What changed in this filing

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Item 1A. Risk Factors

2023-03-16 compared with 2022-03-01 · 230 added, 219 removed, 835 unchanged (35% of the section changed)

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● 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.

We are unable to predict the extent to which the pandemic and related restrictions will impact our business, operations, financial performance and the achievement of our strategic objectives.

We are unable to predict the extent to which the pandemic and related restrictions will continue to impact our business, operations, financial performance and the achievement of our strategic objectives.

● The ongoing military action by Russia in Ukraine could have negative impact on the global economy which could materially adversely affect our business, operations, operating results and financial condition.

There is uncertainty regarding the ultimate impact the conflict, including any escalation or further expansion of the conflict’s current scope, will have on our customers, the global economy, supply chains, logistics, fuel prices, raw material pricing and our business.

● Surging natural gas and electricity costs in Europe poses a threat to our contract manufacturers ability to maintain operations in Europe which can adversely affect or business supply chain.

If the energy crisis or other supply chain challenges impact our ability to obtain raw materials on a timely basis or without significant increases in costs, our financial results and business operations may be adversely affected.

● Failure to secure or retain coverage or adequate reimbursement for Eversense or future versions of Eversense systems, including the related insertion and removal procedures, by third-party payors could adversely affect our business, financial condition and operating results.

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We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability.

Since our inception, we have incurred significant net losses, including net losses of $302.5 million, $175.2 million, and $115.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Since our inception, we have incurred significant net losses from operations and expect to incur additional losses in the near future.

Our positive income in the current year is substantially the result of fair value gains due to embedded derivatives in our convertible notes.

We incurred total net income (loss) of $142.1 million, ($302.5) million, and ($175.2) million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, we had an accumulated deficit of $808.9 million.

To date, we have financed our operations primarily through sales of our equity securities and debt financings.

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).

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 90-day and Eversense E3 in the United States and Eversense 90-day, Eversense XL and Eversense E3 in EEA markets, the Middle East, and Africa (EMEA).

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.

We have never been profitable in past years and positive net income in the current year is largely driven by changes in fair value of derivatives.

Excluding changes to the fair value of our derivative and option agreements, we do not expect to be profitable for at least the next several years.

We expect our expenses to increase significantly as we pursue these objectives.

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Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

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 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 or certificates, diversify our product offerings or continue our operations.

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

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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;

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 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 debt 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.

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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.

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 or operations of our manufacturers, distributors or other third parties with whom we conduct business.

Our business could be adversely affected by health epidemics in regions where we sell products, where we have concentrations of clinical trial sites or other business operations, and could cause significant disruption in the operations of third-party manufacturers and distributors upon whom we rely.

For example, in December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China.

Since then, COVID-19 has spread to multiple countries, including the United States and several European countries.

Our headquarters is located in Maryland, and our contract manufacturers are located in Germany, the United Kingdom and the United States.

Our distributors are located in the United States and various countries in Europe.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S.

government-imposed travel restrictions on travel between the United States, Europe and certain other countries.

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 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.

These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.

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.

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 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.

At various times during the COVID-19 pandemic, (i) our or our partners’ ability to visit physician offices have been restricted, and (ii) insertions of Eversense have been adversely impacted.

During the pandemic, these and other risks could recur or continue.

In addition, in the Spring of 2020 we announced changes in our ability to market Eversense in the U.S., substantially reduced our sales and marketing capabilities, and limited or ceased our efforts to secure new Eversense patients in the U.S.

The impact of these actions on patients and health care providers could delay or negatively impact our ability to stabilize and grow sales of Eversense in the U.S.

In addition, our clinical trials may be affected by the COVID-19 pandemic.

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 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.

The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect our liquidity.

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 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.

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, commercialization efforts, healthcare systems or the global economy as a whole.

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

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

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

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

● implement and execute our business strategy;

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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 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.

Our revenue is dependent on the success of Ascensia in commercializing our product and its future versions.

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

commercial organization to successfully market and sell our CGM system.

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.

Ascensia’s continued organizational development of its sales and marketing capabilities will be critical to successful commercialization of our Eversense systems.

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.

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and EU regulations.

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.

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 (“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, 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.

If the FDA, or any comparable foreign regulatory 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 or variation of an existing regulatory clearance or CE Certificate of Conformity for Eversense.

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

In addition, negative publicity and product liability claims resulting from any adverse regulatory action could have a material adverse effect on our business, financial condition, and operating results.

In addition, negative publicity and product liability

claims resulting from any adverse regulatory action could have a material adverse effect on our business, financial condition, and operating results.

Foreign governmental regulations have become increasingly stringent and more extensive, and we may become subject to even more rigorous regulation by foreign governmental authorities in the future.

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● 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.

However, if regulatory authorities or Notified Bodies 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, 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.

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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.

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.

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.

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

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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.

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.

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Dexcom’s CGM system was the first CGM system to be approved by the FDA for marketing as a non-adjunctive device, and Abbott’s Freestyle Libre was also approved for non-adjunctive use.

Both Dexcom (G6) and Abbott (Freestyle Libre) systems have factory calibration, and do not require user calibration.

Dexcom has also received the first FDA iCGM indication allowing its Dexcom G6 to be interoperable with other diabetes tech devices such as insulin pumps.

Both Dexcom (G6 and G7) and Abbott (Freestyle Libre) systems have factory calibration, and do not require user calibration.

Dexcom has also received the first FDA iCGM indication allowing its Dexcom G6 and G7 to be interoperable with other diabetes tech devices such as insulin pumps.

As the industry evolves, we anticipate encountering increasing competition from companies that integrate CGM with insulin pumps.

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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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Further, we may be required to fund capital investments at our third-party suppliers to support increased production capacity.

In addition, although we expect some of our future versions of Eversense to share product features and components with our current Eversense and Eversense XL versions, manufacturing these future versions of Eversense may require the modification of production lines, the identification of new manufacturers for specific components, or the development of new manufacturing technologies.

In addition, although we expect some of our future versions of Eversense to share product features and components with our current Eversense E3 product, manufacturing future versions of Eversense may require the modification of production lines, the identification of new manufacturers for specific components, or the development of new manufacturing technologies.

It may not be possible for us to manufacture these products at a cost or in quantities sufficient to make these future versions of Eversense commercially viable.

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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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As a result, there is a risk that certain components could be discontinued and no longer available to us.

We may be required to make significant "last time"

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

We may be required to make significant "last time" 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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We, and our suppliers, take precautions to safeguard facilities, including acquiring insurance, employing back-up generators, adopting health and safety protocols and utilizing off-site storage of computer data.

However, vandalism, terrorism or a natural or other disaster, such as an earthquake, health epidemic, such as the coronavirus, fire or flood, could damage or destroy equipment or our inventory of component supplies or finished products, cause substantial delays in our operations, result in the loss of key information, or cause us to incur additional expenses.

However, vandalism, terrorism or a natural or other disaster, such as an

earthquake, health epidemic, such as the coronavirus, fire or flood, could damage or destroy equipment or our inventory of component supplies or finished products, cause substantial delays in our operations, result in the loss of key information, or cause us to incur additional expenses.

Our insurance may not cover our losses in any particular case.

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Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements.

We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all.

We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a

cost-effective basis, on acceptable terms or at all.

We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement.

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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 potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition.

The ongoing military action by Russia in Ukraine could have negative impact on the global economy which could materially adversely affect our business, operations, operating results and financial condition.

On February 24, 2022, Russian forces launched significant military action against Ukraine, and sustained conflict and disruption in the region is possible.

The impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by Canada, the United Kingdom, the European Union, the U.S.

and other countries and companies and organizations against officials, individuals, regions, and industries in Russia and Ukraine, and actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions, tensions, and military actions could adversely affect the global economy and financial markets and thus could affect our business, operations, operating results and financial condition as well as the price of our common stock and our ability to raise additional capital when needed on acceptable terms.

The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.

While our suppliers may source certain raw materials from Russia and Ukraine, to date we have not been notified that the supply of these materials has been significantly impacted by the conflict.

We continue to monitor the situation closely and are proactively assessing and evaluating alternative sources to bolster supply of these materials moving forward, in addition to working closely with our suppliers in any product re-qualification that may be required.

Revenue relating to products manufactured from raw materials sourced from this region does not constitute a material portion of our business.

Further, there is uncertainty regarding the ultimate impact the conflict, including any escalation or further expansion of the conflict’s current scope, will have on our customers, the global economy, supply chains, logistics, fuel prices, raw material pricing and our business.

Surging natural gas and electricity costs in Europe poses a threat to our contract manufacturers ability to maintain operations in Europe which can adversely affect or business supply chain

Europe’s energy crisis driven by the impacts of Russia’s military action in Ukraine is quickly soaring and causing extreme disruption to the manufacturing industry across the continent.

The reduced natural gas supply to Europe has resulted in higher gas costs which have been unsustainable for energy intensive companies that operate across Europe.

Several manufacturers have shut down, suspended or reduced operations amidst the skyrocketing prices.

Several of our suppliers operate in Europe and may be impacted by the energy crisis as the result of increased production costs.

Across Europe, these energy constraints could result in nations or regions enacting emergency energy related policies, limiting energy availability for manufacturers.

The impact of these developments cannot be predicted with certainty, however, any such production constraints could further exacerbate an already ailing supply chain and could have a material, adverse effect on our operations and our ability to source materials that are required to manufacture our products.

We continue to monitor the situation closely and continue to have discussions with our suppliers to determine whether there may be any uncertainty with regards to our ability to source materials that are required to manufacture our products.

Our business could be adversely affected by economic downturns, inflation, increases in interest rates, natural disasters, public health crises such as the COVID-19 pandemic, political crises, geopolitical events, such as the crisis in Ukraine, or other macroeconomic conditions, which have in the past and may in the future negatively impact our business and financial performance.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions,

including, among other things, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, supply chain shortages, increases in inflation rates, higher interest rates and uncertainty about economic stability.

For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets.

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 COVID-19 pandemic has had and could continue to have negative impacts, such as (a) a global or U.S.

recession or other economic crisis;

(b) credit and capital markets volatility (and access to these markets, including by our suppliers and customers);

(d) disruptions in raw material supply, our manufacturing operations, or in our distribution and supply chain;

and (e) our ability to conduct planned clinical trials and commercialization activities.

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

We will continue to monitor the COVID-19 situation closely.

The Federal Reserve recently raised interest rates multiple times in response to concerns about inflation and it may raise them again.

Higher interest rates, coupled with reduced government spending and volatility in financial markets may increase economic uncertainty and affect consumer spending.

If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive.

Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.

Risks Related to our Financial Results and Need for Financing

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

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.

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.

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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Our business may be exposed to foreign exchange risks.

We incur some of our expenses and derive revenues from Eversense XL in currencies other than the U.S dollar.

We incur some of our expenses and derive revenues from the Eversense system in currencies other than the U.S dollar.

As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates.

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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.

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 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 other jurisdictions.

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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 a 365-day sensor.

For example, we currently have a pivotal trial underway 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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Further, the outcomes of our earlier clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.

Moreover, clinical data is often susceptible to varying interpretations and analyses, and many companies that have believed their products performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval.

If we are unable to successfully complete clinical trials of Eversense or other testing, if the results of these trials or tests are not favorable or if there are safety concerns, we may:

● not obtain marketing approval for such modifications;

● be delayed in obtaining marketing approval for such modifications;

● not obtain marketing approval or certification for such modifications;

● be delayed in obtaining marketing approval or certification for such modifications;

● be subject to additional post-marketing testing requirements;

● have Eversense removed from the market after obtaining marketing approval.

Our development costs will also increase if we experience delays in testing or marketing approvals.

Our development costs will also increase if we experience delays in testing, marketing approvals, or certification.

Significant clinical trial delays also could allow our competitors to bring innovative products to market before we do and impair our ability to successfully commercialize our products.

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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, and Ken Horton, our General Counsel and Corporate Development Advisor, 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, Rick Sullivan, 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.

We do not maintain "key person"

insurance for any of our executives or employees.

We do not maintain "key person" insurance for any of our executives or employees.

Recruiting and retaining qualified scientific and clinical personnel and, as we progress the development of our product pipeline toward scaling up for commercialization, manufacturing and sales and marketing personnel, will also be critical to our success.

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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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Our patents expire between 2023 and 2042, subject to any patent extensions that may be available for such patents.

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

If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2032 to 2042, subject to any patent term extensions or adjustments that may be available

for such patents.

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.

We have two pending U.S.

trademark application and 5 pending foreign trademark applications, as well as 12 U.S.

trademark registrations and 129 foreign trademark registrations.

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We rely on our trademarks and trade names to distinguish our products from the products of our competitors and have registered or applied to register many of these trademarks.

For example, we have two pending applications in the United States for the "Eversense"

For example, we have two pending applications in the United States for the "Eversense" trademark.

We cannot assure you that our trademark applications will be approved in a timely manner or at all.

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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the United States Patent and Trademark Office, or USPTO, the European Patent Office, or EPO, and other foreign patent agencies over the lifetime of our owned patents and applications.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the United States Patent and Trademark Office (“USPTO”) the European Patent Office (“EPO”), and other foreign patent agencies over the lifetime of our owned patents and applications.

The USPTO, the EPO and various foreign governmental patent agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process.

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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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We are subject to the patent laws of countries other than the United States, which may not offer the same level of patent protection and whose rules could seriously affect how we draft, file, prosecute and maintain patents, trademarks and patent and trademark applications.

Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (for example, the patent owner has failed to "work"

the invention in that country, or the third party has patented improvements).

In addition, many countries limit the enforceability of patents against government agencies or government contractors.

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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;

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;

● 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;

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

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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.

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If we or our suppliers have significant non-compliance issues or if any corrective action plan that we or our suppliers propose in response to observed deficiencies is not sufficient, the FDA could take enforcement action against us.

We are subject to equivalent limitations and penalties in foreign countries.

Any of the foregoing actions could impair our reputation, business, financial condition and operating results.

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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.

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 (“FCPA”) and other federal statutes and regulations, including those established by the Office of Foreign Assets Control (“OFAC”).

In addition, the U.K.

Bribery Act of 2010, or the Bribery Act, prohibits both domestic and international bribery, as well as bribery across both private and public sectors.

An organization that "fails to prevent bribery"

by anyone associated with the organization can be charged under the Bribery Act unless the organization can establish the defense of having implemented "adequate procedures"

to prevent bribery.

Bribery Act of 2010 (“Bribery Act”) prohibits both domestic and international bribery, as well as bribery across both private and public sectors.

An organization that "fails to prevent bribery" by anyone associated with the organization can be charged under the Bribery Act unless the organization can establish the defense of having implemented "adequate procedures" to prevent bribery.

Under these laws and regulations, as well as other anti-corruption laws, anti-money-laundering laws, export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions.

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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.

Such healthcare laws potentially applicable to our operations include:

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A person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation;

● federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which is enforceable through civil whistleblower or qui tam actions, prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment or approval to the federal government that are false or fraudulent, knowingly making a false statement material to an obligation to pay or transmit money or property to the federal government or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the federal government.

pay or transmit money or property to the federal government or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the federal government.

The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statutes;

● 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), other healthcare professionals (such as physician assistants and nurse practitioners, and teaching hospitals, and ownership and investment interests held by physicians.

● 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 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 PPACA, on device manufacturers regarding the annual reporting to CMS, of any "transfer of value" 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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and state laws governing the privacy and security of certain health information, many of which differ from each other in significant ways and often are not preempted by HIPAA;

● the California Consumer Privacy Act, or CCPA, that creates new individual privacy rights for consumers (which is broadly defined) and places increased privacy and security obligations on entities handling certain personal data;

● 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.

● the California Consumer Privacy Act (“CCPA”) that creates new individual privacy rights for consumers (which is broadly defined) and places increased privacy and security obligations on entities handling certain personal data;

● equivalent foreign legislation and requirements including in relation to interactions between medical devices companies and healthcare professionals, such as national anti-bribery laws of European countries, national sunshine rules, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct.

Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment;

● foreign data privacy regulations, such as the 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.

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 collection and use of personal health data in the EEA and UK is governed by the GDPR.

The GDPR applies to the processing of personal data by any company established in the EEA or UK 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 or UK.

Under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;

fines of up to 20

million Euros or 4% of annual global revenue, whichever is greater;

or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

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.

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

In the ordinary course of business, we may transfer personal data from the EEA and UK or other jurisdictions to the United States or other countries.

Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK or other jurisdictions to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

If there is no lawful manner for us to transfer personal data from the EEA or UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.

Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups.

Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.

We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

We publish privacy policies and other statements regarding data privacy and security.

If these policies or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.

Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.

Preparing for and complying with these obligations requires us to devote significant resources, which may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.

In the ordinary course of our business, we and the third parties upon which we rely, process proprietary, confidential, and sensitive data, including personal data (such as health-related data), intellectual property and trade secrets (collectively, sensitive information).

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.

Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, and other similar threats.

In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Because of the remote work policies, we implemented due to the COVID-19 pandemic, sensitive 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 sensitive information.

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.

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.

We rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts.

Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.

If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences.

While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely.

A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our products and services.

If we or our parties on which we rely fail to comply or are alleged to have failed to comply with applicable data privacy and security regulations, or if we were to experience a security incident involving personal data, we could face significant consequences, including but not limited to;

government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);

litigation (including class-action claims);

additional reporting requirements and/or oversight;

bans on processing personal data;

orders to destroy or not use personal data.

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 compliance with the security incident notification obligations laid out in the GDPR, we notified the Italian Data Protection Authority (“Garante”), of an unintended disclosure of certain user e-mail addresses to other users in Italy.

Subsequent to this notification, we were able to settle the matter with the Garante.

It is possible that the Garante may, in the future, follow up regarding our corrective measures and overall GDPR compliance.

Further investigations of the Garante could cause an adverse reaction by users of our product, negative publicity, financial penalties or negative regulatory implications under the GDPR, any of which could have a material adverse effect on our business.

Moreover, governments and regulators in certain jurisdictions, including Europe, are increasingly seeking to regulate the use, transfer and other processing of non-personal information (for example, under the European Union’s Data Act), an area which has typically been the subject of very limited or no specific regulation.

This means that, if and to the extent such regulations are relevant to our operations or those of our customers, certain of the above risks and considerations may apply equally to our processing of both personal and non-personal information.

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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For example, to enforce compliance with the federal laws, the U.S.

Department of Justice, or DOJ, has recently increased its scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

Dealing with investigations can be time and resource consuming and can divert management's attention from our core business.

Department of Justice has recently increased its scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

Dealing with investigations can be

time and resource consuming and can divert management's attention from our core business.

Additionally, if we settle an investigation with law enforcement or other regulatory agencies, we may be forced to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

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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.

The advertising and promotion of our products in the EEA is subject to EEA countries' national laws implementing the AIMD and applying the Medical Device Regulation, 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.

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Eversense is currently labeled as non-adjunctive;

however twice daily fingerstick calibrations are still required.

however once a day fingerstick calibrations are still required.

We have no control over whether patients adhere to labeling instructions and confirm blood glucose levels to ensure calibration with Eversense.

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

The sales of our products depend in part on the availability of coverage and reimbursement from third-party payors such as government health administration authorities, private health insurers, health maintenance organizations and other healthcare-related organizations.

and other healthcare-related organizations.

Both the federal and state governments in the United States continue to propose and pass new legislation and regulations designed to contain or reduce the cost of healthcare.

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Regulatory requirements continue to differ significantly among countries.

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, 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.

We affixed the CE mark to the original 90-day 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 was sold 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.

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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.

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.

In addition, the exit of the UK from the EU, commonly referred to as “Brexit” could lead to regulatory divergence between the EU and the UK.

On 26 May 2021, the MDR entered into application in the EU.

However, the MDR is not applicable in the UK.

In the UK, medical devices are governed by the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002) which, for the time being, retains a regulatory framework similar to the framework set out by the MDD.

The UK Medicines and Healthcare products Regulatory Agency plans on introducing new legislation governing medical devices with an aim to bring the new regulations into force by July 2024.

Should the UK or Great Britain further diverge from the EU from a regulatory perspective, tariffs could be put into place in the future.

We could therefore, both now and in the future, face significant additional expenses to operate our business, which could significantly and materially harm or delay our ability to generate revenue or achieve profitability of our business.

Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us.

These developments, or the perception that any of them could occur, may significantly reduce global trade and, in particular, trade between the EU and the UK.

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

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These agencies review our design and manufacturing practices, labeling, record keeping, manufacturers’ required reports of adverse experiences and other information to identify potential problems with marketed medical devices.

We are subject to unannounced device inspections by European Notified Bodies, as well as other regulatory agencies overseeing the implementation and adherence of applicable regulations.

We are subject to unannounced device inspections by Notified Bodies, as well as other regulatory agencies overseeing the implementation and adherence of applicable regulations.

These inspections may include our suppliers’ facilities.

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Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our products.

Delays in receipt of or failure to receive regulatory clearances or approvals for our products would harm our business, financial condition and operating results.

Delays in receipt of or failure to

receive regulatory clearances or approvals for our products would harm our business, financial condition and operating results.

While a goal of healthcare reform is to expand coverage to more individuals, it also involves increased government price controls, additional regulatory mandates and other measures designed to constrain medical costs.

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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.

Further, on August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.

The IRA also eliminates the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program.

It is possible that the PPACA 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.

Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.

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 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.

From January 1, 2021 through March 10, 2023, the trading price of our common stock has been as low as $0.85 per share and as high as $5.27 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 15 million shares and on January 19, 2021, our trading volume exceeded 409 million shares, whereas the average daily trading volume from January 1, 2022 to December 31, 2022 was 6.5 million shares.

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Subject to compliance with applicable rules and regulations, we may issue our shares of common stock, including securities convertible into common stock, in connection with a financing, acquisition, investment, our equity incentive plans or otherwise.

This includes the issuance, from time to time, of non-statutory stock options exercisable for shares of our common stock and/or restricted stock units that may be settled in shares of our common stock pursuant to the Senseonics Holdings, Inc.

2023 Commercial Equity Plan.

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

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.

Holders of our Series B convertible preferred stock and our convertible notes may convert their note into common stock and, upon conversion, will dilute your percentage of ownership.

Our note holders have the ability exert substantial influence over us in a manner adverse to your interests.

The Series B convertible preferred stock, PHC Notes, and 2025 Notes are convertible into our common stock at the option of the holder.

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

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 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.

The future funding pursuant to agreements to sell convertible preferred stock to PHC and Energy Capital is not guaranteed.

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, 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.

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.

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.

The PPP Loan matures on April 21, 2022 and bears annual interest at a rate of 1.0%.

Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the eight-week period beginning on the date of loan approval.

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

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.

We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad objectives of the Paycheck Protection Program of the CARES Act.

The certification described above does not contain any objective criteria and is subject to interpretation.

On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.

Subsequently, on April 29, 2020 the SBA issued guidance that it will review all PPP loans of more than $2 million, following the lender’s submission of the borrower’s loan forgiveness application.

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.

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, 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.

Our GAAP operating results could fluctuate substantially due to changes in fair value of the liability options and the derivatives related to the embedded conversion option, interest make-whole provision and make-whole fundamental change provision features of the notes.

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).

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 .

Subject to maintaining specified ownership thresholds, the holders of the PHC Notes have a right to designate two individuals to serve on our board of directors.

As a result, the holders of 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.

The holders of the PHC notes may have interests different the interests of the holders of our common stock.

Our GAAP operating results could fluctuate substantially due to changes in fair value of the derivatives related to the embedded conversion option, interest make-whole provision and make-whole fundamental change provision features of the notes.

ASC 815 requires companies to bifurcate certain embedded derivatives from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria.

The fair value of the derivative is remeasured to fair value at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value of the derivative being charged to earnings (loss).

We utilize a third-party valuation expert and the binomial option pricing method to determine the fair value of the derivative instruments at each reporting date using inputs based on recent trading prices (Level 2) and other observable inputs, including our common stock price, implied volatility, interest rates and credit spreads, or unobservable inputs (Level 3) where there is an absence of recent trading prices.

We utilize a third-party valuation expert and the binomial option pricing method to determine the fair value of the derivative instruments at each reporting date using inputs based on recent trading prices (Level 2) and other observable inputs, including our common stock price, implied volatility, and interest rates, or unobservable inputs (Level 3) where there is an absence of recent trading prices.

We cannot predict the effect that the accounting for the options and notes and the associated fluctuations in the fair value of the liability options and embedded features of the notes will have on our future GAAP financial results, the trading of our common stock and the trading price of the notes, which could be material.

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Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of financial analysts and investors, resulting in a decline in our stock price.

Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition and variable consideration, reserves for inventory obsolescence and warranties, stock-based compensation, embedded features of our senior convertible notes and income taxes.

Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition and variable consideration, reserves for inventory

obsolescence and warranties, stock-based compensation, embedded features of our senior convertible notes and income taxes.

We do not intend to pay cash dividends in the foreseeable future.

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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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Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

(i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine.

(1) any derivative action or proceeding brought on our behalf;

(2) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders;

(3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws;

(4) any action asserting a claim governed by the internal affairs doctrine.

However, this exclusive forum provision would not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act.

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Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

We are subject to taxation in numerous U.S.

states and territories.

We are subject to taxation for US Federal and numerous U.S.

As a result, our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate.

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.

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

Nevertheless, our effective income 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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At December 31, 2022, we had federal and state net operating loss, or NOL, carryforwards of $621.5 million and had research and experimental credit carryforwards of $13.1 million.

NOL carryforwards in the amount of $198.5 million will expire in varying amounts between 2022 and 2037.

NOL carryforwards in the amount of $197.5 million will expire in varying amounts between 2023 and 2037 and tax credits of $13.1 million will expire in varying amounts between 2023 and 2043.

These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities.

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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,"

which generally occurs if the percentage of the corporation's stock owned by 5% stockholders increases by more than 50% over a three-year period, the corporation's ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

In addition, under Section 382/383 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," which generally occurs if the percentage of the corporation's stock owned by 5% stockholders increases by more than 50% over a three-year period, the corporation's ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

We have not determined if we have experienced Section 382/383 ownership changes in the past and if a portion of our NOL and tax credit carryforwards are subject to an annual limitation under Section 382/383.

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If we determine that an ownership change has occurred and our ability to use our historical NOL and tax credit carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition, or results of operations.

New tax laws, statutes, rules, regulations, or ordinances could be enacted at any time.

Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted differently, changed, repealed, or modified at any time.

Any such enactment, interpretation, change, repeal, or modification could adversely affect us, possibly with retroactive effect.

For instance, the recently enacted IRA imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases.

The Tax Cuts and Jobs Act of

2017 (“TCJA”) as amended by the Coronavirus Aid, Relief, and Economic Security Act significantly reformed the Code by lowering U.S.

federal corporate income tax rates, changing the utilization of future net operating loss carryforwards, permitting for the expensing of certain capital expenditures, eliminating the option to currently deduct research and development expenditures and requiring taxpayers to capitalize and amortize U.S.-based and non-U.S.-based research and development expenditures over five and fifteen years, respectively and putting into effect significant changes to U.S.

taxation of international business activities.

The IRA, TCJA, or any future tax reform legislation could have a material impact on the value of our deferred tax assets, result in significant one-time charges, and increase our future tax expenses.

Our bank deposits in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits could be impacted if the underlying financial institutions fail.

Our cash and cash equivalents are held in accounts at US Bank Corp, Truist Bank, and Silicon Valley Bridge Bank (formerly Silicon Valley Bank) and consist of cash in our operating accounts and cash invested in money market funds.

At any point in time, the funds in our operating accounts may exceed the FDIC insurance limits.

While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail.

To date, we have not experienced significant losses or lack of access to cash in our operating accounts or our invested cash or cash equivalents;

however, we can provide no assurances that access to our operating cash or invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors