What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 179 added, 152 removed, 564 unchanged (37% of the section changed)

3 unchanged sentences

(In thousands, except par value)

June 30, December 31,

September 30, December 31,

(Unaudited) (Note 1)

27 unchanged sentences

Common stock, $ 0.001 par value;

200,000 shares authorized, 62,952 and 62,335 shares issued and outstanding at June 30, 2021 (unaudited) and December 31, 2020, respectively.

200,000 shares authorized, 63,451 and 62,335 shares issued and outstanding at September 30, 2021 (unaudited) and December 31, 2020, respectively.

Additional paid-in capital 1,034,980 1,025,233

7 unchanged sentences

(In thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

27 unchanged sentences

(In thousands)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Common Stock Additional

5 unchanged sentences

Shares Amount

Balance at March 31, 2021 62,571 $ 63 $ 968,450 $ 106 $ ( 655,205 ) $ 313,414

Balance at June 30, 2021 62,952 $ 63 $ 997,190 $ 29 $ ( 651,197 ) $ 346,085

Exercise of stock options 464 — 18,992 — — 18,992

Vesting of restricted stock units, net of shares withheld for taxes 5 — ( 297 ) — — ( 297 )

Issuance of common stock for Employee Stock Purchase Plan 100 — 6,317 — — 6,317

Exercise of common stock warrants 30 — 156 — — 156

Fair value of common stock warrants at time of exercise — — 3,066 — — 3,066

Stock-based compensation expense — — 15,873 — — 15,873

Unrealized loss on short-term investments — — — ( 51 ) — ( 51 )

Unrealized gain on short-term investments — — — 8 — 8

Foreign currency translation adjustments — — — ( 23 ) — ( 23 )

Net income — — — — 5,794 5,794

Balance at June 30, 2021 62,952 $ 63 $ 997,190 $ 29 $ ( 651,197 ) $ 346,085

Six Months Ended June 30, 2021

Balance at September 30, 2021 63,451 $ 63 $ 1,034,980 $ 14 $ ( 645,403 ) $ 389,654

Nine Months Ended September 30, 2021

Common Stock Additional

16 unchanged sentences

Foreign currency translation adjustments — — — ( 125 ) — ( 125 )

Net loss — — — — ( 1,036 ) ( 1,036 )

Balance at June 30, 2021 62,952 63 997,190 29 ( 651,197 ) $ 346,085

Net income — — — — 4,758 4,758

Balance at September 30, 2021 63,451 $ 63 $ 1,034,980 $ 14 $ ( 645,403 ) $ 389,654

(1) The Company adopted ASU No.

2 unchanged sentences

:AccountingStandardsUpdate202006Member

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Common Stock Additional

5 unchanged sentences

Shares Amount

Balance at March 31, 2020 60,071 $ 60 $ 847,056 $ ( 245 ) $ ( 639,695 ) $ 207,176

Balance at June 30, 2020 60,787 $ 61 $ 934,402 $ 43 $ ( 666,802 ) $ 267,704

Exercise of stock options 1,072 1 29,030 — — 29,031

Issuance of common stock for Employee Stock Purchase Plan 229 — 4,916 — — 4,916

Exercise of common stock warrants 257 — 899 — — 899

Equity component of convertible senior notes issuance, net of issuance costs — — 85,803 — — 85,803

Payment for capped call transactions related to convertible senior notes — — ( 34,069 ) — — ( 34,069 )

Fair value of common stock warrants at time of exercise — — 25,870 — — 25,870

Stock-based compensation expense — — 12,301 — — 12,301

Unrealized gain on short-term investments — — — 105 — 105

Unrealized loss on short-term investments — — — ( 69 ) — ( 69 )

Foreign currency translation adjustments — — — 216 — 216

Net loss — — — — ( 9,408 ) ( 9,408 )

Balance at June 30, 2020 60,787 $ 61 $ 934,402 $ 43 $ ( 666,802 ) $ 267,704

Six Months Ended June 30, 2020

Balance at September 30, 2020 62,116 $ 62 $ 1,002,502 $ 190 $ ( 676,210 ) $ 326,544

Nine Months Ended September 30, 2020

Common Stock Additional

16 unchanged sentences

Net loss — — — — ( 51,382 ) ( 51,382 )

Balance at June 30, 2020 60,787 $ 61 $ 934,402 $ 43 $ ( 666,802 ) $ 267,704

Balance at September 30, 2020 62,116 $ 62 $ 1,002,502 $ 190 $ ( 676,210 ) $ 326,544

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

Net loss $ ( 1,036 ) $ ( 41,974 )

Adjustments to reconcile net loss to net cash provided (used) by operating activities:

Net income (loss) $ 4,758 $ ( 51,382 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization expense 10,325 7,024

17 unchanged sentences

Other long-term liabilities 2,580 2,381

Net cash provided (used) by operating activities 57,580 ( 5,132 )

Net cash provided by operating activities 91,724 9,432

Investing Activities

32 unchanged sentences

The Company’s manufacturing, sales and support activities principally focus on the t:slim X2 Insulin Delivery System (t:slim X2), the Company’s flagship pump platform which is capable of remote software updates and is designed to display continuous glucose monitoring (CGM) sensor information directly on the pump home screen.

The Company’s insulin pump products are compatible with other complementary digital health offerings, such as the t:connect cloud-based diabetes management application (t:connect) and the Tandem Device Updater, a Mac and PC-compatible tool which offers and supports different updates of the Company’s insulin pump software from a personal computer.

The Company’s insulin pump products are compatible with other complementary digital health offerings, such as the t:connect cloud-based diabetes management application (t:connect) and the Tandem Device Updater, a Mac and PC-compatible tool which offers and supports updates of the Company’s insulin pump software from a personal computer.

The Company’s insulin pump products are generally considered durable medical equipment and have an expected lifespan of at least four years .

16 unchanged sentences

Foreign exchange gains or losses resulting from balances denominated in a currency other than the functional currency are recognized in interest income and other, net in the Company’s condensed consolidated statements of operations.

Reclassifications

Prior year amounts related to the presentation of other income (expense), net on the Company’s condensed consolidated statement of operations and comprehensive loss, have been reclassified to conform to the current year presentation.

Starting with the third quarter of 2020, the first full quarter in which the Company’s convertible senior notes were outstanding, the Company began to present non-operating expenses unrelated to the convertible senior notes with interest income and other, net.

In prior periods, other non-operating expenses were combined with interest expense and reported as interest and other expense.

Summary of Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2021, as compared to those disclosed in the Annual Report, other than the adoption of ASU No.

There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2021, as compared to those disclosed in the Annual Report, other than the adoption of ASU No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, effective January 1, 2021 (see Note 7, “Convertible Senior Notes”).

4 unchanged sentences

Accounts Receivable

The Company grants credit to various customers in the ordinary course of business and is paid directly by customers who use the products, distributors and third-party insurance payors.

The Company grants credit to various customers in the ordinary course of business and is paid directly by customers who use its products, distributors and third-party insurance payors.

The Company maintains an allowance for its current estimate of expected credit losses.

4 unchanged sentences

Short-term investments are carried at fair value.

The Company determined the fair value of its convertible senior notes to be $ 326.6 million at June 30, 2021, and $ 333.5 million at December 31, 2020, based on Level 2 quoted market prices (see Note 7, “Convertible Senior Notes”).

The estimated fair value of certain of the Company’s common stock warrants was determined using the Black-Scholes pricing model as of June 30, 2021 and December 31, 2020 (see Note 5, “Fair Value Measurements”).

The Company determined the fair value of its convertible senior notes to be $ 363.0 million at September 30, 2021, and $ 333.5 million at December 31, 2020, based on Level 2 quoted market prices (see Note 7, “Convertible Senior Notes”).

The estimated fair value of certain of the Company’s common stock warrants was determined using the Black-Scholes pricing model as of September 30, 2021 and December 31, 2020 (see Note 5, “Fair Value Measurements”).

Operating Lease Right-of-Use Assets and Liabilities

1 unchanged sentence

Operating lease right-of-use assets and liabilities are recognized when the Company takes possession of the leased property (the Commencement Date) based on the present value of lease payments over the lease term.

For lease agreements entered into or reassessed after the adoption of ASC 842, the Company combines lease and non-lease components.

For lease agreements entered into or reassessed after the adoption of ASC 842, Leases , the Company combines lease and non-lease components.

Rent expense on noncancellable leases containing known future scheduled rent increases is recorded on a straight-line basis over the term of the respective leases beginning on the Commencement Date (see Note 6, “Leases”).

3 unchanged sentences

During the second quarter of 2021, the Company made an $ 8.1 million equity investment in a private company, which represented less than 5 % of the outstanding equity of that company.

The investment is accounted for using the cost method, as the investment does not have a readily determinable fair value, and is included as a component of other long-term assets on the condensed consolidated balance sheet at June 30, 2021.

Intangible Assets Subject to Amortization

Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges.

Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis.

Amortization of finite-lived intangible assets is recognized over their estimated useful lives on a straight-line basis.

The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company did not recognize any impairment losses during the six months ended June 30, 2021 and 2020.

The Company did not recognize any impairment losses during the nine months ended September 30, 2021 and 2020.

On June 24, 2020, the Company acquired Sugarmate, Inc.

6 unchanged sentences

Revenue Recognition

Revenue is generated primarily from sales of insulin pumps, disposable cartridges and infusion sets to individual customers with third-party insurance coverage and through a network of distributors that resell the products to insulin-dependent diabetes customers.

Revenue is generated primarily from sales of insulin pumps, disposable insulin cartridges and infusion sets to individual customers with third-party insurance coverage and through a network of distributors that resell the products to insulin-dependent diabetes customers.

The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

7 unchanged sentences

When there is no standalone value for the complementary product, the Company determines their value by applying the expected cost plus a margin approach and then allocates the residual to the insulin pumps.

Deferred revenue related to these performance obligations that are satisfied over time was included in the following consolidated balance sheet accounts in the amounts shown as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Deferred revenue related to these performance obligations that are satisfied over time was included in the following consolidated balance sheet accounts in the amounts shown as of September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

Deferred revenue $ 8,489 $ 5,508

2 unchanged sentences

Warranty Reserve

The Company generally provides a four-year warranty on its insulin pumps to end-user customers and may replace any pumps that do not function in accordance with the product specifications.

The Company generally provides a four-year warranty on its insulin pumps to end-user customers and may replace any pumps that do not function in accordance with the product specifications within the warranty period.

Insulin pumps returned to the Company may be refurbished and redeployed.

Additionally, the Company offers a six-month warranty on disposable cartridges and infusion sets.

Additionally, the Company offers a six-month warranty on disposable insulin cartridges and infusion sets.

Estimated warranty costs are recorded at the time of shipment.

3 unchanged sentences

The Company may make further adjustments to the warranty reserve when deemed appropriate, giving additional consideration to the length of time the pump version has been in the field and future expectations of performance based on new features and capabilities that may become available through Tandem Device Updater.

The following table provides a reconciliation of the changes in product warranty liabilities for the three and six months ended June 30, 2021 and 2020 (in thousands):

The following table provides a reconciliation of the changes in product warranty liabilities for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

4 unchanged sentences

Balance at end of period $ 27,545 $ 18,193 $ 27,545 $ 18,193

As of June 30, 2021 and December 31, 2020, total product warranty reserves of $ 25.7 million and $ 22.1 million, respectively, were included in the following consolidated balance sheet accounts (in thousands):

June 30, 2021 December 31, 2020

As of September 30, 2021 and December 31, 2020, total product warranty reserves of $ 27.5 million and $ 22.1 million, respectively, were included in the following consolidated balance sheet accounts (in thousands):

September 30, 2021 December 31, 2020

Other current liabilities $ 11,299 $ 8,409

7 unchanged sentences

The fair value of RSU awards issued under the 2013 Plan that vest based upon the Company’s actual performance relative to predefined performance metrics is estimated based on the fair market value of the underlying stock on the date of grant and the probability that the specified performance criteria will be met, subject to the awardee’s continuing service through the measurement date.

We update our assessment of the probability that the specified performance criteria will be achieved each quarter, and adjust our estimate of the fair value of the performance-based RSUs if necessary.

We update our assessment each quarter of the probability that the specified performance criteria will be achieved, and adjust our estimate of the fair value of the performance-based RSUs if necessary.

Net Income (Loss) Per Share

5 unchanged sentences

Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any, under the treasury stock method.

For the three months ended June 30, 2020, and the six months ended June 30, 2021 and 2020, there is no difference in the weighted average number of shares used to calculate basic and diluted net loss per share due to the Company’s net loss position.

For the three months ended June 30, 2021, the numerator and denominator of the diluted net income per share computation are calculated as follows:

Three Months Ended

(in thousands) 2021

For the three and nine months ended September 30, 2020, there was no difference in the weighted average number of shares used to calculate basic and diluted net loss per share due to the Company’s net loss position.

For the three and nine months ended September 30, 2021, the numerator and denominator of the diluted net income per share computation were calculated as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Net income - basic and diluted $ 5,794 $ 4,758

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

16 unchanged sentences

Accordingly, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives.

The new guidance can be adopted through either a modified retrospective method of transition or a fully retrospective method of transition.

ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company elected to early adopt the new standard on January 1, 2021 using the modified retrospective method, and recorded a net reduction to accumulated deficit of $ 9.0 million, a decrease to additional paid-in capital of $ 85.8 million, and an increase to convertible senior notes, net - long-term of $ 76.8 million to reflect the impact of the accounting change (see Note 7, “Convertible Senior Notes”).

3 unchanged sentences

Government-sponsored enterprises, and financial institutions and corporations with strong credit ratings.

The following represents a summary of the estimated fair value of short-term investments as of June 30, 2021 and December 31, 2020 (in thousands):

At June 30, 2021 Maturity

(in years) Amortized

The following represents a summary of the estimated fair value of short-term investments as of September 30, 2021 and December 31, 2020 (in thousands):

At September 30, 2021 Amortized

Cost Gross Unrealized

2 unchanged sentences

Available-for-sale securities:

Commercial paper Less than 1

$ 222,319 $ 11 $ ( 2 ) $ 222,328

Government-sponsored enterprise Less than 2

63,175 18 ( 19 ) 63,174

Treasury securities Less than 2

104,937 2 ( 23 ) 104,916

Corporate debt securities Less than 2

53,303 6 ( 13 ) 53,296

Supranational bonds Less than 1

3,010 — — 3,010

Commercial paper $ 242,739 $ 8 $ ( 1 ) $ 242,746

Treasury securities 116,945 4 ( 18 ) 116,931

Government-sponsored enterprise 56,344 12 ( 6 ) 56,350

Corporate debt securities 63,595 5 ( 16 ) 63,584

Supranational bonds 3,007 — — 3,007

Total $ 482,630 $ 29 $ ( 41 ) $ 482,618

At December 31, 2020 Maturity

(in years) Amortized

At December 31, 2020 Amortized

Cost Gross Unrealized

2 unchanged sentences

Available-for-sale securities:

Commercial paper Less than 1

$ 108,892 $ 5 $ ( 1 ) $ 108,896

Government-sponsored enterprise Less than 2

52,330 21 ( 1 ) 52,350

Treasury securities Less than 2

143,244 12 ( 2 ) 143,254

Corporate debt securities Less than 2

85,788 48 ( 13 ) 85,823

Commercial paper $ 108,892 $ 5 $ ( 1 ) $ 108,896

Treasury securities 143,244 12 ( 2 ) 143,254

Government-sponsored enterprise 52,330 21 ( 1 ) 52,350

Corporate debt securities 85,788 48 ( 13 ) 85,823

Total $ 390,254 $ 86 $ ( 17 ) $ 390,323

The contractual maturities of available-for-sale debt securities as of September 30, 2021, were as follows (in thousands):

Years to Maturity

At September 30, 2021 Within One Year One to Two Years Estimated Fair Value

Commercial paper $ 242,746 $ — $ 242,746

Treasury securities 59,125 57,806 116,931

Government-sponsored enterprise 30,869 25,481 56,350

Corporate debt securities 63,584 — 63,584

Supranational bonds 3,007 — 3,007

Total $ 399,331 $ 83,287 $ 482,618

The Company has classified all marketable securities, regardless of maturity, as short-term investments based upon the Company’s ability and intent to use any of those marketable securities to satisfy the Company’s liquidity requirements.

The Company periodically reviews the portfolio of available-for-sale debt securities to determine if any investment is impaired due to changes in credit risk or other potential valuation concerns.

Unrealized losses on available-for-sale debt securities at June 30, 2021 were not significant and were due to changes in interest rates, including credit spreads from perceived increased credit risks as a result of the COVID-19 global pandemic.

Unrealized losses on available-for-sale debt securities at September 30, 2021 were not significant and were primarily due to changes in market interest rates.

The Company does not intend to sell the available-for-sale debt securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell these debt securities before recovery of their amortized cost bases, which may be at maturity.

Based on the credit quality of the available-for-sale debt securities in an unrealized loss position, and the Company’s estimates of future cash flows to be collected from those securities, the Company believes the unrealized losses are not credit losses.

Accordingly, the Company did not recognize any impairment losses related to its available-for-sale debt securities at June 30, 2021.

Accordingly, the Company did not recognize any impairment losses related to its available-for-sale debt securities at September 30, 2021.

Accounts Receivable and Inventories

1 unchanged sentence

Accounts receivable consisted of the following (in thousands):

September 30,

2021 December 31,

3 unchanged sentences

Allowance for Credit Losses

The following table provides a reconciliation of the changes in the estimated allowance for expected accounts receivable credit losses for the three and six months ended June 30, 2021 and 2020 (in thousands):

The following table provides a reconciliation of the changes in the estimated allowance for expected accounts receivable credit losses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

Balance at end of the period $ 3,794 $ 3,464 $ 3,794 $ 3,464

Inventories consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

Inventories consisted of the following as of September 30, 2021 and December 31, 2020 (in thousands):

September 30,

2021 December 31,

11 unchanged sentences

Unobservable inputs in which there is little or no market data and that are significant to the fair value of the assets or liabilities, which require the reporting entity to develop its own valuation techniques that require input assumptions.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

Fair Value Measurements at June 30, 2021

(Level 1) (Level 2) (Level 3)

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

Fair Value Measurements at September 30, 2021

Total Level 1 Level 2 Level 3

Cash equivalents (1)

1 unchanged sentence

Commercial paper 242,746 — 242,746 —

Government-sponsored enterprise 63,174 — 63,174 —

Treasury securities 116,931 116,931 — —

Government-sponsored enterprise 56,350 — 56,350 —

Corporate debt securities 63,584 — 63,584 —

4 unchanged sentences

Fair Value Measurements at December 31, 2020

(Level 1) (Level 2) (Level 3)

Total Level 1 Level 2 Level 3

Cash equivalents (1)

1 unchanged sentence

Commercial paper 108,896 — 108,896 —

Government-sponsored enterprise 52,350 — 52,350 —

Treasury securities 143,254 143,254 — —

Government-sponsored enterprise 52,350 — 52,350 —

Corporate debt securities 85,823 — 85,823 —

6 unchanged sentences

The Company validates these prices through independent valuation testing and review of portfolio valuations provided by the Company’s investment managers.

The Company’s Level 3 liabilities at June 30, 2021 and December 31, 2020 include the remaining Series A warrants issued by the Company in connection with the public offering of common stock in October 2017, and which expire in October 2022.

As of June 30, 2021 and 2020, there were Series A warrants outstanding to purchase 29,700 shares and 415,200 shares, respectively, of the Company’s common stock (see Note 8, “Stockholders’ Equity”).

The Company’s Level 3 liabilities at September 30, 2021 and December 31, 2020 include the remaining Series A warrants issued by the Company in connection with the public offering of common stock in October 2017, and which expire in October 2022.

As of September 30, 2021 and 2020, there were Series A warrants outstanding to purchase 1,000 shares and 158,200 shares, respectively, of the Company’s common stock (see Note 8, “Stockholders’ Equity”).

The Company reassesses the fair value of the outstanding Series A warrants at each reporting date utilizing a Black-Scholes pricing model.

2 unchanged sentences

A significant increase (decrease) in any of these inputs in isolation, particularly the market price of the Company’s common stock, would have resulted in a significantly higher (lower) fair value measurement.

The assumptions used to estimate the fair values of the outstanding Series A warrants at June 30, 2021 and December 31, 2020 are presented below:

The assumptions used to estimate the fair values of the outstanding Series A warrants at September 30, 2021 and December 31, 2020 are presented below:

Series A Warrants

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Risk-free interest rate 0.1 % 0.1 %

2 unchanged sentences

Remaining term (in years) 1.1 1.8

The following table presents a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

The following table presents a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the nine months ended September 30, 2021 and 2020:

Nine Months Ended September 30,

Balance at beginning of the period $ 14,261 $ 23,509

2 unchanged sentences

Balance at end of the period $ 116 $ 17,404

Of the loss recognized from the change in fair value of common stock warrants for the six months ended June 30, 2021 and 2020, $ 0.1 million and $ 16.2 million, respectively, was attributable to warrants outstanding as of June 30, 2021 and 2020.

Of the loss recognized from the change in fair value of common stock warrants for the nine months ended 2020, $ 8.5 million was attributable to warrants outstanding as of September 30, 2020.

The corresponding amount for the nine months ended September 30, 2021 was negligible.

The Company’s leases consist of operating leases for general office space, laboratory, manufacturing and warehouse facilities, and equipment.

8 unchanged sentences

The Company used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date.

In March 2021, the Company entered into a second amendment (Second Amendment) to its lease agreement covering approximately 59,013 square feet of general administrative office space (Existing Premises) located on Vista Sorrento Parkway, in San Diego, California (Vista Sorrento Lease).

The Second Amendment expanded the Existing Premises by adding approximately 14,916 square feet of general administrative office space (Expansion Space), and extended the lease term for the Existing Premises through January 2028.

In March 2021, the Company entered into a second amendment (Second Amendment) to its lease agreement covering 59,013 square feet of general administrative office space (Existing Premises) located on Vista Sorrento Parkway in San Diego, California (Vista Sorrento Lease).

The Second Amendment expanded the Existing Premises by adding 14,916 square feet of general administrative office space (Expansion Space), and extended the lease term for the Existing Premises through January 2028.

The Expansion Space lease Commencement Date occurred in March 2021, and the lease term expires in January 2028.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

2 unchanged sentences

Total lease cost $ 2,235 $ 1,977 $ 6,482 $ 5,767

Maturities of operating lease liabilities at June 30, 2021 were as follows (in thousands):

Maturities of operating lease liabilities at September 30, 2021 were as follows (in thousands):

Years Ending December 31,

7 unchanged sentences

The weighted-average remaining lease term and weighted-average discount rate for operating leases were as follows:

September 30,

2021 December 31,

1 unchanged sentence

Weighted-average discount rate used to determine operating lease liabilities 5.6 % 5.9 %

Cash paid for amounts included in the measurement of lease liabilities, representing operating cash flows used for operating leases, was $ 4.7 million and $ 2.9 million for the six months ended June 30, 2021 and 2020, respectively.

Cash paid for amounts included in the measurement of lease liabilities, representing operating cash flows used for operating leases, was $ 7.1 million and $ 5.4 million for the nine months ended September 30, 2021 and 2020, respectively.

High Bluff Lease

In September 2021, the Company entered into a lease agreement for 181,949 square feet of additional general administrative, laboratory, and research and development office space (the Premises) located on High Bluff Drive in San Diego, California (the High Bluff Lease).

Possession of the Premises is expected to be tendered to the Company by the landlord in two phases, with Phase I consisting of 143,850 rentable square feet, and Phase II consisting of 38,099 rentable square feet.

The Company intends to use Phase I of the High Bluff Lease for operations currently located at four separate leased buildings on Roselle Street in San Diego, California that comprise 77,458 square feet in the aggregate, and that have lease terms which are expected to expire in May 2023.

As of September 30, 2021, the Commencement Date for the High Bluff Lease, which is the date upon which the Company will recognize operating lease right-of-use assets and liabilities, and begin recording lease expense, had not yet occurred.

Accordingly, the operating lease right-of-use assets and operating lease liabilities recorded on the condensed consolidated balance sheet at September 30, 2021, and the disclosures of lease cost, maturities of operating lease liabilities, and the weighted-average remaining lease term and weighted-average discount rate above, do not include any amounts related to the High Bluff Lease.

The initial lease term Phase I Commencement Date is expected to occur upon the earlier of (i) the date upon which the Company first commences business in the Phase I portion of the Premises, and (ii) the date on which the Company is tendered possession of the Phase I portion of the Premises (which date is currently anticipated to be March 1, 2022).

The Phase I Rent Commencement Date is expected to be the date which is six months following the Phase I Commencement Date (the Phase I Rent Commencement Date).

The Phase II Commencement Date is expected to occur upon the earlier of (i) the date upon which the Company first commences business in the Phase II portion of the Premises, and (ii) May 1, 2025 (the Phase II Rent Commencement Date).

The lease will expire approximately twelve years, eight months from the first day of the first full month following the Phase I Rent Commencement Date.

The Company has two options to extend the term of the lease, with each option providing for an additional period of five years , by delivering written notice to the landlord in accordance with the terms of the High Bluff Lease.

The High Bluff Lease also includes a first right of offer with respect to an additional 34,569 rentable square feet of general office space should the space become available.

The lease term and associated base rent for the additional space will not be known until the Company is notified that the additional space has become available, and the Company elects to lease the space on terms mutually satisfactory to the Company and the landlord.

The initial base rent for the High Bluff Lease is approximately $ 906,000 per month beginning on the Phase I Rent Commencement Date, and the base rent increases by approximately $ 255,000 per month on the Phase II Rent Commencement Date.

The monthly base rent will increase annually by 3.0 % on each annual anniversary of the respective Rent Commencement Date.

In addition to the monthly base rent, the Company is required to pay its proportionate share of certain ongoing operating expenses throughout the duration of the lease.

No base rent, other than the proportionate share of operating expenses, will be due for the Phase I portion of the Premises for months two through nine of the initial lease term, and for the Phase II portion of the Premises for months two through five following the Phase II Rent Commencement Date.

Future minimum payments for monthly base rent due under the initial lease term, are currently estimated to be as follows (in thousands), subject to a number of factors, including the actual Commencement Date of the lease:

Years Ending December 31,

2021 (remaining) $ —

2026 through 2035 160,764

(1) The Company currently estimates that the Phase I Commencement Date will occur in the first quarter of 2022, and the Phase II Commencement Date will occur in the first quarter of 2025, at which time the respective operating lease right-of-use assets and liabilities will be recorded.

Convertible Senior Notes

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The Notes are now accounted for as a single liability measured at amortized cost, as no other embedded features require bifurcation and recognition as derivatives.

The liability and equity components of the Notes consisted of the following (in thousands) at June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

The liability and equity components of the Notes consisted of the following at September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

Principal amount $ 287,500 $ 287,500

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Carrying amount of the equity component $ — $ 85,803

As of June 30, 2021, the unamortized debt issuance costs of $ 6.9 million associated with the Notes will be amortized to interest expense, at an effective interest rate of 2.2 %, over the remaining term of the Notes of approximately 3.8 years.

The following table details interest expense recognized related to the Notes for the three and six months ended June 30, 2021 and 2020 (in thousands):

As of September 30, 2021, the unamortized debt issuance costs of $ 6.5 million associated with the Notes will be amortized to interest expense, at an effective interest rate of 2.2 %, over the remaining term of the Notes of approximately 3.6 years.

The following table details interest expense recognized related to the Notes for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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The Notes will have a dilutive effect to the extent the average market price per share of the Company’s common stock for a given reporting period exceeds the Conversion Price of $ 112.57 .

As of June 30, 2021, the “if-converted value” did not exceed the principal amount of the Notes.

As of September 30, 2021, the “if-converted value” did not exceed the principal amount of the Notes.

Capped Call Transactions

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For accounting purposes, the Capped Call Transactions are separate transactions, and not part of the terms of the Notes.

As these transactions meet certain criteria under the applicable accounting guidance, the Capped Call Transactions are recorded in stockholders' equity and are not accounted for as derivatives.

As these transactions met certain criteria under the applicable accounting guidance, the Capped Call Transactions were recorded in stockholders' equity and were not accounted for as derivatives.

The cost of the Capped Call Transactions was recorded as a reduction of the Company’s additional paid-in capital in the Company’s consolidated balance sheet and will not be remeasured.

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Shares Reserved for Future Issuance

The following shares of the Company’s common stock were reserved for future issuance as of June 30, 2021 (in thousands):

The following shares of the Company’s common stock were reserved for future issuance as of September 30, 2021 (in thousands):

Shares reserved for issuance upon conversion of Convertible Senior Notes 2,554

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Common Stock Warrants

Warrants outstanding to purchase shares of the Company's common stock as of June 30, 2021 were as follows:

Issue Date Exercise Price Per Share Warrants Outstanding Expiration Date

Warrants outstanding to purchase shares of the Company's common stock as of September 30, 2021 were as follows:

Issue Date Exercise Price Per Share Warrants Outstanding Expiration Date of Warrants Outstanding

October 2017 $ 3.50 1,000 October 2022

March 2017 $ 23.50 193,788 March 2027

August 2011 - August 2012 $ 73.73 27,704 August 2021 - August 2022

May 2012 - August 2012 $ 73.73 19,722 May 2022 - August 2022

Each warrant allows the holder to purchase one share of the Company's common stock at the exercise price per share of the respective warrant.

The Company issued 522 and 125,522 shares of its common stock, respectively, upon the exercise of warrants during the three and six months ended June 30, 2021, and 32,574 and 34,689 shares of its common stock, respectively, upon the exercise of warrants during the three and six months ended June 30, 2020.

The Company issued 29,985 and 155,517 shares of its common stock, respectively, upon the exercise of warrants during the three and nine months ended September 30, 2021, and 257,000 and 291,894 shares of its common stock, respectively, upon the exercise of warrants during the three and nine months ended September 30, 2020.

The Company’s Amended and Restated 2013 Stock Incentive Plan (2013 Plan) was originally approved by the Company’s board of directors in October 2013.

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Common Stock Options

The Company granted options to purchase 239,608 and 355,008 shares of common stock, respectively, during the three and six months ended June 30, 2021, and options to purchase 621,045 and 850,956 shares of common stock, respectively, during the three and six months ended June 30, 2020.

The Company did no t grant any options to purchase shares of common stock during the three months ended September 30, 2021.

The Company granted options to purchase 355,008 shares of common stock during the nine months ended September 30, 2021, and options to purchase 162,886 and 1,010,996 shares of common stock, respectively, during the three and nine months ended September 30, 2020.

These options have an exercise price equal to the closing price of the Company’s common stock on the applicable award date, and generally vest as to 25 % of the underlying shares on the first anniversary of the award, with the balance of the options vesting monthly over the following three years .

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Weighted average grant date fair value (per share) $ 54.92 $ 52.50 $ 56.89 $ 50.04

Risk-free interest rate 1.1 % 0.4 % 1.0 % 0.6 %

Expected dividend yield 0.0 % 0.0 % 0.0 % 0.0 %

Expected volatility 74.9 % 75.0 % 75.1 % 74.3 %

Expected term (in years) 6.1 6.0 6.1 6.0

Restricted Stock Units (RSUs)

The Company granted 339,386 and 342,594 restricted stock units (RSUs), respectively, during the three and six months ended June 30, 2021, and 131,848 RSUs during the three and six months ended 2020.

Weighted average grant date fair value (per share) N/A $ 67.64 $ 56.89 $ 52.83

Risk-free interest rate N/A 0.4 % 1.0 % 0.6 %

Expected dividend yield N/A 0.0 % 0.0 % 0.0 %

Expected volatility N/A 75.3 % 75.1 % 74.5 %

Expected term (in years) N/A 6.1 6.1 6.1

Restricted Stock Units

The Company granted 94,746 and 437,340 restricted stock units (RSUs), respectively, during the three and nine months ended September 30, 2021.

During the three and nine months ended September 30, 2020, the Company granted 2,846 and 134,694 RSUs, respectively.

These RSUs have a grant value equal to the closing price of the Company’s common stock on the award date, and generally vest based only on service as to 25 % of the underlying shares on the first anniversary of the award, with the balance of the RSUs vesting quarterly over the following three years .

The Company also granted 25,674 performance-based RSUs during the three months ended June 30, 2021.

In addition, the Company granted 25,674 performance-based RSUs during the nine months ended September 30, 2021.

The Company did no t grant any performance-based RSUs during the three months ended September 30, 2021.

The performance-based RSUs have a grant value equal to the closing price of the Company’s common stock on the award date, and vest upon the Company’s actual performance relative to predefined performance metrics and subject to the awardee’s continuing service through the December 31, 2024 measurement date.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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The assumptions used in the Black-Scholes option-pricing model for the ESPP were as follows:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Nine Months Ended

September 30,

Weighted average grant date fair value (per share) $ 29.24 $ 36.18

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

Total stock-based compensation expense $ 15,729 $ 12,837 $ 43,653 $ 45,123

The total stock-based compensation expense capitalized as part of the cost of the Company’s inventories was $ 0.8 million at June 30, 2021, and $ 0.6 million at December 31, 2020.

For the three and six months ended June 30, 2021, the Company recognized income tax expense of $ 0.1 million on pre-tax income of $ 4.1 million, and an income tax benefit of $ 0.1 million on pre-tax loss of $ 1.1 million, respectively.

The income tax benefit for the six months ended June 30, 2021 was primarily attributable to the pre-tax loss position and excess tax benefits from stock compensation recorded discretely during the period, partially offset by state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

For the three and six months ended June 30, 2020, the Company recognized an income tax benefit of $ 2.1 million on a pre-tax loss of $ 29.2 million, and an income tax benefit of $ 2.0 million on a pre-tax loss of $ 44.0 million, respectively.

The income tax benefit for three and six months ended June 30, 2020 was primarily due to benefit associated with the release of valuation allowance related to the acquisition of Sugarmate, partially offset by state and foreign income tax expense as a result of current taxable income in those jurisdictions.

The Company calculated the provision (benefit) for income taxes for the three and six months ended June 30, 2021 by applying an estimate of the annual effective tax rate for the full year to ordinary income (loss) adjusted by the tax impact of discrete items.

For the three and six months ended June 30, 2020, the Company calculated the provision for income taxes using a discrete effective tax rate method as the annual effective tax rate method would not provide a reliable estimate.

The Company continues to maintain a full valuation allowance against its net deferred tax assets as of June 30, 2021, based on the current assessment that it is not more likely than not these future benefits will be realized before expiration.

The total stock-based compensation expense capitalized as part of the cost of the Company’s inventories was $ 1.0 million at September 30, 2021, and $ 0.6 million at December 31, 2020.

For the three and nine months ended September 30, 2021, the Company recognized income tax expense of $ 0.1 million and an income tax benefit of $ 2,000 , respectively, on pre-tax income of $ 5.8 million and $ 4.8 million, respectively.

The income tax benefit for the nine months ended September 30, 2021 was primarily attributable to excess tax benefits from stock compensation recorded discretely during the period, offset by state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

For the three and nine months ended September 30, 2020, the Company recognized income tax expense of $ 39,000 on a pre-tax loss of $ 9.4 million, and an income tax benefit of $ 1.9 million on a pre-tax loss of $ 53.3 million, respectively.

The income tax benefit for the nine months ended September 30, 2020 was primarily due to benefit associated with the release of valuation allowance related to the acquisition of Sugarmate, partially offset by state and foreign income tax expense as a result of current taxable income in those jurisdictions.

The Company calculated the provision for income taxes for the three and nine months ended September 30, 2021 by applying an estimate of the annual effective tax rate for the full year to ordinary income adjusted by the tax impact of discrete items.

For the three and nine months ended September 30, 2020, the Company calculated the provision (benefit) for income taxes using a discrete effective tax rate method as the annual effective tax rate method would not provide a reliable estimate.

The Company continues to maintain a full valuation allowance against its net deferred tax assets as of September 30, 2021, based on the current assessment that it is not more likely than not these future benefits will be realized before expiration.

Business Segment and Geographic Information

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Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision-maker (CODM) in making decisions regarding resource allocation and assessing performance.

The Company is organized based on its current product portfolio, which consists primarily of insulin pumps, disposable cartridges and infusion sets for the storage and delivery of insulin.

The Company is organized based on its current product portfolio, which consists primarily of insulin pumps, disposable insulin cartridges and infusion sets for the storage and delivery of insulin.

The Company views its operations and manages its business as one segment and a single reporting unit because key operating decisions and resource allocations are made by the CODM using consolidated financial data.

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Revenues by Geographic Region and Customer Sales Channels

During the three and six months ended June 30, 2021 and 2020, no individual country outside the United States generated revenue that represented more than 10% of total revenue.

During the three and nine months ended September 30, 2021 and 2020, no individual country outside the United States generated revenue that represented more than 10% of total revenue.

The table below sets forth revenues for the Company’s two primary geographical markets, based on the geographic location to which its products are shipped.

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

2 unchanged sentences

Total Sales $ 179,627 $ 123,603 $ 492,803 $ 330,765

Sales to distributors accounted for 68 % and 71 % of the Company’s total domestic sales for the three months ended June 30, 2021 and 2020, respectively, and 68 % and 70 % of total domestic sales for the six months ended June 30, 2021 and 2020, respectively.

Sales to distributors accounted for 95 % and 96 % of the Company’s total international sales for the three months ended June 30, 2021 and 2020, respectively, and 95 % of the Company’s total international sales for both the six months ended June 30, 2021 and 2020.

Sales to distributors accounted for 68 % and 74 % of the Company’s total domestic sales for the three months ended September 30, 2021 and 2020, respectively, and 68 % and 72 % of total domestic sales for the nine months ended September 30, 2021 and 2020, respectively.

Sales to distributors accounted for 96 % and 91 % of the Company’s total international sales for the three months ended September 30, 2021 and 2020, respectively, and 95 % and 93 % of the Company’s total international sales for the nine months ended September 30, 2021 and 2020, respectively.

Commitments and Contingencies

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In September 2020, the Company was named as a defendant in a lawsuit entitled Buck Walsh, individually and on behalf of others similarly situated v.

Tandem Diabetes Care, Inc.

, which was filed in the Superior Court of the State of California in the County of San Diego.

Tandem Diabetes Care, Inc., which was filed in the Superior Court of the State of California in the County of San Diego.

The alleged violations include business and professions code and labor code violations for failure to compensate wages, unpaid meal and rest periods, and failure to reimburse for necessary business-related expenses.

The case was brought as a class action and was later amended to also include a representative action under the California Private Attorney General Act, or PAGA.

The class of plaintiffs includes hourly paid or non-exempt employees of the Company who were employed from April 6, 2016 through the date of adjudication.

The parties recently agreed to resolve the matter on a class-wide basis.

The settlement is intended to resolve the claims of the individual plaintiff, as well as the remaining members of the class, unless an individual class member submits a timely request for exclusion.

The material terms of the settlement are set forth in a binding Memorandum of Agreement dated as of July 1, 2021, which is subject to the completion of a number of conditions, as well as final approval by the court.

There is no guarantee that the conditions will be met or that court approval will be obtained.

If the court does not approve the settlement, or if other conditions to approval of the settlement are not met, the case will continue and the Company will continue to vigorously defend against the claims.

The parties recently agreed to resolve all claims in the lawsuit.

The settlement of claims covered by the PAGA matter were approved by the Superior Court of the State of California in the County of San Diego on September 21, 2021 and settlement amounts were disbursed in October 2021.

Also in October 2021, a settlement of the class action related claims was preliminarily approved by an independent arbitrator mutually acceptable to both parties.

The class action is intended to resolve the claims of the individual plaintiff, as well as the remaining members of the class, unless an individual class member submits a timely request for exclusion.

There is no guarantee that the conditions will be met or that final approval will be obtained.

If the final class settlement is not approved, or if other conditions to approval of the settlement are not met, the case will continue and the Company will continue to vigorously defend against the claims.

From time to time, the Company is involved in various other legal proceedings, regulatory matters, and other disputes or claims arising from or related to the normal course of our business activities, including actions with respect to intellectual property, data privacy, employment, regulatory, product liability and contractual matters.

In connection with these proceedings or matters, the Company regularly assesses the probability and amount (or range) of possible losses based on the developments in these proceedings or matters.

A liability is recorded in the consolidated financial statements if it is determined that it is probable that a loss has been incurred, and that the amount (or range) of the loss can be reasonably estimated.

Because of the uncertainties related to any pending proceedings or matters, the Company is currently unable to predict their ultimate outcome and, with respect to any proceeding or matter where no liability has been accrued, to make a reasonable estimate of the possible loss (or range of loss) that could result from an adverse outcome.

Except as set forth above, as of June 30, 2021 and December 31, 2020, there were no legal proceedings, regulatory matters, or other disputes or claims for which a material loss was considered probable or for which the amount (or range) of loss was reasonably estimable.

Although the results of legal proceedings, disputes and other claims cannot be predicted with certainty, the Company believes it is not currently a party to any legal proceeding(s) which, if determined adversely to the Company, would, individually or taken together, have a material adverse effect on the Company’s business, operating results, financial condition or cash flows.

However, regardless of the merit of the claims raised or the outcome, legal proceedings may have an adverse impact on the Company as a result of defense and settlement costs, diversion of management time and resources, and other factors.

Except as set forth above, as of September 30, 2021 and December 31, 2020, there were no legal proceedings, regulatory matters, or other disputes or claims for which a material loss was considered probable or for which the amount (or range) of loss was reasonably estimable.

However, regardless of the merits of the claims raised or the outcome, legal proceedings, regulatory matters, and other disputes and claims may have an adverse impact on the Company because of as a result of defense and settlement costs, diversion of management time and resources, and other factors.

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-Q

Item 1. Financial Statements