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Item 8. Financial Statements and Supplementary Data

2025-03-03 compared with 2024-03-01 · 307 added, 265 removed, 727 unchanged (44% of the section changed)

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Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023 and 2022

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the years ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023

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We have audited the accompanying consolidated balance sheets of Senseonics Holdings, Inc.

and subsidiary (the Company) as of December 31, 2023 and 2022, the related consolidated statement of operations and comprehensive (loss) income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statement of operations and comprehensive loss, stockholders’ (deficit) equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements, the Company’s current operating plan, existing unrestricted cash and cash equivalents, and minimum cash and satisfaction of performance milestones to comply with debt covenants under its Loan and Security Agreement raise substantial doubt about its ability to continue as a going concern for the one-year period following the date the consolidated financial statements are issued.

Management’s plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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McLean, Virginia

February 29, 2024

March 3, 2025

Senseonics Holdings, Inc.

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Cash and cash equivalents

Restricted cash

Short term investments, net

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Deposits and other assets

Long term investments, net

Property and equipment, net

Liabilities and Stockholders’ Equity (Deficit)

Property, equipment and intangible assets, net

Liabilities and Stockholders’ (Deficit) Equity

Current liabilities:

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Note payable, current portion, net

Derivative liability, current portion

Total current liabilities

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Derivative liabilities

Other liabilities

Non-current operating lease liabilities

Total liabilities

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$ 0.001 par value per share;

12,000 shares and 12,000 shares issued and outstanding as of December 31, 2023 and December 31, 2022

12,000 shares issued and outstanding as of each December 31, 2024 and December 31, 2023

Total temporary equity

Stockholders’ equity (deficit):

Stockholders’ (deficit) equity:

Common stock, $ 0.001 par value per share;

900,000,000 shares authorized as of December 31, 2023 and December 31, 2022;

1,400,000,000 shares and 900,000,000 shares authorized as of December 31, 2024 and December 31, 2023;

595,351,210 shares and 530,364,237 shares issued and outstanding as of December 31, 2024 and December 31, 2023

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Accumulated deficit

Total stockholders' equity (deficit)

Total liabilities, temporary equity and stockholders’ equity (deficit)

Total stockholders' (deficit) equity

Total liabilities, temporary equity and stockholders’ (deficit) equity

The accompanying notes are an integral part of these consolidated financial statements.

Senseonics Holdings, Inc.

Consolidated Statements of Operations and Comprehensive (Loss) Income

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except for share and per share data)

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Operating loss

Other income (expense), net:

Other (expense) income, net:

Interest income

Gain (Loss) on fair value adjustment of option

Exchange related gain, net

Gain (Loss) on extinguishment of debt and option

Interest expense

Gain (Loss) on change in fair value of derivatives

Impairment cost

Other income (expense)

Total other income, net

Net (Loss) Income

Other comprehensive income (loss)

Unrealized gain (loss) on marketable securities

Total other comprehensive gain (loss)

Total comprehensive (loss) income

Basic net (loss) income per common share

Gain on change in fair value of derivatives

Total other (expense) income, net

Other comprehensive loss

Unrealized gain on marketable securities

Total other comprehensive gain

Total comprehensive loss

Basic net loss per common share

Basic weighted-average shares outstanding

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Senseonics Holdings, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

(in thousands)

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Comprehensive Loss

Equtiy (Deficit)

(Deficit) Equity

Temporary Equity

Balance, December 31, 2022

Issuance of convertible preferred stock, net of issuance costs

Issuance of common stock, net of issuance costs

Exercise of stock options and warrants

Issuance of common stock for vested RSUs and ESPP purchases

Issuance of warrants, net of issuance costs

Exercise of stock options and warrants

Exchange of 2025 Notes

Stock-based compensation expense

Shares withheld related to net share settlement of equity awards

Other comprehensive loss

Other comprehensive gain

Balance, December 31, 2023

Issuance of common stock, net of issuance costs

Issuance of the RD Shares and the PP Warrants, net of issuance costs

Issuance of common stock for vested RSUs and ESPP purchases

Issuance of warrants, net of issuance costs

Exercise of stock options and warrants

Exchange of 2025 Notes

Issuance of common stock for vested RSUs and ESPP purchases

Stock-based compensation expense

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Cash flows from operating activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation and ROU amortization expense

Non-cash interest expense

Change in fair value of derivatives

(Gain) Loss on fair value adjustment of option

(Gain) Loss on extinguishment of option

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

Non-cash interest expense (debt discount and deferred costs)

Net amortization of premiums and accretion of discounts on marketable securities

Gain on change in fair value of derivatives

Exchange-related gain, net

Impairment of option

Stock-based compensation expense

Provision for inventory obsolescence

Provision for inventory obsolescence and losses

Loss on disposal of assets

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Accrued interest

Operating lease liabilities

Payments on lease liabilities

Net cash used in operating activities

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Cash flows from financing activities

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of common stock, net

Proceeds from exercise of stock options and ESPP issuances, net

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Repayment of 2025 Notes

Repayment of term loans

Proceeds from issuance of Loan and Security Agreement, net

Proceeds from issuance of the RD Shares and the PP Warrants, net

Payment of debt issuance costs

Proceeds from issuance of warrants, net

Proceeds from issuance of preferred stock, net

Proceeds from issuance of Purchase Warrant, net

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, at beginning of period

Cash and cash equivalents, at ending of period

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents and restricted cash, at beginning of period

Cash and cash equivalents and restricted cash, at ending of period

Supplemental disclosure of cash flow information

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Lease liabilities arising from obtaining right-of-use assets

Supplemental disclosure of non-cash investing and financing activities

Supplemental disclosure of non-cash transactions

Acquisition of sensor insertion network assets in exchange for accounts receivable

Liabilities for contingent consideration

Property and equipment purchases included in accounts payable and accrued expenses

Conversion of options into redeemable convertible preferred stock

Issuance of warrants in exchange for PHC Notes

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Notes to Consolidated Financial Statements

Senseonics Holdings, Inc., a Delaware corporation, is a medical technology company focused on the development and manufacturing of long-term, implantable continuous glucose monitoring system to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy.

Senseonics Holdings, Inc., a Delaware corporation, is a medical technology company focused on the development and manufacturing of long-term, implantable continuous glucose monitoring systems to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy.

Senseonics, Incorporated is a wholly owned subsidiary of Senseonics Holdings, Inc.

and was originally incorporated on October 30, 1996 and commenced operations on January 15, 1997.

Eon Care Services, LLC and Eon Management Services, LLC are wholly owned subsidiaries of Senseonics, Incorporated formed in April 2024 and July 2024, respectively.

Senseonics Holdings, Inc.

and Senseonics, Incorporated are hereinafter collectively referred to as the “Company” unless otherwise indicated or the context otherwise requires.

Liquidity and Capital Resources

The Company’s operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, lack of operating history as a commercial-stage company and uncertainty of future profitability.

Since inception, the Company has suffered substantial operating losses, principally from expenses associated with the Company’s research and development programs and commercial launch of the Eversense® E3 CGM System (for use up to six months ) in both the United States and Europe, and the launch of our legacy versions, including Eversense CGM System in the United States (for use up to 90 days ) and the Eversense CGM and Eversense XL CGM Systems (for use up to six months ) in Europe, the Middle East, and Africa.

and its consolidated subsidiaries and affiliated entities, including its consolidated VIEs are hereinafter collectively referred to as the “Company”, unless otherwise indicated or the context otherwise requires.

Liquidity, Capital Resources, and Going Concern

The Company’s operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, limited operating history as a commercial-stage company and uncertainty of future profitability.

Since inception, the Company has suffered substantial operating losses, principally from expenses associated with the Company’s research and development programs and commercial launch of the Eversense® 365 CGM System (for use up to one-year ) in the United States, the Eversense® E3 (for use up to six months) in Europe and expenses incurred for our legacy product versions.

The Company has not generated significant profit from the sale of products and its ability to generate revenue and achieve profitability largely depends on the Company’s ability to successfully expand the commercialization of Eversense, continue the development of its products and product upgrades, and to obtain necessary regulatory approvals or certifications for the sale of those products.

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To date, the Company has funded its operations principally through the issuance of preferred stock, common stock, convertible note issuance and debt.

As of December 31, 2023, the Company had cash, cash equivalents and marketable securities of $ 109.5 million.

As of December 31, 2024, the Company had unrestricted cash and cash equivalents of $ 74.6 million.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) assuming the Company will continue

as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

Based on the Company's current operating plan, existing unrestricted cash and cash equivalents, minimum cash and satisfaction of performance milestones to comply with debt covenants under its Loan and Security Agreement as discussed in Note 13, the Company has determined that substantial doubt exists regarding its ability to continue as a going concern.

The Company will require additional liquidity to continue its operations over the next twelve months and we are currently evaluating strategies to obtain the required additional funding for future operations.

We anticipate that our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures and other strategic initiatives.

Our ability to continue to fund our operations and meet capital needs will depend on our ability to successfully obtain funding from public or private debt and equity financings and other sources of capital, as further described above under “Funding Requirements and Outlook”.

Actions taken by the Company with regards to liquidity and to manage our cash flows during the years ended December 31, 2024 and 2023, included, but were not limited to the following:

On October 24, 2024, the Company entered into a securities purchase agreement with certain institutional investors to issue and sell (i) in a registered direct offering an aggregate of 45,714,286 shares of the Company’s common stock, $ 0.001 par value per share (the “RD Shares”) and (ii) in a concurrent private placement, warrants to purchase an aggregate of 45,714,286 shares of common stock (the “PP Warrants”).

The combined purchase price of each RD Share and accompanying PP Warrant was $ 0.35 per share for total gross proceeds of $ 16.0 million.

The RD Shares and the PP Warrants were immediately separable and were issued separately.

The PP Warrants have an exercise price of $ 0.35 per share, are non-exercisable for the first six months after issuance and expire five years from the date of initial exercisability.

The offering closed on October 28, 2024, and the Company received proceeds of approximately $ 14.8 million after payment of fees to the placement agent, but before payment of any additional expenses incurred by the Company in connection with the transaction.

The proceeds were allocated to the RD Shares and PP Warrants based on the relative fair values of the instruments themselves at the time of issuance.

On September 8, 2023 (the “Effective Date”), the Company entered into a loan agreement (the “Loan and Security Agreement”) with the several institutions or entities party thereto (collectively, the “Lenders") and Hercules Capital, Inc., a Maryland corporation (“Hercules”) in its capacity as administrative agent and collateral agent for itself and the Lenders, pursuant to which the Lenders have agreed to make available to the Company up to $ 50.0 million in senior secured term loans (the “Term Loan Facility”), consisting of (i) an initial term loan of $ 25.0 million (the “Tranche 1 Loan”), which was funded on the Effective Date and (ii) two additional tranches of term loans in the amounts of up to $ 10.0 million (the “Tranche 2 Loan”) and $ 15.0 million (the “Tranche 3 Loan”), respectively, which will become available to the Company upon the Company’s satisfaction of certain terms and conditions set forth in the Loan and Security Agreement.

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The number of Exchange Shares was determined based upon the volume-weighted average price per share of the common stock during a 15-day averaging period commencing on August 11, 2023 and ending August 31, 2023.

Based on the volume-weighted average price per share of the common stock

during the averaging period, a total of 35.1 million shares of common stock were issued in the Exchanges.

Based on the volume-weighted average price per share of the common stock during the averaging period, a total of 35.1 million shares of common stock were issued in the Exchanges.

The Exchanges were settled on the initial share issuance date of August 14, 2023 and the final settlement date of September 5, 2023.

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The shares will be offered and sold pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on August 10, 2023.

As of December 31, 2023, no sales have been made under the Equity Distribution Agreement.

On October 24, 2024, the Company amended the Equity Distribution Agreement with GS to reduce the maximum amount of shares issuable thereunder to $ 55.0 million.

For the year ended December 31, 2024, the Company received approximately $ 4.3 million in net proceeds from the sale of 11,918,121 shares under the Equity Distribution Agreement.

In November 2021, the Company entered into an Open Market Sale Agreement (the “2021 Sales Agreement”) with Jefferies LLC (“Jefferies”), under which the Company could offer and sell, from time to time, at its sole discretion, shares of its common stock having an aggregate offering price of up to $ 150.0 million through Jefferies as the sales agent in an “at the market” offering.

Jefferies received commissions up to 3.0 % of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement.

For the twelve months ending December 31, 2023 and 2022, the Company received $ 7.4 million and $ 34.2 million in net proceeds from the sale of 9,944,663 shares and 15,160,899 shares of its common stock under the 2021 Sales Agreement, respectively.

Effective August 7, 2023, the Company and Jefferies mutually agreed to terminate the 2021 Sales Agreement.

During 2023, the Company received $ 7.4 million in net proceeds from the sale of 9,944,663 shares of its common stock under the 2021 Sales Agreement.

Effective August 7, 2023, the

Company and Jefferies mutually agreed to terminate the 2021 Sales Agreement.

At the time of termination, approximately $ 106.6 million remained available for issuance pursuant to the 2021 Sales Agreement.

On November 9, 2020, the Company entered into an Equity Line Agreement (the “Equity Line Agreement”) with Energy Capital, LLC, a Florida limited liability company (“Energy Capital”), which provided that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital was committed to purchase up to an aggregate of $ 12.0 million of shares of the Company’s newly designated series B convertible preferred stock (the “Series B Preferred Stock”) at the Company’s request from time to time during the 24-month term of the Equity Line Agreement.

Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, including that the Company have less than $ 8.0 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), the Company had the right, at its sole discretion, to present Energy Capital with a purchase notice (each, a “Regular 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 the Company’s Series B Preferred Stock at a per share price (the “Purchase Price”) equal to $ 1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six months after the date of its issuance, at a conversion price of $ 0.3951 per share, subject to customary anti-dilution adjustments, including in the event of any stock split.

The Equity Line Agreement provided that the Company was not permitted to affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the Company’s common stock on the NYSE American is less than $ 0.25 without the approval of Energy Capital.

In addition, beginning on January 1, 2022, since there had been no sales of the Series B Preferred Stock pursuant to the Equity Line Agreement, Energy Capital had the right, at its sole discretion, by its delivery to the Company of a Regular Purchase Notice, to purchase up to the $ 12.0 million of Series B Preferred Stock under the Equity Line Agreement at the Purchase Price.

On November 7, 2022, Energy Capital exercised in full its right to purchase $ 12.0 million of shares of Series B Preferred Stock.

The excess of the Purchase Price and the fair value of the Energy Capital option in the total amount of $ 37.6 million was recorded in additional-paid-in-capital as convertible preferred stock.

On August 9, 2020, the Company entered into a financing agreement with the parent company of Ascensia Diabetes Care Holdings AG (“Ascensia”), PHC Holdings Corporation (“PHC”), pursuant to which the Company issued $ 35.0 million in aggregate principal amount of Senior Secured Convertible Notes due on October 31, 2024 (the “PHC Notes”), to PHC.

The Company also issued 2,941,176 shares of common stock to PHC as a financing fee.

The Company also has the option to sell and issue PHC up to $ 15.0 million of convertible preferred stock on or before December 31, 2022, contingent upon obtaining U.S.

The Company also had the option to sell and issue PHC up to $ 15.0 million of convertible preferred stock on or before December 31, 2022, contingent upon obtaining U.S.

Food and Drug Administration (“FDA”) approval for the 180-day Eversense product for marketing in the United States before such date.

The Company successfully obtained FDA approval in

February 2022 and the option was not exercised.

The Company successfully obtained FDA approval in February 2022 and the option was not exercised.

As described in Note 13, on March 13, 2023, the Company entered into an Exchange Agreement (the “PHC Exchange Agreement”) with PHC, pursuant to which PHC agreed to exchange (the “PHC Exchange”) its $ 35.0 million aggregate principal amount of the PHC Notes, including all accrued and unpaid interest thereon, for a warrant (the “PHC Exchange Warrant”) to purchase up to 68,525,311 shares of the Company’s common stock, $ 0.001 par value per share (the “PHC Exchange Warrant Shares”).

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The Private Placement closed on March 13, 2023 (the “Private Placement Closing Date”) and the Company received aggregate gross proceeds of $ 15.0 million, before deducting private placement expenses payable by the Company.‌

The Company believes that these agreements provide the financial resources and mutual commitment to support the growth of the new Eversense E3 product and subsequent product versions.

The timing and success of these collaborations and financings are dependent on certain events occurring in accordance with the Company’s plans, and may be influenced by uncontrollable external factors.

Management has concluded that based on the Company’s current operating plans, its existing cash and cash equivalents will be sufficient to meet the Company’s anticipated operating needs through twelve months after issuance of the financial statements.

Summary of Significant Accounting Policies

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The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The consolidated financial statements reflect the accounts of Senseonics Holdings and its wholly owned operating subsidiary Senseonics, Incorporated.

All intercompany balances and transactions have been eliminated in consolidation.

The Company views its operations and manages its business in one segment, glucose monitoring products.

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

GAAP”) assuming the Company will continue

as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The consolidated financial statements reflect the accounts of Senseonics Holdings, Inc.

and its consolidated subsidiaries and affiliated entities, including its VIEs in which the Company is the primary beneficiary.

All intercompany balances and transactions are eliminated upon consolidation.

In November 2024, Eon Management Services, LLC entered into management services agreements (the

“Administrative Agreement”) for an initial fixed term of 10 years with several professional corporations created to support patient access to the Eversense system by contracting nurse practitioners and other healthcare professionals to perform Eversense insertion procedures and other clinical activities.

Eon Care Clinicians PC, Eon Care Clinicians of NJ PC, and Eon Care Clinicians of CA PC (collectively referred to as “Eon Care PCs”) are the professional corporations that were established pursuant to the requirements of its respective domestic jurisdiction governing the corporate practice of medicine.

In accordance with relevant accounting guidance, the Eon Care PCs have been determined to be VIEs of the Company, as the Company is its primary beneficiary with the ability, through the Administrative Agreement to direct the activities (excluding clinical activities) that most significantly affect the Eon Care PCs financial performance and

have the obligation to absorb losses of, or the right to receive benefits from, the Eon Care PCs that could potentially be significant to it.

The assets of the consolidated VIEs may only be used to settle obligations of the consolidated VIEs, if any.

Our variable interest entities’ assets, liabilities, and results of operations were not material to our consolidated financial results.

Use of Estimates

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period.

In the accompanying consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, recoverability of long-lived assets, deferred taxes and valuation allowances, derivative assets and liabilities, obsolete inventory, warranty obligations, variable consideration related to revenue, allowance for credit losses, depreciable lives of property and equipment, and accruals for clinical study costs, which are accrued based on estimates of work performed under contract.

In the accompanying consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, recoverability of long-lived assets and definite-lived intangible assets, deferred taxes and valuation allowances, derivative assets and liabilities, obsolete inventory, warranty obligations, variable consideration related to revenue, allowance for credit losses, depreciable lives of property and equipment, and accruals for clinical study costs, which are accrued based on estimates of work performed under contract.

The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable, including assumptions as to future events.

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These investments are carried at cost, which approximates fair value.

Restricted cash represents cash and cash equivalents that are restricted to withdrawal or use as of the reporting date.

The Company’s restricted cash relates to collateral for procurement cards issued by a U.S.

commercial bank.

Cash, cash equivalents and restricted cash consisted of the following (in thousands):

Money market funds

Cash and cash equivalents

Restricted cash

Cash, cash equivalents and restricted cash

(1) Includes overnight repurchase agreements.

There was no restricted cash held as of December 31, 2023 and December 31, 2022.

Marketable Securities

Marketable securities consist of commercial paper, corporate debt securities, asset backed securities and government and agency securities.

Marketable securities typically consist of commercial paper, corporate debt securities, asset backed securities and government and agency securities.

The Company’s investments are classified as available for sale.

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Cost is determined using the standard cost method that approximates first in, first out.

The Company records an adjustment to reduce the value of inventory for items that are potentially obsolete, where standard costs require adjustment to the net realizable value, and are in excess of future demand taking into consideration the product shelf life.

The Company records an adjustment to reduce the value of inventory for items that are potentially obsolete, where standard costs require adjustment to the net realizable value, and are in excess

of future demand taking into consideration the product shelf life.

The sensor manufacturing process can span several months, involves various contract manufacturers and includes raw components with long lead times, often resulting in significant work-in-progress inventory.

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However, if actual product quality or conditions differ from the Company’s assumptions, additional inventory adjustments that would increase cost of sales could be required.

The Company capitalizes inventory costs associated with pre-launch inventory upon regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized.

The determination to capitalize inventory costs is based on the particular facts and circumstances relating to the product.

Inventory costs incurred prior to regulatory approval are expensed as research and development expenses.

Accounts Receivable

The Company grants credit to various customers in the normal course of business.

Accounts receivable consist of amounts due from distributors and are reduced by an allowance for doubtful accounts at the time potential collection risk is identified.

Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

The Company does not have a history of collectability concerns, and the allowance for uncollectible accounts was $ 0.1 million as of December 31, 2023.

There was no allowance recorded as of December 31, 2022.

Accounts receivable consist of amounts due from distributors and consignment customers.

These receivables are reduced by an expected credit loss at the time revenue is recognized.

Uncollectible accounts are written off against the credit loss reserve after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

At December 31, 2024 and December 31, 2023, the credit loss reserve was $ 0.3 million and $ 0.1 million, respectively.

Property and Equipment, net

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Repairs and maintenance costs are included as expense in the accompanying statement of operations.

The Company amortizes intangible assets acquired using the straight-line method over the estimated economic useful life.

The useful life is determined after considering the specific facts and circumstances related to the use of the intangible asset such as the contractual term of any agreement related to the asset, the historical performance of the asset, the Company's strategy for use of the asset, and any other factors which could impact the useful life of the asset.

The Company evaluates whether contractual arrangements contain leases at the inception of such arrangements.

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Lease and non-lease components are accounted for as a single component for facility leases.

Leases with an initial term of 12 months or less are expensed to rent expense over the related term.

Leases with an initial term of 12 months or less are expensed over the related term.

Impairment of Long-lived Assets

Management reviews long-lived assets, including property and equipment and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Management reviews long-lived assets, including property and equipment, intangibles assets, and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset.

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The fair value of the embedded features are accounted for as a derivative liability in the Company’s consolidated balance sheets and adjusted to fair value each reporting period.

The change in fair value of derivatives is recorded as a component of other income (expense) in the Company’s consolidated statements of operations and comprehensive loss.

The change in fair value of derivatives is recorded as a component of other (expense) income in the Company’s consolidated statements of operations and comprehensive loss.

Product Warranty Obligations

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Additionally, the Company may also replace Eversense system components that do not function in accordance with the product specifications.

Estimated replacement costs are recorded at the time of shipment as a charge to cost of sales in the consolidated statement of operations and are developed by analyzing product performance data and historical replacement experience, including comparing actual return management authorizations to revenue.

At December 31, 2023 and December 31, 2022, the warranty reserve was $ 0.5 million and $ 0.8 million, respectively.

replacement costs are recorded at the time of shipment as a charge to cost of sales in the consolidated statement of operations and are developed by analyzing product performance data and historical replacement experience, including comparing actual return management authorizations to revenue.

The following table provides a reconciliation of the change in estimated warranty liabilities for the years ended December 31, 2024 and 2023 (in thousands):

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Revenue Recognition

We generate the majority of our product revenue from sales of the Eversense system and related components and supplies to Ascensia, through the Commercialization Agreement, third-party distributors in the European Union and to strategic fulfillment partners in the United States (collectively “Customers”), who then resell the products to health care providers and patients.

We generate product revenue from sales of the Eversense system and related components and supplies to Ascensia, through the Commercialization Agreement, third-party distributors outside the United States and to strategic fulfillment partners in the United States (collectively “Customers”), who then resell the products to health care providers and patients.

We are paid for our sales directly to the Customers, regardless of whether or not the Customers resell the products to health care providers and patients.

The Company also generates product revenue from sales of the Eversense system and related components and supplies through a consignment model with our network of healthcare professionals in the United States and revenue is recognized when the product is consumed by a patient.

Revenue from product sales is recognized at a point in time when the Customers obtain control of our product based upon the delivery terms as defined in the contract at an amount that reflects the consideration which we expect to receive in exchange for the product.

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Product conformity guarantees do not create additional performance obligations and are accounted for as warranty obligations in accordance with guarantee and loss contingency accounting guidance.

In addition, we sell small quantities of our products directly to healthcare provider locations within the United States.

In these direct sales, inventory is purchased on consignment to ensure availability when a patient is identified.

Under the consignment model, small quantities of inventory are held at healthcare provider locations to ensure

availability when a patient is identified.

No revenue is recognized upon delivery of our products to the healthcare provider locations, as we retain the ability to control the inventory.

Rather, revenue is recognized when the product is consumed.

Rather, revenue is recognized when the product is consumed by a patient.

For the twelve months ended December 31, 2024 and December 31, 2023, the Company derived 15 % and 5 % of total revenue, respectively from consignment sales.

Our contracts may contain some form of variable consideration such as prompt-pay discounts, tier-volume price discounts and for the Commercialization Agreement, revenue share.

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The Company uses the asset and liability method of accounting for income taxes.

Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are in effect when the differences are expected to reverse.

Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and

are measured using the enacted tax rates and laws that are in effect when the differences are expected to reverse.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.

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Management does not expect the outcome related to accrued uncertain tax provisions to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company recognizes interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense.

The Company recognizes interest and penalties accrued on any unrecognized tax positions as a component of income tax expense.

The Company is subject to taxation in various jurisdictions in the United States and remains subject to examination by taxing jurisdictions for the year 2004 and all subsequent periods due to the availability of NOL and tax credit carryforwards.

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Fair Value of Financial Instruments

Under ASC 825, the Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the statement of financial position for which it is practicable to estimate that value.

The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of their short maturities.

The Company’s term loan under the 2025 Notes, Loan and Security Agreement and warrants are recorded at historical cost, net of discounts.

The fair value for debt is estimated by a discounted cash flow model using a discount rate equal to the rate currently offered on similar borrowings.

The associated embedded conversion features in the Notes are derivative instruments and along with Options are remeasured at fair value each reporting period.

The valuation methodology for derivative instruments are described further within Note 18 – Fair Value Measurements.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred.

For available-for-sale debt securities in unrealized loss positions, the new standard requires allowances to be recorded instead of reducing the amortized cost of the investment.

The Company currently holds investments in available-for sale securities.

The Company has not historically experienced collection issues or bad debts with trade receivables.

Accordingly, the Company does not expect this to have a significant impact on its consolidated financial statements and related disclosures at this time.

The Company adopted this guidance as of January 1, 2023 and its adoption did not have a material impact on the consolidated financial statements and related disclosures.

Recently Adopted

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires that an entity report segment information in accordance with Topic 280, Segment Reporting.

The amendment in the ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis, with early adoption permitted.

We adopted ASU 2023-07 on December 31, 2024 on a retrospective basis and the adoption resulted in enhanced disclosures as included in Note 19, Segment Information.

Not Yet Adopted

In December 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), the objective of which is to enhance the transparency of income tax disclosures by requiring greater disaggregation of information presented and consistent categories in the rate reconciliation.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, or our fiscal year 2025, using either a prospective or retrospective transition method, and early adoption is permitted.

The Company is currently evaluating the impact of the new standard on its financial statements and disclosures.

In November 2024, the FASB issued Accounting Standards Update (“ASU”) No.

2024-03, Disaggregation of Income Statement Expenses (DISE) (“ASU 2024-03”), the objective of which is to provide greater transparency about an

entity’s expenses to allow investors to better understand an entity’s performance, assessing its prospects for future cash flows, and comparing its performance both over time and with that of other entities.

ASC 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

The requirements will be applied prospectively with the option for retrospective application.

Early adoption is permitted.

The Company is currently evaluating the impact of the new standard on its financial statements and disclosures.

Revenue Recognition

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Net revenue from the Company’s distribution arrangement with Ascensia, a related party, accounted for 82 %, and 93 % of total net revenues for the years ended December 31, 2024 and 2023, respectively.

Net Income (Loss) per Share

Basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

An aggregate of 83,951,061 shares of common stock issuable upon the exercise of the PHC Exchange Warrant Shares and the Purchase Warrant Shares held by PHC are included in the number of outstanding shares used for the computation of basic net income (loss) per share for the year ended December 31, 2023.

Revenue earned under consignment arrangements with healthcare providers accounted for approximately 15 % and 5 % of total net revenues from the years ended December 31, 2024 and 2023, respectively.

Ascensia earns a commission on sales made through the consignment channel.

Revenues for these corresponding periods represent sales of sensors, transmitters, and miscellaneous Eversense system components.

Net Loss per Share

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Since the shares are issuable for little or no consideration, sometimes referred to as “penny warrants”, they are considered outstanding in the context of earnings per share, as discussed in ASC 260-10-45-13.

Dilutive net income (loss) per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents.

Potentially dilutive common shares consist of shares issuable from restricted stock units, stock options, warrants and the Company’s convertible notes.

Dilutive net loss per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents.

Potentially dilutive common shares consist of

shares issuable from restricted stock units, stock options, warrants and the Company’s convertible instruments.

Potentially dilutive common shares issuable upon vesting of restricted stock units and exercise of stock options and warrants are determined using the average share price for each period under the treasury stock method.

Potentially dilutive common shares issuable upon conversion of the Company’s convertible notes are determined using the if converted method.

Potentially dilutive common shares issuable upon conversion of the Company’s convertible instruments are determined using the if converted method.

The if-converted method assumes conversion of convertible securities at the beginning of the reporting period.

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In periods of net loss, all potentially dilutive common shares are excluded from the computation of the diluted net loss per share for those periods, as the effect would be anti-dilutive.

Net (loss) income

Impact of conversion of dilutive securities

Dilutive Net loss

Net (loss) income per share

Basic weighted average shares outstanding

Dilutive potential common stock outstanding

Stock-based awards

Series B Preferred Stock

Diluted weighted average shares outstanding

Outstanding anti-dilutive securities not included in the diluted net income per share calculations were as follows:

(Dollars, in thousands, except per share amounts)

Basic weighted average common shares outstanding

Net loss per share:

Basic and diluted

Outstanding anti-dilutive securities not included in the diluted net loss per share calculations were as follows:

Stock-based awards

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Marketable Securities

Marketable securities available for sale, were as follows (in thousands):

December 31, 2023

Commercial Paper

Corporate debt securities

Government and agency securities

There were no marketable securities held as of December 31, 2024.

Marketable securities as of December 31, 2023, were as follows (in thousands):

December 31, 2023

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Government and agency securities

The following are the scheduled maturities as of December 31, 2023 (in thousands):

Carrying Amount

The Company periodically reviews its portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns.

For debt securities where the fair value of the investment is less than the amortized cost basis , the Company assesses at the individual security level, for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment.

Unrealized losses on available-for-sale securities at December 31, 2023 were not significant and were primarily due to changes in interest rates and not due to increased credit risk associated with specific securities.

The Company does not intend to sell these impaired investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

Unrealized losses on available-for-sale securities as of December 31, 2023 were

not significant and were primarily due to changes in interest rates and not due to increased credit risk associated with specific securities.

Inventory, net

Inventory, net consisted of the following (in thousands):

Finished goods

Work-in-process

Finished goods

Raw materials

The Company recorded $ 0.2 million and $ 1.4 million in cost of sales for the years ended December 31, 2023 and 2022, respectively, to reduce the value of inventory for items that are potentially obsolete, to adjust costs to their net realizable value, and for inventory in excess of product demand.

The Company recorded $ 4.3 million and $ 0.2 million in cost of sales for the years ended December 31, 2024 and 2023, respectively, to reduce the value of inventory for items that are potentially obsolete due to expiry, in excess of product demand, or to adjust costs to their net realizable value.

These costs were primarily write offs of our existing Eversense E3 systems following obtaining FDA 510(k) clearance to sell Eversense 365.

In addition, we incurred $ 0.6 million in cost of sales due to impairment losses on prepayments to suppliers as the result of the transition from Eversense E3 to Eversense 365 system.

The Company capitalizes inventory costs associated with products when future commercialization is considered probable and the future economic benefit is expected to be realized, which is typically when regulatory approval is obtained.

As such, the Company began capitalizing costs related to the 365-day product inventory in September 2024 upon successfully obtaining FDA 510(k) clearance.

Prior to regulatory approval, the Company expensed all inventory-related costs, including that used for clinical development, to research and development expenses.

We expect this to impact the cost of sales as the pre-clearance inventory is sold to customers.

The Company incurred $ 1.9 million and $ 0.3 million in product costs prior to the clearance for the years ended December 31, 2024 and 2023, which primarily consisted of work in process inventory.

If we were to have included those costs previously expensed as a component of cost of sales, our cost of sales for the year ended December 31, 2024 would have been approximately $ 1.6 million higher, for a total cost of sales of $ 23.5 million.

As a result, costs of sales related to sales of the 365-day product will initially reflect a lower average cost per unit over approximately the next quarter as the previous expensed inventory is fully exhausted.

Prepaid expenses and other current assets

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Clinical and Preclinical

Interest receivable

IT and software

Sales and Marketing

Rent and utilities

Research and development

Accounting and Audit

Sales and Marketing

Interest receivable

Research and development

Total prepaid expenses and other current assets

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Refundable employee retention credits, enacted under the CARES Act.

Property and Equipment, net

Property and equipment, net consisted of the following as of December 31, 2023 and 2022 (in thousands):

Property, Equipment and Intangible Assets, net

Property, equipment and intangible assets, net consisted of the following as of December 31, 2024 and 2023 (in thousands):

Property and equipment

Machinery and laboratory equipment

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Leasehold improvements

Accumulated depreciation

Property and equipment, net

Depreciation expense for the years ended December 31, 2023 and 2022 was $ 0.4 million and $ 0.5 million, respectively.

There were no material disposals during 2023 or 2022.

Intangible assets

Sensor insertion network assets

Accumulated depreciation and amortization

Property, equipment and intangible assets, net

Depreciation and amortization expense for the years ended December 31, 2024 and 2023 was $ 0.6 million and $ 0.4 million, respectively.

During 2024, the Company disposed of fully depreciated office furniture and equipment in the amount of $ 0.4 million.

There was no gain or loss on these disposals.

There were no material disposals during 2023.

In November 2024, the Company acquired the sensor insertion network assets of NPG to directly contract with healthcare providers under our Eon Care subsidiaries.

The purchase price of $ 0.7 million was satisfied in exchange for the settlement of a portion of NPG’s outstanding accounts receivable balance.

The total value of the sensor insertion network assets of $ 0.8 million includes the agreed-upon purchase price, the fair value of contingent consideration, and transaction costs.

These intangible assets will allow us to further expand patient access to sensor insertion options and enhance convenience.

The intangible assets will be amortized over a 5-year period.

Over the next five years, the annual amortization expense for these finite life intangible assets will total approximately $ 0.8 million, as follows:

less than $ 0.2 million in each of the years 2025- 2028 and $ 0.1 million in 2029.

Accrued Expenses and Other Current Liabilities

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Contract manufacturing

Interest on notes payable

Professional and administration services

Product warranty and replacement obligations

Operating lease

Sales and marketing services

Interest on notes payable

Operating lease

Product warranty and replacement obligations

Accrued construction and renovations costs

Total accrued expenses and other current liabilities

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Non-current operating lease liabilities

Other non-current liabilities

Non-current operating lease liabilities

Total operating lease liabilities

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Operating leases

During the years ended December 31, 2023 and 2022, the Company made cash payments of $ 1.1 million and $ 1.0 million included in the measurement of its operating lease liabilities, respectively.

During the years ended December 31, 2024 and 2023, the Company made cash payments of $ 0.9 million and $ 1.1 million, respectively included in the measurement of its operating lease liabilities.

The Company has a defined contribution 401(k) plan available to all full-time employees.

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Administrative expenses for the plan, which are paid by the Company, were not material in 2024 or 2023.

Notes Payable, Preferred Stock and Stock Purchase Warrants

Notes Payable and Stock Purchase Warrants

Loan and Security Agreement

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At the Company’s option, the Company may prepay all or any portion of the outstanding borrowings under the Loan and Security Agreement, subject to a prepayment fee equal to (a) 3.0 % of the principal amount being prepaid if the prepayment occurs within one year of the Effective Date, 2.0 % of the principal amount being prepaid if the prepayment occurs during the second year following the Effective Date, and 1.00 % of the principal amount being prepaid if the prepayment occurs more than two years after the Effective Date and prior to the Maturity Date.

In addition, the Company paid a $ 375,000 facility fee upon closing and will pay additional facility charges in connection with any borrowing of the Tranche 2 Loan or Tranche 3 Loan, in each case in the amount of 0.50 % of the amount of such tranche of loans.

In addition, the Company paid $ 425,000 in facility fees upon drawing Tranche 1 and Tranche 2 loans.

The Company will pay additional facility charges in connection with any borrowing of the Tranche 3 Loan, in the amount of 0.50 % of the amount.

The Loan and Security Agreement also provides for an end of term fee in an amount equal to 6.95 % of the aggregate principal amount of loan advances actually made under the Loan and Security Agreement, which fee is due and payable on the earliest to occur of (i) the Maturity Date, (ii) the date the Company prepays the outstanding loans in full, and (iii) the date that the secured obligations become due and payable.

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The Loan and Security Agreement contains a minimum cash covenant that requires the Company to hold unrestricted cash equal to 30 % of the outstanding loan amount under the Loan and Security Agreement.

The Loan and Security Agreement also contains a performance covenant, commencing on July 1, 2024, that requires the Company to generate net product revenue on a trailing six-month basis in excess of specified percentage for applicable measuring periods, subject to certain exceptions.

The performance covenant shall be waived at any time in which either (a) the Company’s market capitalization exceeds $ 550.0 million and the Company maintains unrestricted cash equal to at least 50 % of the total amounts funded, or (b) the Company maintains unrestricted cash equal to at least 80 % of the total amounts funded

In addition, the Loan and Security Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, corporate changes, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions.

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Following an event of default and any applicable cure period, a default interest rate equal to the then-applicable interest rate plus 4.0 % may be applied to the outstanding amount, and the Lenders will have the right to accelerate all amounts outstanding under the Loan and Security Agreement, in addition to other remedies available to them as secured creditors of the Company.

The Company was in compliance with all covenants as of December 31, 2024.

In addition, in connection with the issuance of the Tranche 1 Loan the Company issued warrants to the Lenders (collectively, the “Tranche 1 Warrants”) to acquire an aggregate of 832,362 shares of the Company’s common stock at an exercise price of $ 0.6007 per share (the “Tranche 1 Warrant Shares”).

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The proceeds from the Loan and Security Agreement were allocated between the Tranche 1 Loan and the Tranche 1 Warrants based on their respective fair value of $ 25.0 million and $ 0.4 million, and the amount allocated to the Tranche 1 Warrants was recorded in equity resulting in a debt discount to the Tranche 1 Loan that is being amortized as additional interest expense over the term of the loan agreement using the effective interest method.

On January 2, 2024, in connection with the issuance of the Tranche 2 Loan the Company issued additional warrants to the Lenders (collectively, the Tranche 2 Warrants”) to acquire an aggregate of 347,887 shares at an exercise price of $ 0.5749 per share (the “Tranche 2 Warrant Shares”).

On January 2,

2024, in connection with the issuance of the Tranche 2 Loan the Company issued additional warrants to the Lenders (collectively, the “Tranche 2 Warrants”) to acquire an aggregate of 347,887 shares at an exercise price of $ 0.5749 per share (the “Tranche 2 Warrant Shares”).

The Company estimated the fair value of the Tranche 2 Warrants as of the grant date to be $ 0.1 million and classified the full amount in equity.

In connection with Loan and Security Agreement, the Company incurred $ 1.1 million in debt issuance costs and debt discounts which are netted against the principal balance of the initial term loan and amortized as interest expense over the term of the initial term loan using an effective interest rate of 12.92 %.

The fair value of the Company’s Loan and Security Agreement was $ 37.0 million as of December 31, 2024.

Pursuant to the Loan and Security Agreement, the Company also agreed to issue additional seven year term warrants upon the funding of the Tranche 2 Loan and Tranche 3 Loan, which warrants would be exercisable for an aggregate number of shares equal to 2.0 % of the funded loan amount divided by the exercise price equal to the three-day volume-weighted average price at the time of the advance.

On April 22, 2020, the Company received $ 5.8 million in loan funding from the PPP pursuant to the CARES Act, as amended by the Flexibility Act, and administered by the Small Business Administration (“SBA”).

The unsecured loan (the “PPP Loan”) is evidenced by the PPP Note dated April 21, 2020 (the “PPP Note”) in the principal amount of $ 5.8 million with Silicon Valley Bank (“SVB.”)

Under the terms of the PPP Note and the PPP Loan, interest accrued on the outstanding principal at a rate of 1.0 % per annum.

The term of the PPP Note was two years .

In April 2022, the Company repaid the outstanding principal and accrued interest in full.

Convertible Preferred Stock and Warrants

Equity Line Agreement

On November 9, 2020, the Company entered into an equity line agreement with Energy Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital was committed to purchase up to an aggregate of $ 12.0 million of shares of the Company’s newly designated Series B Preferred Stock at the Company’s request from time to time during the 24-month term of the Equity Line Agreement.

Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, the Company had the right, at sole discretion, to present Energy Capital with a Regular 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 at the Purchase Price equal to $ 1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six months after the date of its issuance, at a conversion price of $ 0.3951 per share, subject to customary anti-dilution adjustments, including in the event of any stock split.

The Equity Line Agreement provided that we shall not affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the Company’s common stock on the NYSE American is less than $ 0.25 without the approval of Energy Capital.

In addition, beginning on January 1, 2022, since there have been no sales of the Series B Preferred Stock pursuant to the Equity Line Agreement, Energy Capital had the right, at its sole discretion, by its delivery to the Company of a Purchase Notice, to purchase up to $ 12.0 million of Series B Preferred Stock under the Equity Line Agreement at the Purchase Price.

On November 7, 2022, Energy Capital exercised in full its right to purchase $ 12.0 million of Series B Preferred Stock.

The Company accounted for the Equity Line Agreement as a put/call option (the “Energy Capital Option”).

This put/call option was classified as a liability in accordance with ASC 480 on the Company’s balance sheet and was recorded at the estimated fair value of $ 4.2 million upon issuance.

In connection with the issuance of the Equity Line Agreement, the Company incurred and expensed $ 7.6 million in debt issuance costs in fiscal year 2020.

The put/call option was 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).

The fair value of the Energy Capital Option as of December 31, 2021 was $ 69.4 million.

The Company adjusted the Energy Capital Option to its fair value of $ 25.7 million on the exercise date, recognizing a fair value adjustment gain of $ 43.7 million.

Concurrently with entry into the Equity Line Agreement, the Company issued a warrant to Energy Capital,

exercisable beginning on May 9, 2021, to purchase up to 10,000,000 shares of common stock at an exercise price of $ 0.3951 per share (the “Warrant”).

The Warrant was exercised on a net basis in February 2022 and Energy Capital received 8,917,535 shares of common stock upon the net exercise of the Warrants.

Pursuant to the Loan and Security Agreement, the Company also agreed to issue additional seven year term warrants upon the funding of the Tranche 3 Loan, which warrants would be exercisable for an aggregate number of shares equal to 2.0 % of the funded loan amount divided by the exercise price equal to the three-day volume-weighted average price at the time of the advance.

Stock Purchase Warrants

Securities Purchase Agreement

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On the private placement closing date, the Company received aggregate gross proceeds of $ 15.0 million, before deducting private placement expenses payable by the Company.

All or any part of the Purchase Warrant shall is exercisable by the holder at any time and from time to time.

All or any part of the Purchase Warrant is exercisable by the holder at any time and from time to time.

The Company determined that the Purchase Warrant shall be classified as equity in accordance with ASC Topic 480, Distinguishing Liabilities from Equity and ASC Topic 815.

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Pursuant to the Note Purchase Agreement, the Company borrowed $ 35.0 million in aggregate principal through the issuance and sale of PHC Notes on August 14, 2020 (the “Closing Date”).

The Company also issued 2,941,176 shares of its common stock, $ 0.001 par value per share to PHC as a

financing fee (the “Financing Fee Shares”) on the Closing Date.

The Company also issued 2,941,176 shares of its common stock, $ 0.001 par value per share to PHC as a financing fee (the “Financing Fee Shares”) on the Closing Date.

The Financing Fee Shares were recorded as debt discount in the amount of $ 1.5 million.

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

The Note Purchase Agreement also contained 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.

The Company also had the option to sell and issue PHC up to $ 15.0 million of convertible preferred stock on or before December 31, 2022 (the “PHC Option”), which was initially contingent upon obtaining FDA approval for the 180-day Eversense E3 product for marketing in the United States before such date, and which the Company successfully obtained in February 2022.

The Company developed an estimated fair value at December 31, 2021 to be $ 0.2 million, and an impairment loss of $ 1.6 million was recognized in net income as the difference between the fair value of the investment and its carrying amount.

The PHC option was not exercised and expired on December 31, 2022 and the Company recognized a loss on extinguishment of $ 0.1 million.

The Note Purchase Agreement also contained customary events of default, after which the PHC Notes would 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.

180-day Eversense E3 product for marketing in the United States before such date, and which the Company successfully obtained in February 2022.

The PHC option was not exercised and expired on December 31, 2022.

The Note Purchase Agreement also contained several provisions requiring bifurcation as a separate derivative liability including an embedded conversion feature, mandatory prepayment upon event of default that constitutes a breach of the minimum revenue financial covenant, optional redemption upon an event of default, change in interest rate after PMA approval and default interest upon an event of default.

The Company recorded the fair value of the embedded features in the amount of $ 25.8 million as a derivative liability in the Company’s consolidated balance sheets in accordance with ASC Topic 815, Derivatives and Hedging.

The derivative is adjusted to fair value at each reporting

period, with the change in the fair value recorded in change in fair value of derivatives that is a component of other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.

On the date of issuance, the Company recorded the fair value of the embedded features in the amount of $ 25.8 million as a derivative liability in the Company’s consolidated balance sheets in accordance with ASC Topic 815, Derivatives and Hedging.

The derivative was adjusted to fair value at each reporting period, with the change in the fair value recorded in change in fair value of derivatives that is a component of other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.

In connection with the issuance of the Note Purchase Agreement, the Company incurred $ 2.9 million in debt issuance costs and debt discounts.

The associated debt issuance costs were recorded as a contra liability in the amount of $ 1.4 million and are deferred and amortized as additional interest expense over the term of the notes at an effective interest rate of 29.19 %.

There were no conversions of the PHC Notes prior to the exchange of the PHC Notes for the PHC Exchage Warrant described above.

As described above, the PHC Exchange Agreement with PHC was consummated on March 31, 2023, whereby PHC exchanged the PHC Notes in $ 35.0 million principal amount and all accrued and unpaid interest for the PHC Exchange Warrant.

There were no conversions of the PHC Notes prior to the exchange of the PHC Notes for the PHC Exchange Warrant described above.

As described above, the PHC Exchange was consummated on March 31, 2023, whereby PHC exchanged the PHC Notes in $ 35.0 million principal amount and all accrued and unpaid interest thereon for the PHC Exchange Warrant.

On March 31, 2023, the Company was released from its obligation under the PHC Notes.

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The 2025 Notes are general, unsecured, senior subordinated obligations of the Company and bear interest at a rate of 5.25 % per year, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020.

The 2025 Notes will mature on January 15, 2025, unless earlier repurchased or converted.

The 2025 Notes matured on January 15, 2025 and the Company repaid the outstanding principal and accrued interest.

The Company used $ 37.9 million of the net proceeds from the issuance of the 2025 Notes to repurchase $ 37.0 million aggregate principal amount of the Company’s outstanding 2023 Notes, at a purchase price equal to the principal amount thereof, plus accrued and unpaid interest thereon.

The 2025 Notes are convertible, at the option of the holders, into shares of the Company’s common stock, at an initial conversion rate of 757.5758 shares per $ 1,000 principal amount of the 2025 Notes (equivalent to an initial conversion price of approximately $ 1.32 per share).

The Company may redeem for cash all or part of the 2025 Notes, at its option, if (1) the last reported sale price of the Company’s common stock has been at least 150 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption and (2) a registration statement covering the resale of the shares of the Company’s common stock issuable upon conversion of the 2025 Notes is effective and available for use and is expected to remain effective and available for use during the redemption period as of the date of the redemption notice date.

(whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption and (2) a registration statement covering the resale of the shares of the Company’s common stock issuable upon conversion of the 2025 Notes is effective and available for use and is expected to remain effective and available for use during the redemption period as of the date of the redemption notice date.

The redemption price will be equal to 100 % of the principal amount of the 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

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In certain circumstances, the Company will be required to pay cash in lieu of delivering make whole shares unless the Company obtains stockholder approval to issue shares.

The 2025 Notes are guaranteed on a senior unsecured basis by the Company’s wholly owned subsidiary, Senseonics, Incorporated, and may be guaranteed by certain future subsidiaries.

The 2025 Notes are guaranteed on a senior unsecured basis by the Company’s wholly owned subsidiary, Senseonics, Incorporated.

The subsidiary guarantor is 100 % owned, the guarantee is full and unconditional and joint and several and the parent company has no independent assets or operations and any subsidiaries of the parent company other than the subsidiary guarantor are minor.

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Loan modifications require third-party debt related costs to be expensed immediately, whereas fees paid to lenders of the modified loans are deferred.

The third-party costs associated with the new note holders are also deferred as discounts that are amortized as additional interest expense over the term of the notes.

Of the $ 4.3 million, $ 3.3 million were expensed for loan modifications were recorded within other income (expense) on the consolidated statement of operations and comprehensive loss and $ 1.0 million were deferred as discounts to the debt in 2019.

The third-party costs associated with the new note holders were also deferred as discounts that are amortized as additional interest expense over the term of the notes.

The 2025 Notes also contained an embedded conversion option requiring bifurcation as a separate derivative liability, along with the fundamental change make-whole provision and the cash settled fundamental make-whole shares provision.

The Company recorded the fair value of the embedded features in the amount of $ 38.3 million as a debt discount and derivative liability in the Company’s consolidated balance sheets in accordance with ASC Topic 815, Derivatives and Hedging .

The derivative is adjusted to fair value at each reporting period, with the change in the fair value recorded to other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.

The 2025 Notes do not have current observable inputs such as recent trading prices (Level 3) and are measured at fair value using the binomial option pricing model and incorporate management’s assumptions for probabilities of conversion occurrence through maturity, stock price, volatility, risky (bond) rate, credit spread and recovery rates.

The derivative was adjusted to fair value at each reporting period, with the change in the fair value recorded to other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.

The conversion feature does not have current observable inputs such as recent trading prices (Level 3) and are measured at fair value using the binomial option pricing model and incorporate management’s assumptions for probabilities of conversion occurrence through maturity, stock price, volatility, risky (bond) rate, credit spread and recovery rates.

On April 21, 2020, $ 24.0 million in principal on the 2025 Notes were settled pursuant to an exchange agreement.

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Based on the volume-weighted average price per share of the common stock during the averaging period, a total of 35.1 million shares of common stock were issued in the Exchanges.

Based on the volume-weighted average price per share of the common stock during the averaging period, a total of 35.1 million shares of

common stock were issued in the Exchanges.

The Exchanges were settled on the initial share issuance date of August 14, 2023 and the final settlement date of September 5, 2023.

The Company accounted for the Exchanges as an extinguishment of the Exchanged Notes and the associated embedded derivative and recognized a loss of $ 4.6 million in the caption “Exchange related gain (loss), net” that is a component of other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.

The extinguishment loss represents the difference between (i) the carrying value of the Exchanged Notes (inclusive of

the fair value of the embedded derivative) and (ii) the sum of $ 7.5 million cash payment, the fair value of the Exchanged Shares, and transaction costs incurred in the Exchange.

Following the Exchanges, approximately $ 20.4 million aggregate principal amount of the 2025 Notes remain outstanding.

The remaining unamortized debt discount and debt issuance costs are amortized as interest expense over the term of the loan at an effective interest rate of 15.54 %.

The extinguishment loss represents the difference between (i) the carrying value of the Exchanged Notes (inclusive of the fair value of the embedded derivative) and (ii) the sum of $ 7.5 million cash payment, the fair value of the Exchanged Shares, and transaction costs incurred in the Exchange.

Following the Exchanges, approximately $ 20.4 million aggregate principal amount of the 2025 Notes remained outstanding.

The remaining unamortized debt discount and debt issuance costs were amortized as interest expense over the term of the loan at an effective interest rate of 15.54 %.

The fair value of the Company’s 2025 Notes, excluding the embedded features, was $ 20.9 million as of December 31, 2024 and $ 19.1 million at December 31, 2023.

The fair value of the derivative at December 31, 2024 and December 31, 2023 was $ 0.0 million and $ 0.1 million, respectively.

On January 15, 2025, the Company repaid the outstanding principal and accrued interest in full and the derivative was unexercised upon maturity.

In January 2018, the Company issued $ 50.0 million in aggregate principal amount of the 2023 Notes.

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Carrying Amount ($)

PHC Convertible Notes

Loan and Security Agreement

Includes accretion of end of term fees payable at maturity

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Total Interest Expense ($)

PHC Convertible Notes

Loan and Security Agreement

Includes accretion of end of term fees payable at maturity

Twelve Months Ended December 31, 2023

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PHC Convertible Notes

Includes accretion of end of term fees payable at maturity

The following are the scheduled maturities of the Company’s notes payable (including end of term fees) as of December 31, 2023:

Loan and Security Agreement

The following are the scheduled maturities of the Company’s notes payable (including end of term fees) as of December 31, 2024 (in thousands):

Stockholders’ Deficit

In connection with the Company’s acquisition of Senseonics, Incorporated in December 2015 (the “Acquisition”), (1) all outstanding shares of common stock of Senseonics, $ 0.01 par value per share, were exchanged for 1,955,929 shares of the Company's common stock, $ 0.001 par value per share (reflecting an exchange ratio of 2.0975 ), (2) all outstanding shares of preferred stock were converted into shares of common stock of Senseonics, and exchanged into 55,301,674 shares of the Company’s common stock, $ 0.001 par value per share, and (3) all outstanding options and warrants to purchase shares of common stock of Senseonics were exchanged for or replaced with options and warrants to acquire shares of the Company’s common stock using the same exchange ratio.

As of December 31, 2023 and December 31, 2022, the Company’s authorized capital stock included 900,000,000 shares of common stock, par value $ 0.001 per share.

As of December 31, 2024 and December 31, 2023, the Company’s authorized capital stock included 1,400,000,000 and 900,000,000 shares of common stock, par value $ 0.001 per share, respectively.

The Company had 595,351,210 and 530,364,237 shares of common stock issued and outstanding at December 31, 2024 and December 31, 2023, respectively.

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The Company had 12,000 shares of Series B Preferred Stock outstanding as of December 31, 2024 and 2023.

Since the Preferred stock has a redemption feature at the option of the holder, it is classified as temporary equity.

Voting Rights

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These warrants expire on June 30, 2026, November 22, 2026, and March 29, 2027, respectively, and are classified in equity.

On November 9, 2020, the Company issued the Energy Capital Warrants to purchase an aggregate of 10,000,000 shares of the Company’s common stock with an exercise price of $ 0.3951 per share.

The Energy Capital Warrants are exercisable until November 9, 2030.

The warrants were recorded within equity based on their fair value of $ 3.4 million.

In February 2022, the Energy Capital Warrants were exercised in full, on a net basis and Energy Capital received 8,917,535 shares of common stock upon the net exercise of the warrants.

On March 13, 2023, the Company issued to PHC, the Purchase Warrant to purchase 15,425,750 shares of common stock.

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All or any part of the Purchase Warrant is exercisable by the holder at any time and from time to time.

On September 8, 2023, Company entered into the Loan and Security Agreement and issued the Tranche 1 Warrants to acquire an aggregate of 832,362 shares of the Company’s common stock at an exercise price of $ 0.6007 per share.

The Tranche 1 Warrants may be exercised through the earlier of (i) the seventh anniversary of the Effective Date and (ii) the consummation of certain acquisition transactions involving the Company, as set forth in the warrant agreement.

On September 8, 2023, the Company entered into the Loan and Security Agreement with the Lenders and issued the Tranche 1 Warrants to acquire an aggregate of 832,362 shares of common stock at an exercise price of $ 0.6007 per share.

The Tranche 1 Warrants were recorded in equity based on their fair value of $ 0.4 million.

The number of shares for which the Tranche 1 Warrants are exercisable and the associated exercise price are subject to certain customary proportional adjustments for fundamental events, including stock splits and reverse stock splits, as set forth in the warrant agreement.

On January 2, 2024, in connection with the issuance of the Tranche 2 Loan the Company issued the Tranche 2 Warrants to acquire an aggregate of 347,887 shares of common stock at an exercise price of $ 0.5749 per share.

The Tranche 2 Warrants were recorded in equity based on their fair value of $ 0.1 million.

The Tranche 1 Warrants and Tranche 2 Warrants may be exercised through the earlier of (i) the seventh anniversary of the issuance date and (ii) the consummation of certain acquisition transactions involving the Company, as set forth in the warrant agreement.

The number of shares for which the Tranche 1 Warrants and Tranche 2 Warrants are exercisable and the associated exercise price are subject to certain customary proportional adjustments for fundamental events, including stock splits and reverse stock splits, as set forth in the warrant agreement.

On October 24, 2024, the Company entered into a securities purchase agreement with certain institutional investors and in a private placement issued the PP Warrants to purchase an aggregate of 45,714,286 shares of common stock at an exercise price of $ 0.35 per share.

The PP Warrants were recorded within equity based on its relative fair value of $ 6.1 million.

The PP Warrants are non-exercisable for the first six months after issuance and expire on April 29, 2030.

The number of shares for which the PP Warrants are exercisable and the associated exercise price are subject to certain customary proportional adjustments for fundamental events as set forth in the warrant agreement.

Stock-Based Compensation

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The Company initiated its first 2016 ESPP offering period on August 1, 2019.

On February 1, 2023, there were 86,816 shares purchased in connection with the offering period.

On August 1, 2023, there were 135,496 shares purchased in connection with the offering period.

On January 31, 2024, there were 199,066 shares purchased in connection with the offering period.

On July 31, 2024, there were 207,982 shares purchased in connection with the offering period.

The 2016 ESPP is considered compensatory for financial reporting purposes.

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The weighted average grant-date fair value of stock option awards granted in 2024 and 2023 was $ 0.39 and $ 0.47 per share, respectively.

For the years ended December 31, 2023 and 2022, 5,925 , and 974,285 , options were exercised, respectively, with an aggregate intrinsic value at the time of exercise of approximately $ 0.1 million and $ 1.0 million, respectively.

The total fair value of options that vested during 2023 and 2022 were approximately $ 0.5 million and $ 2.1 million, respectively.

The aggregate intrinsic value of the options currently exercisable at December 31, 2023 was $ 0.03 million.

For the years ended December 31, 2024 and 2023, 11,861 and 5,925 options were exercised, respectively, with an aggregate intrinsic value at the time of exercise of less than $ 0.1 million for each year.

The total fair value of options that vested during 2024 and 2023 was approximately $ 0.2 million and $ 0.5 million, respectively.

The aggregate intrinsic value of the options currently exercisable at December 31, 2024 was less than $ 0.1 million.

The aggregate intrinsic value of stock options outstanding at December 31, 2024 was $ 0.07 million, which approximated the aggregate intrinsic value of options vested and expected to vest as of December 31, 2024.

The weighted average grant date fair value of the unvested stock option awards outstanding at December 31, 2024 and 2023 was $ 0.42 and $ 0.54 per share, respectively.

The weighted average grant date fair value of the stock option awards vested, exercised, and forfeited/cancelled for the year ended December 31, 2023 were $ 1.31 , $ 0.27 and $ 0.51 per share, respectively.

The weighted average grant date fair value of the stock option awards vested, exercised, and forfeited/cancelled for the year ended December 31, 2024 was $ 0.82 , $ 0.37 and $ 0.49 per share, respectively.

Fair value is estimated at each grant date under the plans using the Black-Scholes Model with assumptions summarized in the following table:

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Stock-based compensation expense is recorded monthly and is adjusted periodically for actual forfeitures as they occur.

Stock-based compensation expense for employee and non-employee stock options was $ 0.7 million and $ 2.1 million, for the years ended December 31, 2023 and 2022, respectively, classified as follows (in thousands):

Stock-based compensation expense for employee and non-employee stock options for each of the years ended December 31, 2024 and 2023, is as follows (in thousands):

Cost of sales

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Selling, general and administrative

Total stock-based compensation

Total stock-based compensation expense related to stock options

As of December 31, 2024, there was $ 1.1 million of total unrecognized compensation cost related to non-vested stock option awards, which is expected to be recognized over a weighted average period of 2.60 years.

Restricted Stock Units

The Company issued 327,171 and 156,272 restricted stock units in lieu of cash payment for board and director fees to members of the Board of Directors during 2023 and 2022, respectively, under the non-employee director compensation policy.

These restricted stock units were immediately vested upon issuance.

In addition, the Company issued a total of 9,451,628 and 7,707,027 restricted stock units to employees of the Company during 2023 and 2022, respectively, as incentive compensation.

Restricted stock units granted annually to members of the Board of Directors vest on the earlier of the first anniversary of the grant date or the next year’s annual meeting of stockholders.

New members of the Board of Directors may be granted initial restricted stock units which vest over a three-year period.

The Company issued a total of 19,242,847 and 8,415,992 restricted stock units to employees of the Company during 2024 and 2023, respectively, as incentive compensation.

Restricted stock units granted to employees in 2024 and 2023 vest in eight equal installments beginning with an initial accelerated vesting tranche in the month following the grant, followed by seven vesting dates every six months .

The Company issued 2,065,107 and 1,362,807 restricted stock units to members of the Board of Directors during 2024 and 2023, respectively, under the non-employee director compensation policy.

These grants includes an annual grant that vests on the earlier of the first anniversary of the grant date or the next year’s annual meeting of stockholders and grants issued in lieu of compensation that immediately vest upon issuance.

New members of the Board of Directors may be granted initial restricted stock units which vest over a three-year period.

Restricted stock units activity under the Plans during the years ended December 31, 2024 and 2023, is as follows:

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The aggregate intrinsic value of the restricted stock units currently outstanding at December 31, 2024 was $ 11.5 million.

Employee stock-based compensation expense for employee granted restricted stock units was $ 8.0 million and $ 6.5 million, for the years ended December 31, 2023 and 2022, respectively, classified as follows (in thousands):

Employee stock-based compensation expense for restricted stock units granted to employees for the years ended December 31, 2024 and 2023, respectively, is as follows (in thousands):

Cost of sales

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Selling, general and administrative

Total stock-based compensation

Total stock-based compensation expense related to RSUs

As of December 31, 2024, there was $ 11.3 million of total unrecognized compensation cost related to non-vested restricted stock units, which is expected to be recognized over a weighted average period of 2.23 years.

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federal or state income taxes has been recorded as the Company has incurred net operating losses since inception and provides a full valuation allowance against its net deferred income tax assets.

The tax effect of temporary differences that give rise to the net deferred income tax asset at December 31, 2023 and 2022 is as follows (in thousands):

The tax effect of temporary differences that give rise to the net deferred income tax assets (liabilities) at December 31, 2024 and 2023 is as follows (in thousands):

Deferred income tax assets (liabilities)

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Valuation allowance

Total net deferred tax assets

Total deferred tax assets

Deferred tax liabilities:

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Amortization of debt discount

Total deferred tax liability

Net deferred tax assets

The net change in valuation allowance for the years ended December 31, 2023 and 2022 was a net increase of $ 16.3 million and a net increase of $ 16.8 million, respectively.

The increase in valuation allowance is primarily due to deferred tax assets generated from net operating losses, research and experimental costs capitalized, and tax credits generated in 2023 and is partially offset by a decrease in the deferred tax assets related to the fair value of derivative liability.

This increase in valuation allowance is based on management's assessment that it is more likely than not that the Company will not realize these deferred tax assets.

At December 31, 2023, the Company had NOL carryforwards of $ 656.9 million and research and experimental credit carryforwards of $ 15.3 million.

Total deferred tax liabilities

Net deferred tax assets (liabilities)

The net change in valuation allowance for the years ended December 31, 2024 and 2023 was a net increase of $ 19.9 million and $ 16.3 million, respectively.

The increase in valuation allowance is primarily due to deferred tax assets generated from net operating losses, research and experimental costs capitalized, and tax credits generated in 2024.

This increase in valuation allowance is based on management's assessment that it is not more likely than not that the Company will realize these deferred tax assets.

At December 31, 2024, the Company had gross federal and state NOL carryforwards of $ 703.3 million and $ 89.7 million, respectively and research and experimental credit carryforwards of $ 17.1 million.

Research and experimental credit carryforwards will expire in varying amounts between 2025 and 2044.

NOL carryforwards in the amount of $ 196.4 million will expire in varying amounts between 2024 and 2037.

NOL carryforwards incurred in tax years 2018 and forward have an indefinite carryforward period.

Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of NOL carryforwards and research and development credit carryforwards which can be available in future years.

Federal NOL carryforwards in the amount of $ 193.3 million will expire in varying amounts between 2025 and 2037.

Federal NOL carryforwards incurred in tax years 2018 and forward have an indefinite carryforward period, although limited to eighty percent of taxable income annually.

State NOLs have various expiration dates beginning in 2032.

Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of NOL carryforwards and research and experimental credit carryforwards which can be available in future years.

A reconciliation of the Company’s estimated U.S.

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Deferred income taxes reflect temporary differences in the recognition of revenue and expense for tax reporting and financial statement purposes.

Deferred tax liabilities and assets are adjusted for changes in tax laws or tax rates of the various tax jurisdictions as of the enacted date.

The federal tax rate remained unchanged at 21 % for the 2023 tax year.

The change in state tax rate from 2022 to 2023 is primarily due to changes in applicable state apportionment factors and change in jurisdictions.

A breakdown of the Company’s uncertain tax position during 2023 and 2022 is as follows (in thousands):

Deferred tax assets (liabilities) are adjusted for changes in tax laws or tax rates of the various tax jurisdictions as of the enacted date.

A breakdown of the Company’s uncertain tax positions during 2024 and 2023 is as follows (in thousands):

Gross unrecognized tax benefit at beginning of year

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Gross unrecognized tax benefit at end of year

During 2022 and 2023, the Company incurred minor penalties and interest for filed tax returns due to taxing authorities.

During 2023 and 2024, the Company incurred no significant amounts related to penalties and interest for filed tax returns due to taxing authorities.

If recognized, the entire amount of gross unrecognized tax benefit would favorably affect the effective income tax rate, although, due to the Company’s valuation allowance there would be no net impact.

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Ascensia, through the ownership interests of its parent company, PHC, is a related party.

For the year ended December 31, 2023, revenue from Ascensia was $ 20.7 million and the amount due from Ascensia was $ 3.7 million.

At December 31, 2023, the Company had estimated replacement obligations under warranties in the amount of $ 0.5 million and other amounts due to Ascensia of $ 0.5 million.

For the year ended December 31, 2024, revenue from Ascensia was $ 18.5 million and the amount due from Ascensia was $ 4.9 million as of December 31, 2024.

At December 31, 2024, the Company had commissions due to Ascensia in the amount of $ 1.2 million, estimated replacement obligations under warranties in the amount of $ 0.3 million and other amounts due to Ascensia of $ 0.3 million.

We also purchase certain medical supplies from Ascensia for our clinical trials.

We paid Ascensia $ 0.1 million for the year ended December 31, 2024 under this arrangement.

For the year ended December 31, 2022, revenue from Ascensia was $ 15.7 million and the amount due from Ascensia was $ 2.3 million.

At December 31, 2022, the Company had estimated replacement obligations under warranties in the amount of $ 0.8 million and other amounts due to Ascensia of less than $ 0.1 million.

We also purchase certain medical supplies from Ascensia for our clinical trials.

For the year ended December 31, 2023, revenue from Ascensia was $ 20.7 million and the amount due from Ascensia was $ 3.7 million as of December 31, 2023.

At December 31, 2023 the Company had estimated replacement obligations under warranties in the amount of $ 0.5 million and other amounts due to Ascensia of $ 0.5 million.

purchase certain medical supplies from Ascensia for our clinical trials.

We paid Ascensia $ 0.6 million for the year ended December 31, 2023 under this arrangement.

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Money market funds⁽¹⁾

Commercial paper

Corporate debt securities

Government and agency securities

Embedded features of the 2025 Notes

December 31, 2023

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Corporate debt securities

Asset backed securities

Government and agency securities

Embedded features of the 2025 Notes

Embedded features of the PHC Notes

Embedded features of the 2025 Notes

(1) Classified as cash and cash equivalents due to their short-term maturity

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Conversion of financial instruments

Gain on fair value adjustment of option

Gain on change in fair value of derivatives

Loss on extinguishment of option

Financial asset impairment cost, net

Transfers into Level 3

Transfers out of Level 3

Ending balance

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When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.

During the year ended December 31, 2023, there were no transfers between Level 1, Level 2, or Level 3.

During the year ended December 31, 2022, transfers into Level 2 of liabilities previously classified in Level 3 were due to increased trade activity associated with these instruments providing better price transparency, permitting classification to Level 2.

In addition, transfers into Level 3 of liabilities previously classified in Level 2 were an increase in unobservable inputs, permitting classification to Level 3.

During the years ended December 31, 2024 and 2023, there were no transfers between Level 1, Level 2, or Level 3.

Segment Information

The Company views its operations and manages its business in one operating segment, which also represents one reportable segment which derives its revenues from diabetes products and services.

Operating segments are defined

as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company CODM, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources.

The CODM assesses performance for the segment based on net loss, which is reported in the consolidated statements of operations and comprehensive loss and uses the financial information in deciding on how to invest into the Company.

The measure of segment assets reported on the balance sheets as total assets.

The table below summarizes the significant expense categories regularly reviewed by the CODM for the years ended December 31, 2024 and 2023:

(in thousands)

Cost of goods sold

Sales and marketing expenses

Research and development expenses

General and administrative expenses

Other segment items (1)

(1) Other segment items include interest income, interest expense, exchange related gains, gains on changes in fair value, and other income, and other expense as presented in the Company’s consolidated statements of operations and comprehensive loss.

From time to time, the Company is subject to litigation and claims arising in the ordinary course of business.

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Except as described below there were no other subsequent events which required recognition, adjustment to or disclosure in the financial statements.

As previously disclosed in Note 13, on Septembr 8, 2023 (“the Effective Date”), the Company entered into a Loan and Security Agreement with Hercules Capital, Inc.

and the Lenders, pursuant to which the Lenders agreed to make available to the Company up to $ 50.0 million in senior secured term loans consisting of (i) an initial term loan of $ 25.0 million, which was funded on the Effective Date and (ii) two additional tranches of term loans in the amounts of up to $ 10.0 million (the “Tranche 2 Loan”) and $ 15.0 million (the “Tranche 3 Loan”), respectively.

On January 2, 2024, the Tranche 2 Loan was funded in an amount of $ 10.0 million following the Company’s satisfaction of certain terms and conditions set forth in the Loan and Security Agreement in the fourth quarter of 2023.

In connection with the Loan and Security Agreement, the Company issued additional warrants to the Lenders to acquire an aggregate of 347,887 shares at an exercise price of $ 0.5749 per share.

As previously disclosed in Note 13, on January 15, 2025, the Company repaid the outstanding principal and accrued interest for the 2025 Notes in the full amount of $ 20.9 million.

The conversion option expired unexercised.

On January 31, 2025, Energy Capital converted its 12,000 shares of Series B Preferred Stock to common stock.

The Company issued 30,372,058 shares of common stock to Energy Capital upon the conversion of the Series B Preferred Shares.

Subsequent to December 31, 2024, and through February 28, 2025, the Company received approximately $ 26.1 million in proceeds (net of commissions) from the sale of 27,628,704 shares of common stock under the Equity Distribution Agreement.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data