production of our sensors and transmitters are located in Germany, the United Kingdom, China, Japan and the

United States.

For example, any manufacturing supply interruption of Eversense or future generation products, could adversely affect our ability to conduct planned clinical trials and commercialization activities.

Sales and demand for Eversense have been and may be adversely affected by the global COVID-19 pandemic.

Sales and demand for Eversense have been and may continue to be adversely affected by the global COVID-19 pandemic.

Disruptions in the distributions of Eversense could result if patients are physically quarantined, if physicians restrict access to their facilities for a material period of time, if we are unable to train new physicians, if patients are unable or unwilling to visit health care providers, or if health care providers prioritize treatment of acute or communicable illnesses over diabetes management.

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Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic.

Some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare

Some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations.

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In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The review of our products by the FDA and other regulators has been and may continue to be adversely affected by the COVID-19 pandemic.

On September 30, 2020 we submitted a PMA supplement application to extend the wearable life of the Eversense CGM System to 180 days to the FDA.

Following the submission of the PMA, we have received communication from the FDA advising us that the reallocation of agency resources to address Emergency Use Authorization (EUA) applications for products related to the COVID-19 public health emergency is affecting marketing application reviews, including the Eversense 180-day product.

Based on a February 19, 2021 communication, we understand that the FDA expects to assign a reviewer, and that our PMA will be placed under review, no later than April 15, 2021.

Based on the passage of time and this new information from the FDA, we are anticipating approval no earlier than the second half of 2021.

The timing to completion and outcome of such a review is uncertain, as is the impact of COVID-19 on agency review timelines or possible delays.

A delay in the approval of our 180-day product in the U.S.

could delay Ascensia from being able to market a product with longer duration and other additional patient benefits to the U.S.

market and could adversely affect our net revenues and financial results.

The review of our products by the FDA and other foreign regulatory authorities and Notified Bodies has been and may continue to be adversely affected by the COVID-19 pandemic.

The timing to completion and outcome of such a review is uncertain, as is the impact of COVID-19 on review timelines or possible delays.

The global pandemic of COVID-19 continues to rapidly evolve.

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However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.

We have limited commercialization experience in the United States and Europe.

If we are unable to successfully expand our commercialization of Eversense in the United States and Europe, or if Ascensia experiences difficulties is establishing support for Eversense, our business will be harmed.

We have limited operating history as a commercial-stage company and may face difficulties encountered by companies early in their commercialization in competitive and rapidly evolving markets.

Our experience as a commercial-stage company upon which to evaluate our business, future sales expectations and operating results is limited.

In assessing our business prospects, you should consider the various risks and difficulties frequently encountered by companies early in their commercialization in competitive and rapidly evolving markets, particularly companies that develop and sell medical devices.

These risks include our ability to:

● obtain regulatory clearance, certification or approval to commercialize our products;

● perform clinical trials with respect to Eversense or future versions of Eversense;

● implement and execute our business strategy;

● expand and improve the productivity of our sales and marketing infrastructure to grow sales of Eversense or future versions of Eversense;

● increase awareness of our brand and Eversense and build loyalty among people with diabetes, their caregivers and healthcare providers;

● manage expanding operations;

● manage and secure effective sales of our product through our new collaboration with Ascensia, including its establishment of required commercial infrastructure in the U.S.

and elsewhere, and its adapting to a new product category in which it has limited experience;

● expand the capabilities and capacities of our third-party manufacturers, including increasing production of current products efficiently and having our vendors adapt their manufacturing facilities to the production of new products;

● respond effectively to competitive pressures and developments;

● enhance Eversense and develop future versions of Eversense;

● attract, retain and motivate qualified personnel in various areas of our business.

Due to our limited operating history as a commercial-stage company, we may not have the institutional knowledge or experience to be able to effectively address these and other risks that may face our business.

In addition, we may not be able to develop insights into trends that could emerge and negatively affect our business and may fail to respond effectively to those trends.

As a result of these or other risks, we may not be able to execute key components of our business strategy, and our business, financial condition and operating results may suffer.

If we are unable to successfully expand our commercialization of Eversense in the United States and Europe through our Commercialization Agreement with Ascensia, our business will be harmed.

We have limited commercialization experience in both the United States and Europe.

We have invested substantially all of our efforts and financial resources to the development and commercialization of Eversense.

Our ability to generate revenue from our products will depend heavily on successful commercialization of products in the United States and Europe, including through our new collaboration with Ascensia, and on continuing development of future generations of our Eversense system.

Our ability to generate revenue from our products will depend heavily on successful commercialization of products in the United States and Europe, which is entirely dependent on our collaboration with Ascensia, and on continuing development of future generations of our Eversense system.

The success of any products that we develop will depend on several factors, including:

● receipt of timely marketing approvals from applicable regulatory authorities;

● receipt of timely marketing approvals from applicable regulatory authorities or CE Certificates Conformity from Notified Bodies in the EEA;

● our ability to procure and maintain suppliers and manufacturers of the components of Eversense and future versions of Eversense;

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● maintaining a continued acceptable accuracy, safety, duration and convenience profile of Eversense.

Our revenue is dependent, in part, upon the size of the markets in the territories for which we have regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement, and whether we own the commercial rights for that territory.

Our revenue is dependent, in part, upon the size of the markets in the territories for which we have regulatory approval or certification, the accepted price for the product, the ability to obtain coverage and reimbursement, and whether we own the commercial rights for that territory.

If the number of people with diabetes we target is not as significant as we estimate or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products.

Our revenue is also dependent on the success of Ascensia in commercializing our product.

Our revenue is dependent on the success of Ascensia in commercializing our product, including the launch of the Eversense E3 CGM system which we expect to in the second quarter of 2022.

Our product is a new product for Ascensia globally and they must additionally establish certain functions of their U.S.

commercial organization to successfully market and sell our CGM system.

If Ascensia experiences difficulties or delays in establishing sales and other functions that are required to support the product or adjusting to the requirements of supporting our product, there could be a materially negative impact on our net revenues from Eversense.

Approval in the United States by the FDA or by a regulatory agency in another country does not guarantee approval by the regulatory authorities in other countries or jurisdictions or ensure approval for the same conditions of use.

Ascensia’s continued organizational development of its sales and

marketing capabilities will be critical to successful commercialization of our Eversense systems, including the launch of the Eversense E3 six-month product If Ascensia is unable to maintain effective sales, marketing and other functions that are required to support the product, it will have a materially negative impact on our net revenues from Eversense.

Approval in the United States by the FDA or approval, or certification by a regulatory agency or Notified Body in another country does not guarantee approval, or certification by the regulatory authorities or Notified Bodies in other countries or jurisdictions or ensure approval, or certification for the same conditions of use.

In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries.

Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods.

If we do not achieve one or more of these approvals in a timely manner or at all, we could experience significant delays or an inability to fully commercialize Eversense and achieve profitability.

Approval or certification processes vary among countries and can involve additional product testing and validation and additional administrative review periods.

If we do not achieve one or more of these approvals, or certifications in a timely manner or at all, we could experience significant delays or an inability to fully commercialize Eversense and achieve profitability.

Both before and after a product is commercially released, we will have ongoing responsibilities under U.S.

and EU regulations.

We will also be subject to periodic inspections by the FDA, the corresponding Notified Body in the European Union and EEA and comparable foreign authorities to determine compliance with regulatory requirements, such as the Quality System Regulation, or QSR, of the FDA, medical device reporting regulations, vigilance in reporting of adverse events and regulations regarding notification, corrections, and recalls.

We will also be subject to periodic inspections by the FDA, the Notified Bodies in the EEA and comparable foreign authorities to determine compliance with regulatory requirements, such as the Quality System Regulation, or QSR, of the FDA, medical device reporting regulations, vigilance in reporting of adverse events and regulations regarding notification, corrections, and recalls.

These inspections can result in observations or reports, warning letters or other similar notices or forms of enforcement action.

If the FDA, the corresponding Notified Body in the European Union and EEA or any comparable foreign authority concludes that we are not in compliance with applicable laws or regulations, or that any of our products are ineffective or pose an unreasonable health risk, such authority could ban these products, suspend or cancel our marketing authorizations, impose "stop-sale"

If the FDA, or any comparable foreign authority concludes that we are not in compliance with applicable laws or regulations, or that any of our products are ineffective or pose an unreasonable health risk, such authority could ban these products, suspend, vary or cancel our marketing authorizations or CE Certificates of Conformity, impose "stop-sale"

and "stop-import"

orders, refuse to issue export certificates, detain or seize adulterated or misbranded products, order a recall, repair, replacement, correction or refund of such products, or require us to notify health providers and others that the products present unreasonable risks of substantial harm to the public health.

Discovery of previously unknown problems with our product's design or manufacture may result in restrictions on the use of Eversense, restrictions placed on us or our suppliers, or withdrawal of an existing regulatory clearance for Eversense.

The FDA, the corresponding Notified Body in the European Union and EEA or comparable foreign authorities may also impose operating restrictions, enjoin and restrain certain violations of applicable law pertaining to medical devices, assess civil or criminal penalties against our officers, employees or us, or recommend criminal prosecution of our company.

The FDA, competent authorities of EEA countries and comparable foreign regulatory authorities may also impose operating restrictions, enjoin and restrain certain violations of applicable law pertaining to medical devices, assess civil or criminal penalties against our officers, employees or us, or recommend criminal prosecution of our company.

Adverse regulatory action may restrict us from effectively marketing and selling our products.

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Our success depends on our ability to continue to develop, commercialize and gain market acceptance for our products.

Our current business strategy is highly dependent on the successful commercialization of Eversense and achieving and maintaining market acceptance.

In order to sell Eversense to people with diabetes, we or our commercialization partners must educate them, their caregivers and healthcare providers that Eversense is an attractive alternative to competitive products for the monitoring of glucose levels, including SMBG, as well as other competitive CGM systems and alternatives to CGM methodologies.

Our current business strategy is highly dependent on the successful commercialization of Eversense by Ascensia and achieving and maintaining market acceptance.

In order to sell Eversense to people with diabetes, we and Ascensia must educate them, their caregivers and healthcare providers that Eversense is an attractive alternative to competitive products for the monitoring of glucose levels, including SMBG, as well as other competitive CGM systems and alternatives to CGM methodologies.

Market acceptance and adoption of Eversense depends on educating people with diabetes, as well as their caregivers and healthcare providers, as to the distinct features, ease-of-use, positive lifestyle impact, and other perceived benefits of Eversense as compared to competitive products.

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● adverse results of clinical trials relating to Eversense or similar competitive products;

● loss of regulatory approval for Eversense, adverse publicity or other adverse events including any product liability lawsuits;

● loss of regulatory approval or CE Certificates of Conformity for Eversense, adverse publicity or other adverse events including any product liability lawsuits;

● any limitations in the ability of Ascensia to effectively communicate and promote product benefits.

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These development needs include additional features, extended product life and other attributes we believe may be desired by patients.

We may not be successful in developing, obtaining regulatory approval for, or marketing future versions of Eversense.

We may not be successful in developing, obtaining regulatory approval or certification for, or marketing future versions of Eversense.

In addition, notwithstanding our market research efforts, our future products may not be accepted by people with diabetes, their caregivers, healthcare providers or third-party payors who reimburse people with diabetes for Eversense and healthcare providers for their services.

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● obtain coverage and adequate reimbursement for Eversense or future versions of Eversense and the related insertion and removal procedures;

● obtain the necessary regulatory approvals for Eversense and future versions of Eversense.

● obtain the necessary regulatory approvals or certifications for Eversense and future versions of Eversense.

However, if regulatory authorities were to disagree, this would adversely impact our ability to commercialize that product enhancement.

If we fail to generate demand by developing products that incorporate features requested by people with diabetes, their caregivers or healthcare providers, or if we do not obtain regulatory clearance or approval for future versions of Eversense in time to meet market demand, we may fail to generate sales sufficient to achieve or maintain profitability.

We have in the past experienced, and we may in the future experience, delays in various phases of product development, approval and commercial launch, including during research and development, regulatory submission and approval, manufacturing, limited release testing, marketing and customer education efforts.

If we fail to generate demand by developing products that incorporate features requested by people with diabetes, their caregivers or healthcare providers, or if we do not obtain regulatory clearance, certification or approval for future versions of Eversense in time to meet market demand, we may fail to generate sales sufficient to achieve or maintain profitability.

We have in the past experienced, and we may in the future experience, delays in various phases of product development, approval, certification and commercial launch, including during research and development, regulatory submission and approval or certification, manufacturing, limited release testing, marketing and customer education efforts.

Any delays in our anticipated product launches may significantly impede our ability to successfully compete in our markets.

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Further, one third-party payor's decision to cover our products does not assure that other payors will also provide coverage for the products or will provide coverage at an adequate reimbursement rate.

In addition, there may be significant delays in obtaining a reimbursement determination, and coverage, if granted, may be more limited than the purposes for which the product is cleared by the FDA, the corresponding Notified Body in the European Union and EEA or other foreign regulatory authorities.

In addition, there may be significant delays in obtaining a reimbursement determination, and coverage, if granted, may be more limited than the purposes for which the product is cleared or certified by the FDA, a Notified Body in the EEA or other foreign regulatory authorities.

Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers its associated costs, including research, development, manufacture, sale and distribution.

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Many of these coverage policies reimburse for CGM systems under durable medical equipment benefits, which are restrictive in nature and require the healthcare provider or supplier to comply with extensive documentation and other requirements.

In addition, those third-party payors that cover CGM products may and have included limitations as to the patient conditions and characteristics eligible for coverage and may adopt different coverage and reimbursement policies for our products, which could also diminish payments for Eversense.

addition, those third-party payors that cover CGM products may and have included limitations as to the patient conditions and characteristics eligible for coverage and may adopt different coverage and reimbursement policies for our products, which could also diminish payments for Eversense.

It is possible that some third-party payors will not offer any coverage for our products.

Even if favorable coverage and reimbursement status is attained for Eversense, less favorable coverage policies and reimbursement rates may be implemented in the future.

Eversense is an implantable medical device in the clinic setting and thus follows a different reimbursement path when compared to the current CGM class.

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Our dependence on the commercial success of our Eversense products makes us particularly susceptible to any cost containment or reduction efforts.

If third-party coverage and reimbursement of products for which we may receive regulatory approval is not available or adequate in either the United States or international markets, or if our production costs increase faster than increases in reimbursement levels, we or our commercial partners may be unable to sell Eversense or future versions of Eversense profitably and our business would be adversely impacted.

If third-party coverage and reimbursement of products for which we may receive regulatory approval or certification is not available or adequate in either the United States or international markets, or if our production costs increase faster than increases in reimbursement levels, we or our commercial partners may be unable to sell Eversense or future versions of Eversense profitably and our business would be adversely impacted.

Moreover, in the EU some countries may require the completion of additional studies that compare the cost-effectiveness of a particular medical device candidate to currently available therapies.

This Health Technology Assessment, or HTA process, which is currently governed by the national laws of the individual EU Member States, is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medical device in the national healthcare systems of the individual country is conducted.

The outcome of HTA regarding specific medical device will often influence the pricing and reimbursement status granted to these products by the competent authorities of individual EU Member States.

On January 31, 2018, the European Commission adopted a proposal for a regulation on health technologies assessment.

The Regulation is intended to boost cooperation among EU Member States in assessing health technologies, including new medical devices, and providing the basis for cooperation at EU level for joint clinical assessments in these areas.

In December 2021 the HTA Regulation was adopted and entered into force on January 11, 2022.

It will apply from 2025.

In March 2019, we launched a patient access program, the Eversense Bridge Program, to assist those patients who do not have insurance coverage for Eversense, or whose insurance is denied or insufficient.

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In December 2020, we terminated the Eversense Bridge Program.

We expect our partner Ascensia to implement a patient assistance program and related programs as part of its commercialization efforts.

The lack of a patient assistance program, or a program’s design being ineffective, could adversely impact the sales of

Eversense and, consequently our net revenues.

We expect our partner Ascensia to implement patient assistance programs and related programs as part of its commercialization efforts.

The lack of a patient assistance program, or a program’s design being ineffective, could adversely impact the sales of Eversense and, consequently our net revenues.

In addition, we may not be able to recognize a substantial portion of the revenue related to Eversense insertions for the patients participating in these access programs.

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and Ascensia Diabetes Care Holdings AG.

In addition to CGM providers, we also compete with providers of traditional SMBG systems, including Roche Diabetes Care, a division of Roche Diagnostics;

and Ascensia Diabetes Care Holdings AG.

There are also a number of academic and other institutions involved in various phases of our industry’s technology development.

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● greater ability to cross-sell products or provide incentives to healthcare providers to use their products;

● more experience in conducting research and development, manufacturing, clinical trials, and obtaining regulatory approval or clearance.

● more experience in conducting research and development, manufacturing, clinical trials, and obtaining regulatory approval or clearance and certification.

In addition, mergers and acquisitions in the diabetes industry may result in even more resources being concentrated among a smaller number of our competitors.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Smaller or early-stage companies may also prove to be

significant competitors, particularly through collaborative arrangements with large and established companies.

These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our programs.

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In addition, our internal estimates are based in large part on current treatment patterns by healthcare providers using CGM systems and our belief that the incidence of diabetes in the United States and worldwide is increasing.

While we believe these factors have historically provided and may continue to provide us with effective tools in estimating the total market for CGM systems and CGM related products and our products, these estimates may not be correct and the conditions supporting our

estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.

The actual incidence of diabetes, and the actual demand for our products or competitive products, could differ materially from our projections if our assumptions are incorrect.

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Ascensia intends to continue developing customer loyalty programs to help with retention aimed at patients, their caregivers and healthcare providers, which include patient ambassadors, training specific to Eversense, ongoing support by sales and clinical employees and 24/7 technical support and customer service.

If demand for our products fluctuates as a result of the introduction of competitive products, changes in reimbursement policies, manufacturing problems, perceived safety issues with our or our competitors' products, the failure to secure regulatory clearance or approvals, or for other reasons, our ability to attract and retain customers could be harmed.

If demand for our products fluctuates as a result of the introduction of competitive products, changes in reimbursement policies, manufacturing problems, perceived safety issues with our or our competitors' products, the failure to secure regulatory clearance or approvals, certifications or for other reasons, our ability to attract and retain customers could be harmed.

The failure to retain a high percentage of our customers would negatively impact our business, financial condition and operating results.

We have limited operating history as a commercial-stage company and may face difficulties encountered by companies early in their commercialization in competitive and rapidly evolving markets.

Our experience as a commercial-stage company upon which to evaluate our business, future sales expectations and operating results is limited.

These risks include our ability to:

● obtain regulatory clearance or approval to commercialize our products;

● perform clinical trials with respect to Eversense or future versions of Eversense;

● implement and execute our business strategy;

● expand and improve the productivity of our sales and marketing infrastructure to grow sales of Eversense or future versions of Eversense;

● increase awareness of our brand and Eversense and build loyalty among people with diabetes, their caregivers and healthcare providers;

● manage expanding operations;

● manage and secure effective sales of our product through our new collaboration with Ascensia, including its establishment of required commercial infrastructure in the U.S.

and elsewhere, and its adapting to a new product category in which it has limited experience;

● respond effectively to competitive pressures and developments;

● enhance Eversense and develop future versions of Eversense;

● attract, retain and motivate qualified personnel in various areas of our business.

In addition, we may not be able to develop insights into trends that could emerge and negatively affect our business and may fail to respond effectively to those trends.

As a result of these or other risks, we may not be able to execute key components of our business strategy, and our business, financial condition and operating results may suffer.

We contract with third parties for the manufacture of Eversense.

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For our business strategy to be successful, our suppliers must be able to provide us with components and Eversense systems in sufficient quantities, in compliance with regulatory requirements and quality control standards, in accordance with agreed upon specifications, at acceptable costs and on a timely basis.

Future increases in sales of Eversense, whether expected or unanticipated, could strain the ability of our suppliers to deliver an increasingly large supply of components and Eversense systems in a manner that meets these various requirements.

Future increases in sales of Eversense, whether

expected or unanticipated, could strain the ability of our suppliers to deliver an increasingly large supply of components and Eversense systems in a manner that meets these various requirements.

We generally use a small number of suppliers of components for our products.

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We may be required to make significant "last time"

purchases of component inventory that is being discontinued by the supplier to ensure

supply continuity.

purchases of component inventory that is being discontinued by the supplier to ensure supply continuity.

If we fail to obtain sufficient quantities of high-quality components to meet demand for our products in a timely manner or on terms acceptable to us, we would have to seek alternative sources of supply.

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Failure of any of our suppliers to deliver components at the level our business requires could disrupt the manufacturing of our products and limit our ability to meet our sales commitments, which could harm our reputation and adversely affect our business.

We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA or other regulatory agencies, and the failure of our suppliers to comply with strictly enforced regulatory requirements could expose us to regulatory action including warning letters, product recalls, and termination of distribution, product seizures or civil penalties.

It could also require us to cease using the components, seek alternative components or technologies and modify our products to incorporate alternative components or technologies, which could result in a requirement to seek additional regulatory approvals.

We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA or other foreign regulatory agencies, and the failure of our suppliers to comply with strictly enforced regulatory requirements could expose us to regulatory action including warning letters, product recalls, and termination of distribution, product seizures or civil penalties.

Any disruption of this nature or increased expenses could harm our commercialization efforts and adversely affect our operating results.

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Based on our experience, complications from use of Eversense may include sensor errors, sensor failures or skin irritation under the adhesive dressing of the transmitter.

Inflammation or redness, swelling, minor infection, and minor

bleeding at the sensor insertion site are also possible risks with an individual's use of the device.

Inflammation or redness, swelling, minor infection, and minor bleeding at the sensor insertion site are also possible risks with an individual's use of the device.

However, if unanticipated side-effects result from the use of Eversense or future versions of Eversense, we could be subject to liability and our systems would not be widely adopted.

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Eversense or future versions of Eversense may contain undetected errors or defects.

Disruptions or other performance problems with Eversense or future versions of Eversense, including our sensors not lasting for the full approved duration of use, may harm our reputation.

Disruptions or other performance problems with Eversense or future versions of Eversense, including our sensors not lasting for the full approved or certified duration of use, may harm our reputation.

If that occurs, we may incur significant costs, the attention of our key personnel could be diverted, or other significant customer relations problems may arise.

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A material liability claim or other occurrence that harms our reputation or decreases market acceptance of Eversense could harm our business and operating results.

This risk exists even if a device is cleared or approved for commercial sale and manufactured in facilities licensed and regulated by the FDA or an applicable foreign regulatory authority.

This risk exists even if a device is cleared, certified or approved for commercial sale and manufactured in facilities licensed and regulated by the FDA or an applicable foreign regulatory authority.

Any side effects, manufacturing defects, misuse or abuse associated with Eversense or future versions of Eversense systems could result in patient injury or death.

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We rely on our information technology systems to effectively manage patient requisitions and data, customer service cases and replacement obligations, marketing data, accounting and financial functions, inventory and order management, product quality records, research and development data, and technical support functions.

Despite our security measures, our information technology systems are vulnerable to damage or interruption from earthquakes, fires, floods and other natural disasters, terrorist attacks, attacks by computer viruses or hackers, power losses, and computer system or data

network failures.

In addition, our data management application and a variety of our software systems, including the software in our smart transmitter, are hosted by third-party service providers whose security and information technology systems are subject to similar risks, which could be subject to computer viruses or hacker attacks or other failures.

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In addition, we may have limited control over the amount and timing of resources that any future collaborators devote to our or their future products.

Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management.

Disputes between us and our collaborators

may result in litigation or arbitration which would increase our expenses and divert the attention of our management.

Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

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Our operating results, and the variability of these operating results, will be affected by numerous factors, including:

● regulatory clearance or approvals affecting our products or those of our competitors;

● regulatory clearance, certification or approvals affecting our products or those of our competitors;

● Ascensia’s ability to increase sales of Eversense and to commercialize and sell our future products, and the number of our products sold in each quarter;

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As a result of our lack of operating history as a commercial-stage company and Ascensia’s lack of experience selling CGM systems, and Eversense in particular, and due to the complexities of the industry and regulatory framework in which we operate, it will be difficult for us to forecast demand for our future products and to forecast our sales with any degree of certainty.

For example, many of the products we will seek to develop and introduce in the future will require regulatory approval or clearance and import licenses before we can sell such products and given that the timing of such approvals, clearances or licenses may be uncertain, it will be difficult for us to predict sales projections for these products with any degree of certainty before such approvals, clearances or licenses are obtained.

For example, many of the products we will seek to develop and introduce in the future will require regulatory approval, certification or clearance and import licenses before we can sell such products and given that the timing of such approvals, certification, clearances or licenses may be uncertain, it will be difficult for us to predict sales projections for these products with any degree of certainty before such approvals, certifications, clearances or licenses are obtained.

In addition, we will be increasing our operating expenses as we expand our business.

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Most of these restrictions are subject to certain minimum thresholds and exceptions.

The Note Purchase Agreement also contains customary events of default, after which the PHC Notes be due and payable immediately, including defaults related to payment compliance, material inaccuracy of representations and warranties, covenant compliance, material adverse changes, bankruptcy and insolvency proceedings, cross defaults to certain other agreements, judgments against the Company, change of control or delisting events, termination of any guaranty, governmental approvals, and lien priority.

and warranties, covenant compliance, material adverse changes, bankruptcy and insolvency proceedings, cross defaults to certain other agreements, judgments against the Company, change of control or delisting events, termination of any guaranty, governmental approvals, and lien priority.

In addition, the indentures related to the 2023 Notes and the 2025 Notes contain, and any future indebtedness we incur may contain, various negative covenants that restrict, among other things, our ability to:

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Risks Related to Development of our Products

If we modify our approved product, we may need to seek additional approvals, which, if not granted, would prevent us from selling our modified products.

A component of our strategy is to continue to modify and upgrade our Eversense system, which requires approval by the FDA and analogous regulatory bodies in other jurisdictions.

We may not be able to obtain additional regulatory approvals for new products or for modifications to, or additional indications for, our existing products in a timely fashion, or at all.

Delays in obtaining future approvals, including potential delays in obtaining approval of our currently pending applications, would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our revenue and potential future profitability.

If we modify our approved product or CE marked, we may need to seek additional approvals or CE Certificates of Conformity, which, if not granted, would prevent us from selling our modified products.

A component of our strategy is to continue to modify and upgrade our Eversense system, which requires approval or certification by the FDA and analogous regulatory bodies in other jurisdictions.

We may not be able to obtain additional regulatory approvals or certifications for new products or for modifications to, or additional indications for, our existing products in a timely fashion, or at all.

Delays in obtaining future approvals or certification, including potential delays in obtaining approval of our currently pending applications, would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our revenue and potential future profitability.

Any modifications to the Eversense that could significantly affect its safety or effectiveness, including significant design and manufacturing changes, or that would constitute a major change in its intended use, manufacture, design, components, or technology requires approval of a new premarket approval application, or PMA, or PMA supplement or similar modifications in other jurisdictions.

However, certain changes to a PMA-approved device do not require submission and approval of a new PMA or PMA supplement, or appropriate modifications in other jurisdictions, and may only require notice to FDA in a PMA Annual Report, or similar notifications.

In the U.S., the FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any such decision.

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Similar regulatory considerations apply outside the U.S.

If new regulatory approvals are required, this could delay or preclude our ability to market the modified system.

If new regulatory approvals or certifications are required, this could delay or preclude our ability to market the modified system.

For those medical devices sold in the EEA, we must notify our Notified Body if significant changes are made to the products or if there are substantial changes to our quality assurance systems affecting those products.

Obtaining variation of existing CE Certificates of Conformity or a new Certificate can be a time-consuming process, and delays in obtaining required future clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.

Medical device development involves a lengthy and expensive process, with an uncertain outcome.

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While we have completed pivotal trials in Europe and the United States, we are and may need to conduct future clinical trials in order to develop new versions of our system or to comply with requirements for post-approval studies.

For example, subject to regulatory clearance of our IDE, we are planning to initiate a pivotal trial to support a future PMA supplement for 365-day sensor.

For example, subject to regulatory clearance of our IDE, we are planning to initiate a pivotal trial to support a future PMA supplement for a 365-day sensor.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome.

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Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the management, research and development, clinical, financial and business development expertise of Tim Goodnow, our Chief Executive Officer, Nick Tressler, our Chief Financial Officer, Mukul Jain, our Chief Operating Officer, Fran Kaufman, our Chief Medical Officer, and Mirasol Panlilio, our Vice President and General Manager, Global Commercial Operations, as well as the other members of our scientific and clinical teams.

We are highly dependent on the management, research and development, clinical, financial and business development expertise of Tim Goodnow, our Chief Executive Officer, Nick Tressler, our Chief Financial Officer, Mukul Jain, our Chief Operating Officer, and Ken Horton, our General Counsel and Corporate Development Advisor, as well as the other members of our scientific and clinical teams.

Although we have employment agreements with our executive officers, each of them may terminate their employment with us at any time and will continue to be able to do so.

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In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy.

Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their

availability to us.

If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

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We could become the subject of product liability lawsuits alleging that component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information resulted in an unsafe condition, injury or death to customers.

In addition, the misuse of our products or the failure of customers to adhere to operating guidelines could cause significant harm to customers, including death, which could result in product liability claims.

In addition, the misuse of our products or the failure of

customers to adhere to operating guidelines could cause significant harm to customers, including death, which could result in product liability claims.

Product liability lawsuits and claims, safety alerts or product recalls, with or without merit, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business, harm our reputation and adversely affect our ability to attract and retain customers, any of which could harm our business, financial condition and operating results.

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If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2044 to 2060.

We are also seeking patent protection for our proprietary technology in

Europe, Japan, China, Canada, India, Australia and other countries and regions throughout the world.

We have no pending U.S.

We are also seeking patent protection for our proprietary technology in Europe, Japan, China, Canada, India, Australia and other countries and regions throughout the world.

We have one pending U.S.

trademark applications and 6 pending foreign trademark applications, as well as 14 U.S.

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There can be no assurance that this type of litigation will not occur, and any future litigation or the threat thereof may adversely affect our ability to hire additional direct sales representatives.

A loss of key personnel or their work product could hamper or prevent our ability to commercialize Eversense or future versions of Eversense, which could have an adverse effect on our business, financial condition and operating results.

A loss of key personnel or their

work product could hamper or prevent our ability to commercialize Eversense or future versions of Eversense, which could have an adverse effect on our business, financial condition and operating results.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

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● issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges;

● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

● we may not develop additional proprietary technologies that are patentable.

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Our products and operations are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state regulatory agencies in the United States and the European Commission and corresponding Notified Body in the European Union and the EEA.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state regulatory agencies in the United States, foreign regulatory authorities and the Notified Bodies in the EEA.

The regulations are very complex and are subject to rapid change and varying interpretations.

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● marketing, manufacturing, sales and distribution;

● pre-market clearance or approval;

● pre-market clearance, certification or approval;

● servicing and post-market surveillance;

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

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the regulatory agency or other regulators to grant future clearances or approvals, and the suspension or withdrawal of existing approvals by such regulatory agencies.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the regulatory agency or other regulators or Notified Bodies to grant future clearances, CE Certificates of Conformity or approvals, and the suspension, variation or withdrawal of existing approvals or CE Certificates of Conformity by such regulatory bodies.

For example, in September 2019 we voluntarily initiated a recall of Eversense sensors that had not yet been implanted, due to premature loss of function due to inadequate hydration of the sensor’s glucose-sensing surface.

This recall, as well as any of the above sanctions, could result in higher than anticipated costs or lower than anticipated sales and harm our reputation, business, financial condition and operating results.

The FDA regulatory clearance process and regulatory processes in other countries is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing Eversense and future versions of Eversense.

Products that are approved through a PMA application generally need FDA approval before they can be modified, and similar approval processes are required in other jurisdictions where we may want to market our products.

The process of obtaining regulatory approvals to market a medical device can be costly and time-consuming, and we may not be able to obtain these approvals on a timely basis, or at all for our products.

The FDA regulatory clearance process and regulatory processes in other countries are expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances, certification and approvals could prevent us from commercializing Eversense and future versions of Eversense.

Products that are approved through a PMA application generally need FDA approval before they can be modified, and similar approval or certification processes are required in other jurisdictions where we may want to market our products.

The process of obtaining regulatory approvals or certifications to market a medical device can be costly and time-consuming, and we may not be able to obtain these approvals or certifications on a timely basis, or at all for our products.

If the FDA requires us to go through a more rigorous examination for future products or modifications to existing products than we had expected, our product introductions or modifications could be delayed or canceled, which could cause our sales to decline or to not increase in line with our expectations.

The FDA can delay, limit or deny approval of a device for many reasons, including:

The FDA or comparable foreign regulatory authorities and Notified Bodies can delay, limit or deny approval or certification of a device for many reasons, including:

● we may not be able to demonstrate that our products are safe and effective for their intended users;

● the data from our clinical trials may be insufficient to support approval;

● the data from our clinical trials may be insufficient to support approval or certification;

● the manufacturing process or facilities we use may not meet applicable requirements.

In addition, the FDA may change approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval of our product modifications under development.

Following the submission of the PMA for our 180-day product, we received communication from the FDA advising us that the reallocation of agency resources to address Emergency Use Authorization (EUA) applications for products related to the COVID-19 public health emergency is affecting marketing application reviews, including the Eversense 180-day product.

Based on a February 19, 2021 communication, we understand that the FDA expects to assign a reviewer, and that our PMA will be placed under review, no later than April 15, 2021.

Based on the passage of time and this new information from the FDA, we are anticipating approval no earlier than the second half of the year and note that the timing to completion and outcome of such a review is uncertain.

Further reallocation of agency resources, shelter-in-place orders and other impacts from the COVID-19 pandemic are difficult to predict and could alter or delay the timing of response by the FDA regarding our submission.

Any delay in, or failure to receive or maintain, approval for our products could prevent us from generating revenue from these products or achieving profitability.

Additionally, the FDA and other regulatory authorities have broad enforcement powers.

Regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some people with diabetes from using our products and adversely affect our reputation and the perceived accuracy and safety of our products.

If we or our third-party suppliers fail to comply with the FDA's good manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely manner.

In addition, the FDA or comparable foreign regulatory authorities may change approval or certification policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or certification of our product modifications under development.

Any delay in, or failure to receive or maintain, approval or certifications for our products could prevent us from generating revenue from these products or achieving profitability.

In particular, any delay in obtaining CE Certificate of Conformity of Eversense E3 system in the EEA, could significantly impair our commercial strategy in Europe and our ability to generate revenue in Europe, which would have a material, adverse effect on our business.

If we or our third-party suppliers fail to comply with the FDA's or other foreign regulatory authorities’ good manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely manner.

We and our third-party suppliers are required to comply with the FDA's QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products.

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Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products in the EEA.

We must comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products.

Later discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension, variation or withdrawal of CE Certificates of Conformity, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.

We are subject to the U.K.

Bribery Act, the U.S.

Foreign Corrupt Practices Act and other anti-corruption and anti-money-laundering laws, as well as export control laws, customs laws, sanctions laws and other laws governing our future global operations.

Foreign Corrupt Practices Act and other anti-corruption and anti-money-laundering laws in foreign jurisdictions, as well as export control laws, customs laws, sanctions laws and other laws governing our future global operations.

If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of operations and financial condition.

Our current and future global operations will expose us to trade and economic sanctions and other restrictions imposed by the United States, the European Union and other governments and organizations.

Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the Foreign Corrupt Practices Act, or the FCPA, and other federal statutes and regulations,

including those established by the Office of Foreign Assets Control, or OFAC.

In addition, the U.K.

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A violation of these laws or regulations could adversely impact our business, results of operations and financial condition.

We will implement and maintain policies and procedures designed to ensure compliance by us, and our directors, officers, employees, representatives, third-party distributors, consultants and agents with the FCPA, OFAC restrictions, the Bribery Act and other export control, anticorruption, anti-money-laundering and anti-terrorism laws and regulations.

We cannot assure you, however, that our policies and procedures will be sufficient or that directors, officers, employees, representatives, third-party distributors, consultants and agents have not engaged and will not engage in conduct for which we may be held responsible, nor can we assure you that our business partners have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to us or even result in our being held liable for such conduct.

Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money-laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money-laundering and anti-terrorism laws or regulations, including in foreign jurisdictions, may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

We are subject to additional federal, state and foreign laws and regulations relating to our healthcare business;

our failure to comply with those laws could have an adverse impact on our business.

Although we will not provide healthcare services, submit claims for third-party payor reimbursement, or receive payments directly from government health insurance programs or other third-party payors for Eversense, we are subject to broadly applicable federal, state, and foreign healthcare laws, including health care fraud and abuse and health information privacy and security laws, which could adversely impact our business.

information privacy and security laws, which could adversely impact our business.

Such healthcare laws potentially applicable to our operations include:

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● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implementing regulations, which created federal criminal and civil statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which also imposes obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” that create, receive, maintain or transmit individually identifiable health

information for or on behalf of a covered entity and their subcontractors, regarding the privacy, security and transmission of such individually identifiable health information;

● federal "sunshine"

requirements imposed by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care Education Reconciliation Act of 2010, or collectively, the PPACA, on device manufacturers regarding the annual reporting to the Centers for Medicare and Medicaid Services, or CMS, of any "transfer of value"

made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, and, beginning in 2022, will require the annual reporting of any payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants, and certified nurse midwives during the previous year.

made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners, and teaching hospitals, and ownership and investment interests held by physicians.

Failure to timely submit required information may result in significant civil monetary penalties;

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● foreign data privacy regulations, such as the European General Data Protection Regulation (EU) 2016/679, or GDPR, which impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting, and may be stricter than U.S.

The risk of our being found in violation of these laws and regulations is increased by the fact that the scope and enforcement of these laws is uncertain, many of them have not been fully interpreted by the regulatory authorities or the courts, their provisions are open to a variety of interpretations, or they vary country by country.

courts, their provisions are open to a variety of interpretations, or they vary country by country.

We are unable to predict what additional federal, state or foreign legislation or regulatory initiatives may be enacted in the future regarding our business or the healthcare industry in general, or what effect such legislation or regulations may have on us.

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Any of these challenges could impact our reputation, business, financial condition and operating results.

The collection and use of personal health data in the European Economic Area, or EEA (being the European Union plus Norway, Iceland and Liechtenstein) is governed by the General Data Protection Regulation 2016/679, or GDPR, which entered into application on May 25, 2018.

The GDPR applies to the processing of personal data by any company established in the EEA and to companies established outside the EEA to the extent they process personal data in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA.

The GDPR enhances data protection obligations for data controllers of personal data, including stringent requirements relating to the consent of data subjects, expanded disclosures about how personal data is used, requirements to conduct privacy impact assessments for “high risk” processing, limitations on retention of personal data, mandatory data breach notification and “privacy by design” requirements, and creates direct obligations on service providers acting as processors.

The GDPR also imposes strict rules on the transfer of personal data outside of the EEA to countries that do not ensure an adequate level of protection, like the United States.

Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States and Norway, Iceland and Liechtenstein may result in fines up to €20 million or 4% of a company’s global annual revenues for the preceding financial year, whichever is higher.

Moreover, the GDPR grants data subjects the right to claim material and non-material damages resulting from infringement of the GDPR.

Given the breadth and depth of changes in data protection obligations, maintaining compliance with the GDPR will require significant time, resources and expense, and we may be required to put in place additional controls and processes ensuring compliance with the new data protection rules.

This may be onerous and adversely affect our business, financial condition and results of operations.

There has been limited enforcement of the GDPR to date, so we face uncertainty as to the exact interpretation of the new requirements on trials and we may be unsuccessful in implementing all measures required by data protection authorities or courts in interpretation of the new law.

The GDPR and accompanying laws are evolving and subject to interpretation and may impose limitations on our activities or otherwise adversely affect our business.

Because of the remote work policies, we implemented due to the COVID-19 pandemic, information that is normally protected, including company confidential information, may be less secure.

Cybersecurity and data security threats continue to evolve and raise the risk of an incident that could affect our operations or compromise our business information or sensitive personal data, including health data.

We may also need to collect more extensive health-related information from our employees to manage our workforce.

In addition, further to the United Kingdom’s exit from the EU on January 31, 2020, the GDPR ceased to apply in the UK at the end of the transition period on December 31, 2020.

However, as of January 1, 2021, the UK’s European Union (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31, 2020 but subject to certain UK specific amendments) into UK law (referred to as the ‘UK GDPR’).

The UK GDPR and the UK Data Protection Act 2018 set out the UK’s data protection regime, which is independent from but aligned to the EU’s data protection regime.

Non-compliance with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever is higher.

On June 28, 2021, the European Commission adopted an adequacy decision permitting flows of personal data between the European Union and the UK to continue without additional requirements.

However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews/ extends that decision and remains under review by the European Commission during this period.

The relationship between the UK and the European Union in relation to certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term, and how data transfers to and from the UK will be regulated in the long term.

These changes may lead to additional costs and increase our overall risk exposure.

If we or our third-party partners fail to comply or are alleged to have failed to comply with data protection and privacy laws and regulations, or if we were to experience a data breach involving personal data, we could be subject to government enforcement actions or private lawsuits.

Any associated claims, inquiries, or investigations or other

government actions could lead to unfavorable outcomes that have a material impact on our business including through significant penalties or fines, monetary judgments or settlements including criminal and civil liability for us and our officers and directors, increased compliance costs, delays or impediments in the development of new products, negative publicity, increased operating costs, diversion of management time and attention, or other remedies that harm our business, including orders that we modify or cease existing business practices.

In February 2021, in conjunction with a communication to users regarding our distribution changes and securing customer and technical support, we made an unintended disclosure of certain user e-mail addresses to other users in Italy.

To remedy this error, we communicated with affected parties and self-reported the disclosure to the appropriate authorities in Italy for GDPR.

This disclosure could cause adverse reaction by users of our product and negative regulatory implications under GDPR.

We are unable to predict at this time if there are any further impacts to this unintended disclosure.

In response, we communicated with affected parties and self-reported the disclosure to the appropriate authorities in Italy for the GDPR.

Subsequently, we have engaged in communications with the Italian authorities concerning the disclosure and other GDPR-related obligations.

In January 2022, we were notified by the Italian authorities of their determination that our unintended disclosure constituted a violation of the GDPR.

In February 2022, we responded to the Italian authorities regarding the alleged GDPR violations.

We expect the Italian authorities to issue a formal decision on this matter in the second quarter of 2022.

This unintended disclosure or the outcome of the proceedings with the Italian authorities could cause an adverse reaction by users of our product, negative publicity, financial penalties or negative regulatory implications under GDPR, any of which could have a material adverse effect on our business.

Our activities, including our research, sales and marketing, and patient reimbursement support activities, may be subject to scrutiny under these laws.

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

We may be liable if the FDA or another regulatory agency concludes that we have engaged in the off-label promotion of our products.

We may be liable if the FDA, competent authorities of the EEA countries, or another regulatory agency concludes that we have engaged in the off-label promotion of our products.

Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of the off-label use of our products.

Healthcare providers may use our products off-label, as the FDA does not restrict or regulate a physician's choice of treatment within the practice of medicine.

However, if the FDA determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties.

It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties.

Although we intend to train our marketing and direct sales force to not promote our products for uses outside of their cleared uses and our policy will be to refrain from statements that could be considered off-label promotion of our products, the FDA or another regulatory agency could disagree and conclude that we have engaged in off-label promotion.

However, if the FDA, competent authorities of the EEA countries, or other foreign regulatory authorities determine that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties.

It is also possible that other federal, state or competent authorities of the EEA countries, or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties.

Although we intend to train our marketing and direct sales force to not promote our products for uses outside of their cleared uses and our policy will be to refrain from statements that could be considered off-label promotion of our products, the FDA competent authorities of the EEA countries, or another regulatory agency could disagree and conclude that we have engaged in off-label promotion.

In addition, the off-label use of our products may increase the risk of product liability claims.

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International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country.

In order to market our products in other countries, we must obtain regulatory approvals and comply with extensive safety and quality regulations in other countries.

In the EEA, our devices are required to comply with the essential requirements set out in Annex I of the EU Active Implantable Medical Device Directive (Council Directive 90/385/EEC) in order to be placed on the market.

Provided that our devices successfully complete a conformity assessment under Council Directive 90/385/EEC demonstrating compliance with these essential requirements, we may affix the CE conformity mark to our devices, without which they cannot be commercialized in the EEA.

The advertising and promotion of our products is subject to the laws of EEA Member States implementing Directive 2006/114/EC concerning misleading and comparative advertising, Directive 2005/29/EC on unfair commercial practices, as well as other EEA Member State laws or codes of practice governing the advertising and promotion of medical devices.

These laws may limit or restrict the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare providers, which could negatively impact our business, operating results and financial condition.

In order to market our products in other countries, we must obtain regulatory approvals or certifications and comply with extensive safety and quality regulations in other countries.

The advertising and promotion of our products in the EEA is subject to EEA countries' national laws implementing the AIMD and applying the MDR, Directive 2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other national legislation of individual EEA countries governing the advertising and promotion of medical devices.

EEA countries' legislation may also restrict or impose limitations on our ability to advertise our products directly to the general public.

In addition, voluntary EU and national industry Codes of Conduct provide guidelines on the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals, which could negatively impact our business, operating results and financial condition.

Off-label use of our product by patients could lead to product liability claims and regulatory action.

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While we do not believe that, as a general matter, such a claim would have merit, the possibility of an adverse result to the manufacturer cannot be dismissed, and in any event, we could incur significant defense costs.

Also, if there should be widespread off-label use of our system by patients, and resulting adverse medical events, the FDA or other regulatory bodies might require us, to implement additional measures to reduce off-label use, which could be costly or reduce adoption of Eversense.

Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain regulatory clearance or approval of our products.

Also, if there should be widespread off-label use of our system by patients, and resulting adverse medical events, the FDA, competent authorities of the EEA countries or other foreign regulatory bodies might require us, to implement additional measures to reduce off-label use, which could be costly or reduce adoption of Eversense.

Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain regulatory clearance, certification or approval of our products.

Recent political, economic and regulatory influences are subjecting the healthcare industry to fundamental changes.

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We expect this global regulatory environment will continue to evolve, which could impact the cost, the time needed to approve, and ultimately, our ability to maintain existing approvals or obtain future approvals for our products.

For example, in the EU, the EU Medical Device Regulation will repeal and replace both Directive 93/42/EEC concerning medical devices and Directive 90/385/EEC concerning active implantable medical devices, and therefore will materially change the regulatory environment in which we operate in Europe.

The majority of the provisions in the EU Medical Device Regulation apply from spring 2020.

The Company will need to ensure compliance with the EU Medical Device Regulation in the future if it is to place a medical device on the EU market after this regulation comes into force and this may take time and require additional resources to ensure compliance.

Regulations of the FDA and other regulatory agencies in and outside the U.S.

For example, in the EU, on May 26, 2021, the EU Medical Device Regulation entered into application repealing and replacing both Directive 93/42/EEC concerning medical devices and Directive 90/385/EEC concerning active implantable medical devices.

We affixed the CE mark to the original Eversense CGM system in June 2016, which marked the first certification for the product to be sold within the European Economic Area (EEA).

Subsequently, we affixed the CE mark to the extended life Eversense XL CGM system in September 2017 which is currently available in select markets in Europe and the Middle East.

The changes to the regulatory system implemented in the EU by the Medical Device Regulation include stricter requirements for clinical evidence and pre-market assessment of safety and performance, new classifications to indicate risk levels, requirements for third party testing by Notified Bodies, tightened and streamlined quality management system assessment procedures and additional requirements for the quality management system, additional requirements for traceability of products and transparency as well a refined responsibility of economic operators.

We are also required to provide clinical data in the form of a clinical evaluation report.

Fulfilment of the obligations imposed by the Medical Device Regulation may cause us to incur substantial costs.

We may be unable to fulfil these obligations, or our Notified Body may consider that we

have not adequately demonstrated compliance with our related obligations to merit a CE Certificate of Conformity on the basis of the Medical Device Regulation.

Regulations of the FDA and other regulatory agencies, including third country authorities and Notified Bodies, in and outside the U.S.

impose extensive compliance and monitoring obligations on our business.

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These inspections may include our suppliers’ facilities.

In addition, EU member states have powers to suspend the marketing and use, or demand the recall, of unsafe or non-compliant devices.

In addition, the competent authorities of individual EEA countries have powers to suspend the marketing and use, or demand the recall, of unsafe or non-compliant devices.

They also have the power to bring enforcement action against companies or individuals for breaches of the device rules.

Non-compliance may also result in Notified Bodies revoking any certificate of conformity that they have issued for a device or the manufacturer’s quality system.

Non-compliance may also result in Notified Bodies revoking, suspending or varying any CE Certificate of Conformity that they have issued for a device or the manufacturer’s quality system.

In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products.

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Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated medical device tax and “Cadillac” tax on high-cost employer-sponsored health coverage and, effective January 1, 2021, also eliminated the health insurer tax.

On December 14, 2018, a Texas U.S.

District Court Judge ruled that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017.

Additionally, on December 18, 2019, the U.S.

Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well.

Supreme Court is currently reviewing the case, although it is unknown when a decision will be made.

Further, although the U.S.

Supreme Court has not yet ruled on the constitutionality of the PPACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the PPACA marketplace.

The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the PPACA.

It is unclear how the Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration will impact the PPACA and our business.

On June 17, 2021, the U.S.

Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.

Thus, the ACA will remain in effect in its current form.

Prior to the U.S.

Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the PPACA marketplace.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the PPACA.

It is possible that the ACA will be subject to judicial or Congressional challenges in the future.

It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the PPACA and our business.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 with the exception of a temporary suspension from May 1, 2020 through March 31, 2021 unless additional Congressional action is taken.

from May 1, 2020 through March 31, 2021 unless additional Congressional action is taken.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Congress and the Biden administration are considering additional health reform measures.

At this time, we cannot predict which, if any, additional healthcare reform proposals will be adopted, when they may be adopted or what impact they, or the PPACA, may have on our business and operations, and any of these impacts may be adverse on our operating results and financial condition.

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The stock market in general and the market for innovative, emerging medtech and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.

From December 23, 2020 through March 3, 2021, the trading price of our common stock has been as low as $0.43 per share and as high as $5.56 per share.

This recent extreme stock price volatility has been accompanied by extremely high trading volume in our common stock in comparison to historical experience.

From December 1, 2020 through February 25, 2022, the trading price of our common stock has been as low as $0.36 per share and as high as $5.56 per share.

This extreme stock price volatility has been accompanied by extremely high trading volume in our common stock in comparison to historical experience.

During this period, the average daily trading volume of our common stock has been approximately 24 million shares and on January 19, 2021, our trading volume exceeded 409 million shares, whereas the average daily trading volume from January 1, 2021 to December 31, 2021 was 26.4 million shares.

The extreme recent increase in trading volume and volatility has not necessarily correlated to the company’s announcement of material developments and appears unrelated to changes in actual or expected operating performance.

The extreme increase in trading volume and volatility has not necessarily correlated to the company’s announcement of material developments and often appears unrelated to changes in actual or expected operating performance.

Purchases or sales of large quantities of our stock, including the establishment and/or closing of significant short positions in our stock could have an unusual or adverse effect on our market price.

Market fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future.

Abnormal trading

activity, including activity that is considered market manipulation, can lead to irrational and/or temporary movements in the price of our common stock, which, in turn, may increase its risk and volatility.

Abnormal trading activity, including activity that is considered market manipulation, can lead to irrational and/or temporary movements in the price of our common stock, which, in turn, may increase its risk and volatility.

We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.

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● sales of substantial amounts of our stock by existing stockholders (including stock by insiders or 5% stockholders);

● regulatory approvals, timelines or other actions;

● regulatory approvals, certifications, timelines or other actions;

● litigation;

● public concern as to the safety of our products or recalls;

● the make-up of our shareholder base;

● the other factors described in this Risk Factors section.

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Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.

The holders of the convertible preferred stock rank senior to our common stock upon a liquidation of our company.

In the event of a liquidation, dissolution or winding up of our company, our Series A convertible preferred stock, along with any convertible preferred stock that we may issue to PHC or Energy Capital, will rank senior to our common stock.

Each share of preferred stock will be entitled to receive an amount per share equal to the greater of the purchase price paid and the amount that the holder would have been entitled to receive at such time if the convertible preferred stock were converted into common stock.

Until the holders of the convertible preferred stock have been paid their liquidation amount in full, no payment will be made to any holder of common stock.

If our assets, or the proceeds from their sale, distributable among the holders of the convertible preferred stock are not sufficient to pay the liquidation amount in full, then those assets or proceeds will be distributed among the holders of the convertible preferred stock.

In that case, there would be no assets or proceeds remaining to be distributed to holders of our common stock, which could impact the trading price of our common stock.

Shares of our convertible preferred stock, including shares issuable under our Equity Line Agreement with Energy Capital, and the PHC Notes are convertible into shares of our common stock and, upon conversion, will dilute your percentage of ownership.

Each share of our convertible preferred stock is convertible at any time at the option of the holder into approximately 2,100 shares of our common stock (subject to customary anti-dilution adjustments, including in the event of any stock split).

Under the Equity Line Agreement, subject to the satisfaction of certain conditions, including that we have less than $8 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), we also have the right, in our sole discretion, to present Energy Capital with a purchase notice directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of our Series B Preferred Stock, with such shares convertible into common stock at a price of $0.3951 per share.

Also, under the Equity Line Agreement, beginning January 1, 2022, subject to the satisfaction of certain conditions, Energy Capital has the option to purchase any Series B Preferred Stock that we have not already sold to it under the agreement at a price of $1,000 per share.

The PHC Notes are, and the Convertible preferred stock issuable under our Equity Line Agreement with Energy Capital, will be convertible into shares of our common stock and, upon conversion, will dilute your percentage of ownership.

The PHC Notes are also convertible into our common stock at the option of the holder.

Accordingly, any conversion of convertible preferred stock or the PHC Notes would dilute the ownership of our holders of common stock.

Additionally, under the Equity Line Agreement, subject to the satisfaction of certain conditions, including that we have less than $8 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), we have the right, in our sole discretion, to present Energy Capital with a purchase notice directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of our Series B Preferred Stock, with such shares convertible into common stock at a price of $0.3951 per share.

Also, under the Equity Line Agreement, subject to the satisfaction of certain conditions, Energy Capital has the option to purchase any Series B Preferred Stock that we have not already sold to it under the agreement at a price of $1,000 per share.

The potential dilutive effect of the conversion of shares of convertible preferred stock or convertible notes may also adversely affect our ability to obtain additional financing on favorable terms or at all.

Holders of the convertible preferred stock and convertible notes have the ability exert substantial influence over us in a manner adverse to your interests.

Subject to maintaining specified ownership thresholds, the holders of convertible preferred stock and the PHC Notes have the ability to designate, in the aggregate, up to three members of our board of directors.

The holders of convertible preferred stock generally are entitled to vote with the holders of the shares of common stock on all matters submitted for a vote of holders of shares of common stock (voting together with the holders of shares of common stock as one class) on an as-converted basis.

Additionally, certain matters require the approval of the majority of the outstanding convertible preferred stock, voting as a separate class, including (i) altering or changing adversely the powers, privileges, preferences or rights of the convertible preferred stock, or (ii) amendments, modifications, repeal or waiver of any provision of our certificate of incorporation or of the certificate of designations that would adversely affect the rights, preferences, privileges or powers of the convertible preferred stock.

As a result, the holders of our convertible preferred stock and the PHC Notes are able to influence our decisions, including the election and removal of directors, any merger, consolidation, sale of all or substantially all of our assets, or other significant corporate transactions.

Holders of our convertible notes have the ability exert substantial influence over us in a manner adverse to your interests.

Subject to maintaining specified ownership thresholds, the former holders of our Series A convertible preferred stock, which has now been converted to common stock, and the PHC Notes have the ability to designate, in the aggregate, up to three members of our board of directors.

As a result, the holders of the PHC Notes and the former holders of our convertible preferred stock are able to influence our decisions, including the election and removal of directors, any merger, consolidation, sale of all or substantially all of our assets, or other significant corporate transactions.

Some of these persons or entities may have interests different the interests of the holders of our common stock.

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We have entered into agreements with PHC and Energy Capital that, collectively, provide for our receipt of up to $27 million of aggregate funding pursuant to the sale of convertible preferred stock to PHC and Energy Capital.

Pursuant to our agreement with PHC, we have the option to sell and issue to PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022, contingent upon our obtaining FDA approval for the 180-day Eversense product for marketing in the United States before such date.

On November 9, 2020, we entered into the Equity Line Agreement with Energy Capital.

Pursuant to our agreement with PHC, we have the option to sell and issue to PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022, which was contingent upon our obtaining FDA approval for the 180-day Eversense product for marketing in the United States before such date.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA.

On November 9, 2020, we entered into the Equity Line Agreement with

Energy Capital.

Under the Equity Line Agreement, subject to the satisfaction of certain conditions, including that we have less than $8 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), we have the right, in our sole discretion, to present Energy Capital with a purchase notice directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of our Series B Preferred Stock, with such shares convertible into common stock at a price of $0.3951 per share.

Also, under the Equity Line Agreement, beginning January 1, 2022, subject to the satisfaction of certain conditions, Energy Capital has the

option to purchase any Series B Preferred Stock that we have not already sold to it under the agreement at a price of $1,000 per share.

Because of the contingencies of each transaction, there can be no guarantee that we will be able to sell the additional convertible preferred stock to PHC or Energy Capital.

If we are unable to do so, we may be forced to seek to raise additional capital on less advantageous terms, if available at all, which would likely have a material adverse effect on our liquidity and the trading price of our common stock.

We may not be entitled to forgiveness of our recently received PPP Loan, and our application for the PPP Loan could in the future be determined to have been impermissible or could result in damage to our reputation.

Our application for the PPP Loan could, in the future, be determined to have been impermissible or could result in damage to our reputation.

On April 22, 2020 we received proceeds of $5.8 million from a loan under the Paycheck Protection Program of the CARES Act, a portion of which may be forgiven, which used to retain current employees, maintain payroll and make lease and utility payments.

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Not more than 25% of the forgiven amount may be for non-payroll costs.

The amount of the PPP Loan eligible to be forgiven is limited because of certain headcount reductions that we implemented in March 2020 and will be reduced if our full-time headcount declines further, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%.

We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest and we cannot provide any assurance that we will be eligible for loan forgiveness, or that any amount of the PPP Loan will ultimately be forgiven by the SBA.

We expect to apply forgiveness and make payments on any unforgiven portion on the PPP Loan in the second half of 2021.

Furthermore, on April 28, 2020, the Secretary of the U.S.

Department of the Treasury stated that the SBA will perform a full review of any PPP loan over $2.0 million before forgiving the loan.

We have elected not to apply for forgiveness and are making monthly payments of principal and interest until the loan is paid in full in the second quarter of 2022.

In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations.

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The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans.

If, despite our good-faith belief that given our Company's circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to penalties, including significant civil, criminal and administrative penalties and could be required to repay the PPP Loan in its entirety.

In addition, receipt of a PPP Loan may result in adverse publicity and damage to reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources.

Should we be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the PPP Loan or otherwise, such audit or review could result in the diversion of management’s time and attention and legal and reputational costs.

If we were to be audited or reviewed and receive an adverse determination or finding in such audit or review, we could be required to return the full amount of the PPP Loan.

Should we be audited or reviewed by federal or state regulatory authorities, such audit or review could result in the diversion of management’s time and attention and legal and reputational costs.

Any of these events could have a material adverse effect on our business, results of operations and financial condition.

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Our liability options related to the Energy Capital Agreement and Masters Capital Agreement are classified as liabilities in accordance with ASC 480 on the Company’s balance sheet and are recorded at fair value.

These options are

required to be remeasured to fair value at each reporting period with the change recorded in change in fair value of derivatives that is a component of other income (expense).

These options are required to be remeasured to fair value at each reporting period with the change recorded in change in fair value of derivatives that is a component of other income (expense).

Our convertible senior subordinated notes contain certain embedded features that require bifurcation of the embedded conversion option along with the fundamental change make-whole provision, interest make-whole provision, and the cash settled fundamental make-whole shares provision, and recorded the fair value of these embedded features as a derivative liability in the Company’s consolidated balance sheets in accordance with Accounting Standards Codification, or ASC, Topic 815, Derivatives and Hedging .

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Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.

There are provisions in our certificate of incorporation and bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change of control was considered favorable by some or

all of our stockholders.

For example, our board of directors has the authority to issue up to 5,000,000 shares of preferred stock.

The board of directors can fix the price, rights, preferences, privileges, and restrictions of the preferred stock without any further vote or action by our stockholders.

The issuance of shares of preferred stock may delay or prevent a change of control transaction.

The issuance of shares of preferred stock may delay or prevent a

change of control transaction.

As a result, the market price of our common stock and the voting and other rights of our stockholders may be adversely affected.

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While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions.

If a court were to find these types of provisions to be inapplicable or unenforceable, and if a court were to find the exclusive forum provision in our amended and restated bylaws to be

inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could materially adversely affect our business.

If a court were to find these types of provisions to be inapplicable or unenforceable, and if a court were to find the exclusive forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could materially adversely affect our business.

I f we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

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In preparing our financial statements, we estimate the amount of tax that will become payable in each of such places.

Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including passage of the newly enacted federal income tax law, changes in the mix of our profitability from state to state, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income

taxes and changes in tax laws.

Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.

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Under the Tax Cuts and Jobs Act of 2017, as modified by the CARES Act, federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but in the case of tax years beginning after 2020, may only be used to offset 80% of our taxable income annually.

Federal NOL carryforwards generated in taxable years beginning in 2018, 2019 and 2020 will similarly carry forward indefinitely but will not be subject to such 80% of annual taxable income limitation.

Federal NOL carryforwards generated in taxable years beginning in 2018 will similarly carry forward indefinitely but will not be subject to such 80% of annual taxable income limitation.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, and corresponding provisions of state law, if a corporation undergoes an "ownership change,"

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

What changed 10-K

Item 1A. Risk Factors