UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2017~~

2022

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number 001-36189

Tandem Diabetes Care, Inc.

(Exact name of registrant as specified in its charter)

~~Delaware~~	~~20-4327508~~
Delaware				20-4327508
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
11075 Roselle Street				92121
~~11045 Roselle Street~~ San Diego, ~~California~~		California	~~92121~~	(Zip Code)
(Address of principal executive offices)				~~(Zip Code)~~

(858) 366-6900

(Registrant’s telephone number, including area ~~code~~

code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Exchange on Which Registered
Common Stock, par value $0.001 per share	TNDM	~~The NASDAQ Stock~~Nasdaq Global Market ~~LLC~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

☐

Non-accelerated filer

☐

☐ ~~(Do not check if a smaller reporting company)~~

Smaller reporting company

☐

Emerging growth company

☒

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October ~~23, 2017,~~28, 2022, there were ~~10,118,659~~64,298,785 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

~~Part I~~		~~Financial Information~~			1
~~Item 1~~ Part I			Financial Information			~~Financial Statements~~1				1
Item 1			Financial Statements			1
			Condensed Consolidated Balance Sheets at September 30, ~~2017~~2022 (Unaudited) and December 31, ~~2016~~ 2021						1
						Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)				2
			Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)			3
			Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)						3 5
						Notes to Unaudited Condensed Consolidated Financial Statements				4 6
Item 2						Management’s Discussion and Analysis of Financial Condition and Results of Operations				15 25
Item 3						Quantitative and Qualitative Disclosures ~~about~~About Market Risk				29 42
Item 4						Controls and Procedures				30 42

Part II						Other Information				31 44
Item 1						Legal Proceedings				31 44
Item 1A						Risk Factors				31 44
~~Item 2~~				~~Unregistered Sales of Equity Securities and Use of Proceeds~~			62
~~Item 3~~		~~Defaults Upon Senior Securities~~			62
~~Item 4~~		~~Mine Safety Disclosures~~			62
~~Item 5~~		~~Other Information~~			62
Item 6	Exhibits			~~Exhibits~~81				63

PART I. FINANCIAL INFORMATION

~~Item 1.~~

Item 1. Financial Statements

TANDEM DIABETES CARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

September 30,

December 31,

2017

2016

(Unaudited)

(Note 1)

Assets

Current assets:

Cash and cash equivalents

$
12,079

$
44,678

Restricted cash

-

2,000

Short-term investments

459

8,860

Accounts receivable, net

10,582

11,172

Inventory, net

29,985

21,195

Prepaid and other current assets

2,887

4,187

Total current assets

55,992

92,092

Restricted cash—long-term

10,000

-

Property and equipment, net

20,286

18,409

Patents, net

1,539

1,784

Other long-term assets

160

107

Total assets

$
87,977

$
112,392

Liabilities and stockholders’ deficit

Current liabilities:

Accounts payable

$
7,605

$
7,513

Accrued expense

2,536

1,629

Employee-related liabilities

11,413

10,183

Deferred revenue

2,295

5,208

Other current liabilities

5,562

6,943

Total current liabilities

29,411

31,476

Notes payable—long-term

75,596

78,960

Deferred rent—long-term

4,142

2,609

Other long-term liabilities

6,786

5,274

Total liabilities

115,935

118,319

Commitments and contingencies (Note 8)

Stockholders’ equity:

Common stock, $0.001 par value; 100,000 shares authorized as of September 30, 2017 and December 31, 2016, 5,487 and 3,110 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively.⁽¹⁾

55

31

Additional paid-in capital

438,194

398,623

Accumulated other comprehensive loss

-

(1
)
Accumulated deficit

(466,207
)

(404,580
)
Total stockholders’ deficit

(27,958
)

(5,927
)
Total liabilities and stockholders’ deficit

$
87,977

$
112,392


	September 30,		December 31,
	2022		2021
Assets	(Unaudited)		(Note 1)
Current assets:
Cash and cash equivalents	$	123,786	$	71,181
Short-term investments	484,941		552,630
Accounts receivable, net	112,805		110,725
Inventories	104,774		68,551
Prepaid and other current assets	7,997		8,433
Total current assets	834,303		811,520
Property and equipment, net	72,905		50,386
Operating lease right-of-use assets	116,474		27,503
Other long-term assets	23,838		15,728
Total assets	$	1,047,520	$	905,137
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	61,531	$	28,032
Accrued expenses	7,898		9,419
Employee-related liabilities	47,967		51,556
Operating lease liabilities	12,120		9,279
Deferred revenue	12,974		10,182

Other current liabilities	31,140		23,388
Total current liabilities	173,630		131,856

Convertible senior notes, net - long-term	282,787		281,467
Operating lease liabilities - long-term	127,109		23,922
Deferred revenue - long-term	19,143		16,940
Other long-term liabilities	23,029		17,840
Total liabilities	625,698		472,025
Commitments and contingencies (Note 12)	—		—
Stockholders’ equity:
Common stock, $0.001 par value; 200,000 shares authorized, 64,265 and 63,833 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.	64		64
Additional paid-in capital	1,140,158		1,068,259
Accumulated other comprehensive loss	(5,064)		(616)
Accumulated deficit	(713,336)		(634,595)
Total stockholders’ equity	421,822		433,112
Total liabilities and stockholders’ equity	$	1,047,520	$	905,137

See accompanying notes to unaudited condensed consolidated financial statements.

~~(1)~~

The issued and outstanding shares of common stock have been restated for all periods presented to reflect the effects of the 1-for-10 reverse stock split, which was effective on October 9, 2017 as described in Note 7.

TANDEM DIABETES CARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ~~and comprehensive loss~~

AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Sales

$
27,003

$
12,293

$
67,306

$
55,336

Cost of sales

15,131

13,870

40,680

41,809

Gross profit (loss)

11,872

(1,577
)

26,626

13,527

Operating expenses:

Selling, general and administrative

20,125

20,683

65,077

63,768

Research and development

4,914

6,154

14,910

14,464

Total operating expenses

25,039

26,837

79,987

78,232

Operating loss

(13,167
)

(28,414
)

(53,361
)

(64,705
)
Other income (expense), net:

Interest and other income

60

34

179

258

Interest and other expense

(2,928
)

(1,434
)

(8,445
)

(4,177
)
Total other expense, net

(2,868
)

(1,400
)

(8,266
)

(3,919
)
Net loss

$
(16,035
)

$
(29,814
)

$
(61,627
)

$
(68,624
)
Other comprehensive loss:

Unrealized gain (loss) on short-term investments

$
-

$
(6
)

$
1

$
(23
)
Comprehensive loss

$
(16,035
)

$
(29,820
)

$
(61,626
)

$
(68,647
)
Net loss per share, basic and diluted⁽¹⁾

$
(3.09
)

$
(9.73
)

$
(13.79
)

$
(22.52
)
Weighted average shares used to compute basic and diluted net loss per share⁽¹⁾

5,190

3,063

4,468

3,047


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Sales	$	204,547	$	179,627	$	580,716	$	492,803
Cost of sales	100,122		82,882		283,252		230,317
Gross profit	104,425		96,745		297,464		262,486
Operating expenses:
Selling, general and administrative	84,104		64,923		237,989		190,009
Research and development	36,798		24,102		103,529		62,562
Acquired in-process research and development expenses	31,016		—		31,016		—
Total operating expenses	151,918		89,025		372,534		252,571
Operating income (loss)	(47,493)		7,720		(75,070)		9,915
Other income (expense), net:
Interest income and other, net	1,708		31		2,858		721
Interest expense	(1,576)		(1,511)		(4,629)		(4,526)

Change in fair value of common stock warrants	12		(392)		103		(1,354)
Total other income (expense), net	144		(1,872)		(1,668)		(5,159)
Income (loss) before income taxes	(47,349)		5,848		(76,738)		4,756
Income tax expense (benefit)	1,621		54		2,003		(2)
Net income (loss)	$	(48,970)	$	5,794	$	(78,741)	$	4,758
Other comprehensive income (loss):
Unrealized gain (loss) on short-term investments	$	(258)	$	8	$	(3,899)	$	(81)
Foreign currency translation loss	(524)		(23)		(549)		(125)
Comprehensive income (loss)	$	(49,752)	$	5,779	$	(83,189)	$	4,552

Net income (loss) per share, basic	$	(0.76)	$	0.09	$	(1.23)	$	0.08
Net income (loss) per share, diluted	$	(0.76)	$	0.09	$	(1.23)	$	0.07
Weighted average shares used to compute basic net income (loss) per share	64,236		63,167		64,066		62,780
Weighted average shares used to compute diluted net income (loss) per share	64,237		64,784		64,067		64,198

See accompanying notes to unaudited condensed consolidated financial statements.

~~(1)~~

TANDEM DIABETES CARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

Nine Months Ended September 30,

2017

2016

Operating activities

Net loss
$
(61,627
)

$
(68,624
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

4,737

4,017

Interest expense related to amortization of debt discount and debt issuance costs

1,338

194

Provision for allowance for doubtful accounts

664

666

Provision for inventory reserve

316

1,805

Payment in kind interest accrual of notes payable

1,236

675

Amortization of discount on short-term investments

(16
)

(59
)
Stock-based compensation expense

10,502

8,733

Other

69

(37
)
Changes in operating assets and liabilities:

Accounts receivable, net

(73
)

5,191

Inventory, net

(9,038
)

(7,110
)
Prepaid and other current assets

1,133

(1,408
)
Other long-term assets

(53
)

(8
)
Accounts payable

522

291

Accrued expense

907

(144
)
Employee-related liabilities

797

(1,225
)
Deferred revenue

(4,137
)

8,528

Other current liabilities

(601
)

1,348

Deferred rent

(425
)

(566
)
Other long-term liabilities

(746
)

142

Net cash used in operating activities

(54,495
)

(47,591
)
Investing activities

Purchase of short-term investments

—

(25,890
)
Proceeds from sales and maturities of short-term investments

8,500

37,950

Purchase of property and equipment

(4,299
)

(6,187
)
Net cash provided by investing activities

4,201

5,873

Financing activities

Issuance of notes payable, net of issuance costs

—

14,994

Restricted cash in connection with notes payable

(8,000
)

—

Proceeds from public offering, net of offering costs

25,125

—

Proceeds from issuance of common stock

570

1,592

Net cash provided by financing activities

17,695

16,586

Net decrease in cash and cash equivalents

(32,599
)

(25,132
)
Cash and cash equivalents at beginning of period

44,678

43,088

Cash and cash equivalents at end of period
$
12,079

$
17,956

Supplemental disclosures of cash flow information

Interest paid
$
5,871

$
3,205

Supplemental schedule of noncash investing and financing activities

Lease incentive - lessor-paid tenant improvements
$
3,037

$
—

Debt discount included in other long-term liabilities
$
4,116

$
454

Common stock warrants issued in connection with term loan
$
3,331

$
—

Property and equipment included in accounts payable
$
72

$
802

Three Months Ended September 30, 2022


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at June 30, 2022	64,210	$	64	$	1,118,168	$	(4,282)	$	(664,366)	$	449,584
Exercise of stock options	26	—		583		—		—		583
Vesting of restricted stock units, net of shares withheld for taxes	29	—		(952)		—		—		(952)



Stock-based compensation expense	—	—		22,359		—		—		22,359
Unrealized loss on short-term investments	—	—		—		(258)		—		(258)
Foreign currency translation adjustments	—	—		—		(524)		—		(524)
Net loss	—	—		—		—		(48,970)		(48,970)
Balance at September 30, 2022	64,265	$	64	$	1,140,158	$	(5,064)	$	(713,336)	$	421,822

Nine Months Ended September 30, 2022


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2021	63,833	$	64	$	1,068,259	$	(616)	$	(634,595)	$	433,112
Exercise of stock options	198	—		6,981		—		—		6,981
Vesting of restricted stock units, net of shares withheld for taxes	99	—		(3,527)		—		—		(3,527)
Issuance of common stock under Employee Stock Purchase Plan	129	—		7,915		—		—		7,915
Exercise of common stock warrants	6	—		83		—		—		83

Stock-based compensation expense	—	—		60,447		—		—		60,447
Unrealized loss on short-term investments	—	—		—		(3,899)		—		(3,899)
Foreign currency translation adjustments	—	—		—		(549)		—		(549)
Net loss	—	—		—		—		(78,741)		(78,741)
Balance at September 30, 2022	64,265	$	64	$	1,140,158	$	(5,064)	$	(713,336)	$	421,822

See accompanying notes to unaudited condensed consolidated financial statements.

Three Months Ended September 30, 2021


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
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)

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 gain on short-term investments	—	—		—		8		—		8
Foreign currency translation adjustments	—	—		—		(23)		—		(23)
Net income	—	—		—		—		5,794		5,794
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 Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2020	62,335	$	62	$	1,025,233	$	220	$	(659,210)	$	366,305
Effect of change in accounting for convertible senior notes (1)	—	—		(85,803)		—		9,049		(76,754)
Exercise of stock options	826	1		30,300		—		—		30,301
Vesting of restricted stock units, net of shares withheld for taxes	34	—		(1,164)		—		—		(1,164)
Issuance of common stock under Employee Stock Purchase Plan	100	—		6,317		—		—		6,317
Exercise of common stock warrants	156	—		593		—		—		593
Fair value of common stock warrants at time of exercise	—	—		15,499		—		—		15,499
Stock-based compensation expense	—	—		44,005		—		—		44,005
Unrealized loss on short-term investments	—	—		—		(81)		—		(81)
Foreign currency translation adjustments	—	—		—		(125)		—		(125)
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. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, effective January 1, 2021 (see Note 2, “Summary of Significant Accounting Policies”).

See accompanying notes to unaudited condensed consolidated financial statements.

TANDEM DIABETES CARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2022		2021
Operating Activities
Net income (loss)	$	(78,741)	$	4,758
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	10,689		10,325
Amortization of debt issuance costs	1,395		1,292
Provision for expected credit losses	2,955		1,462
Provision for inventory obsolescence	775		279
Change in fair value of common stock warrants	(103)		1,354
Amortization of premium (discount) on short-term investments	3,381		(83)

Stock-based compensation expense	60,477		43,653

Acquired in-process research and development expenses	31,016		—
Other	(544)		(132)
Changes in operating assets and liabilities:
Accounts receivable, net	(4,796)		(6,773)
Inventories	(37,062)		(1,930)
Prepaid and other current assets	1,364		(157)
Other long-term assets	(960)		(154)
Accounts payable and Accrued expenses	28,038		10,854

Employee-related liabilities	(3,585)		13,061
Deferred revenue	4,998		7,774
Operating leases and Other current liabilities	24,305		3,561
Other long-term liabilities	1,042		2,580
Net cash provided by operating activities	44,644		91,724
Investing Activities
Purchases of short-term investments	(362,494)		(542,838)
Proceeds from maturities of short-term investments	401,062		427,257
Proceeds from sales of short-term investments	21,845		23,288
Purchases of property and equipment	(28,470)		(8,434)
Acquisition, including in-process research and development, net of cash acquired	(25,697)		—
Acquisition of intangible assets and strategic investments	(8,855)		(9,331)
Net cash used in investing activities	(2,609)		(110,058)
Financing Activities



Proceeds from issuance of common stock under Company stock plans, net	11,369		35,453
Proceeds from exercise of common stock warrants	83		593
Other financing activities	(675)		—
Net cash provided by financing activities	10,777		36,046
Effect of foreign exchange rate changes on cash	(207)		50
Net increase in cash and cash equivalents	52,605		17,762
Cash and cash equivalents at beginning of period	71,181		94,613
Cash and cash equivalents at end of period	$	123,786	$	112,375
Supplemental disclosures of cash flow information
Interest paid	$	2,156	$	2,156
Income taxes paid	$	162	$	260
Supplemental schedule of non-cash investing and financing activities
Operating lease right-of-use assets obtained in exchange for operating lease obligations	$	110,980	$	15,087
Purchase of property and equipment included in accounts payable	$	4,319	$	945
Intangible costs in accounts payable and other long-term liabilities	$	515	$	1,029

See accompanying notes to unaudited condensed consolidated financial statements.

TANDEM DIABETES CARE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

The Company

Tandem Diabetes Care, Inc. is a medical device company focused on the design, development and commercialization of ~~products~~technology solutions for people living with ~~insulin-dependent~~ diabetes. ~~The Company~~Tandem Diabetes Care, Inc. is incorporated in the state of Delaware. Unless the context requires otherwise, the terms the “Company” or “Tandem” refer to Tandem Diabetes Care, Inc.

~~The Company manufactures and sells insulin pump products~~, together with its wholly-owned subsidiaries in the United States, Canada and the Netherlands.

The Company manufactures, sells, and supports insulin pump products that are designed to address ~~large~~the evolving needs and preferences of differentiated ~~needs~~segments of the insulin-dependent diabetes market. The Company’s ~~pump products currently include:~~

manufacturing, sales and support activities principally focus on the t:slim X2 Insulin Delivery System ~~or t:~~(t:slim ~~X2,~~X2), the ~~next-generation~~Company’s flagship ~~product that~~pump platform which has an advanced algorithm for managing insulin delivery, and is ~~updatable and~~ designed to display ~~Dexcom G5~~ continuous glucose monitoring ~~or CGM,~~(CGM) sensor information directly on the pump ~~Home Screen; and~~

home screen. The Company’s insulin pump products are compatible with other complementary digital health offerings, such as the t:~~flex Insulin Delivery System, or t:flex, for people with greater insulin needs.~~

~~The Company began commercial sales of its first product, t:slim, in August 2012. During 2015, the Company commenced commercial sales of two additional insulin pumps: t:flex in May 2015~~connect mobile app and ~~t:slim G4 in September 2015. In October 2016, the Company commenced commercial sales of t:slim X2~~cloud-based diabetes management application (t:connect), and discontinued new sales of t:slim. In August 2017, the Company commenced commercial sales of t:slim X2 with Dexcom G5 Mobile CGM integration, or t:slim X2 with G5, and discontinued new sales of t:slim G4. The Company will continue to provide ongoing service and support to existing t:slim and t:slim G4 customers.

~~In July 2016, the Company received clearance from the U.S. Food and Drug Administration (“FDA”) to begin offering~~ the Tandem Device Updater, a ~~Mac~~Mac- and PC-compatible tool ~~for the~~which offers and supports remote ~~update of Tandem insulin pump software.~~

In July 2016, the Company also announced and launched a Technology Upgrade Program that provided eligible t:slim and t:slim G4 customers a path to obtain t:slim X2, or, as of August 2017, t:slim X2 with G5. Participating customers had the right to exchange their original t:slim and t:slim G4 for a t:slim X2 or t:slim X2 with G5, under a variable pricing structure. The ~~Technology~~ ~~Upgrade Program expired on September 30, 2017.~~

~~In September 2017, the Company commenced commercial sales of products using the t:lock~~^TM Connector, or t:lock, which replaces the standard Luer-lok connector that historically joined an infusion set to the cartridge. t:lock incorporates a smaller inner cavity than the Luer-lok connector, which reduces the amount of insulin used in the process and reduces the time required to fill the infusion set tubing.

Effective December 31, 2016, the Company adopted FASB Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements – Going Concern, which requires management to evaluate whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date the financial statements are issued.

The financial statements included in this Quarterly Report on form 10-Q for the three and nine months ended September 30, 2017 (the “Quarterly Report”) have been prepared on a basis that assumes the Company will continue as a going concern, and do not include any adjustments that may result from the outcome of this uncertainty. This basis of accounting contemplates the recoveryupdates of the Company’s ~~assets~~insulin pump software from a personal computer. The Company’s insulin pump products are generally considered durable medical equipment and ~~the satisfaction~~have an expected lifespan of ~~the Company’s liabilities and commitments in the normal course of business and does not include any adjustments~~at least four years. In addition to ~~reflect the possible future effects of the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should~~insulin pumps, the Company ~~be unable~~sells disposable products that are used together with the pumps and are replaced every few days, including cartridges for storing and delivering insulin, and infusion sets that connect the insulin pump to ~~continue~~a user’s body, as ~~a going concern.~~

~~The Company has incurred operating losses since its inception and,~~well as ~~reflected in the accompanying financial statements, the Company has an accumulated deficit of $466.2 million as of September 30, 2017, which reflects a net loss of $61.6 million~~other accessories for ~~the nine months ended September 30, 2017. The Company had cash and cash equivalents and short-term investments of $22.5 million at September 30, 2017, including $10.0 million of restricted~~ ~~cash as required by the Company’s term loan agreement (as amended, the “Term Loan Agreement”)~~ ~~with Capital Royalty Partners II, L.P. and its affiliate funds (“Capital Royalty Partners”).~~ The Company used $54.5 million in cash from operations in the nine months ended September 30, 2017. The Company concluded that, at the date the financial statements in this Quarterly Report were issued, it did not have sufficient cash to fund its operations for the next twelve months without additional financing and, therefore, there was substantial doubt about its ability to continue as a going concern within one year after the date the financial statements were issued.

On October 9, 2017, the Company effected a 1-for-10 reverse stock split of its issued and outstanding shares of common stock. The par value per share and the authorized number of shares of common stock and preferred stock were not adjusted as a result of the reverse stock split. All common stock share and per-share amounts for all periods presented in these condensed financial statements have been adjusted to reflect the reverse stock split. The number of authorized shares of common stock remains at 100 million shares.

The Company completed a registered public offering on October 17, 2017, or the October Financing, which resulted in gross proceeds to the Company of $16.2 million, before deducting underwriting discounts and commissions and other offering expenses (see Note 9 “Subsequent Events”). As part of the October Financing, the Company issued 4,630,000 shares of common stock, Series A warrants to purchase 4,630,000 shares of common stock and Series B warrants to purchase 4,630,000 shares of common stock, at a public offering price of $3.50 per share and accompanying warrants. The Series A warrants have an exercise price of $3.50 per share, are immediately exercisable, and will expire on the 5-year anniversary of the date of issuance. The Series B warrants have an exercise price of $3.50 per share, are immediately exercisable, and will expire on the 6-month anniversary of the date of issuance. Each series of warrants, if exercised by all holders in full, may result in additional gross proceeds of $16.2 million to the Company. As a result of the completion of the financing, the Company has satisfied the equity financing covenant in the Term Loan Agreement ~~(see Note 6, “Term Loan Agreement”), although it remains subject to additional covenants.~~

~~The Company believes it will be necessary to raise additional funding.~~ The Company intends to seek additional capital from public or private offerings of its capital stock or it may elect to borrow additional amounts under new debt financing arrangements or from other sources. If the Company issues equity or convertible debt securities to raise additional funding, its existing stockholders may experience dilution, it may incur significant financing costs, and the new equity or convertible debt securities may have rights, preferences and privileges senior to those of its existing stockholders. If the Company issues debt securities to raise additional funding, it would incur additional debt service obligations, it could become subject to additional restrictions limiting its ability to operate its business, and it may be required to further encumber its assets. The Company’s ability to continue as a going concern, meet its minimum liquidity requirements, satisfy the covenants under the Term Loan Agreement, and execute its business strategy is dependent on its ability to raise significant additional capital, of which there can be no assurance. If the Company cannot generate sufficient revenues from the sale of its products or secure additional financing on acceptable terms, it may be forced to significantly alter its business strategy, substantially curtail or modify its current operations, or cease operations altogether.

enhanced usability.

Basis of Presentation

and Principles of Consolidation

The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ~~(“U.S. GAAP”)~~(U.S. GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments which are of a normal and recurring nature, considered necessary for a fair presentation of the financial information contained herein, have been included.

Interim financial results are not necessarily indicative of results anticipated for the full year or any other period(s). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying ~~footnotes~~notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 (“Annual Report”)~~2021 (Annual Report), from which the balance sheet information herein was derived. ~~These unaudited~~The condensed consolidated financial statements ~~exclude disclosures required by~~include the accounts of Tandem Diabetes Care, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The functional currency of the Company’s foreign subsidiaries is their respective local currency. The Company translates the financial statements of its foreign subsidiaries into U.S. ~~GAAP~~dollars using period-end exchange rates for ~~complete financial statements.~~

assets and liabilities and average exchange rates for each period for revenue, costs and expenses. Translation related adjustments are included in other comprehensive income (loss) in the condensed consolidated statements of operations, and in accumulated other comprehensive income (loss) in the stockholders’ equity section of the Company’s condensed consolidated balance sheets. 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

Starting with the first quarter of 2022, the Company included the liability related to common stock warrants (see Note 5, “Fair Value Measurements”) as a component of other current liabilities on the Company’s condensed consolidated balance sheet. In addition, deferred revenue long-term, which was previously reported as a component of other long-term liabilities, is now separately reported on the condensed consolidated balance sheet. The corresponding balances at December 31, 2021, have been reclassified to conform to the current year presentation.

2. Summary of Significant Accounting Policies

There have been no ~~significant~~material changes ~~in our~~to the Company’s significant accounting policies during the nine months ended September 30, ~~2017,~~2022, as compared ~~with~~to those disclosed in the Company’s 2021 Annual ~~Report.~~

Report, except for adding the accounting policies related to an asset acquisition and recently launched Tandem Choice technology access program (Tandem Choice), which are included herein.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make ~~informed~~ estimates and ~~assumptions~~judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying ~~footnotes~~notes as of the date of the consolidated financial statements. ~~Actual~~Some of those judgments can be subjective and complex, and therefore, actual results could differ materially ~~differ~~ from those estimates ~~and assumptions.~~

~~Restricted Cash~~

The Company recorded $10.0 million and $2.0 million of restricted cash as of September 30, 2017 and December 31, 2016, respectively, for the minimum cash balance requirement in connection with the Term Loan Agreement (see Note 6, “Term Loan Agreement”).

under different assumptions or conditions.

Accounts Receivable

The Company grants credit to various customers in the ~~normal~~ordinary course of ~~business.~~business and is paid directly by customers who use its products, distributors and third-party insurance payors. The Company maintains an allowance for ~~doubtful accounts for potential~~its current estimate of expected credit losses. Provisions for expected credit losses are ~~made~~estimated based on historical experience, assessment of specific risk, ~~specific~~ review of outstanding invoices, forecasts about the future, and various ~~additional~~ assumptions and estimates that are believed to be reasonable under the ~~circumstances.~~circumstances, including credit risks as a result of the coronavirus pandemic, recessionary concerns, changes in discretionary spending, increased interest rates, and other macroeconomic factors. 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.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and employee-related liabilities are reasonable estimates of their fair values because of the short-term nature of these assets and liabilities. Short-term investments are carried at fair value. ~~Based~~The carrying value and estimated fair value of certain of the Company’s common stock warrants was determined using the Black-Scholes pricing model as of September 30, 2022 and December 31, 2021 (see Note 5, “Fair Value Measurements”).

The Company’s convertible senior notes are carried at amortized cost on the ~~borrowing rates currently available for loans with similar terms, the~~condensed consolidated balance sheets (see Note 7, “Debt”). The Company ~~believes that~~measures the fair value of its ~~long-term~~convertible senior notes ~~payable approximates~~for disclosure purposes. The Company estimated the fair value of its ~~carrying value.~~

~~Certain trade-in rights offered by~~convertible senior notes to be $257.6 million and $430.0 million at September 30, 2022 and December 31, 2021, respectively, based on Level 2 quoted market prices as of those dates.

Operating Lease Right-of-Use Assets and Liabilities

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized when the Company ~~pursuant~~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 Leases, the Company combines lease and non-lease components. Rent expense on noncancelable 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. The difference between rent expense and rent paid is accounted for as a component of operating lease right-of-use assets on the Company’s consolidated balance sheets. Landlord improvement allowances and other similar lease incentives are recorded as a reduction of the right-of-use leased assets, and are amortized on a straight-line basis as a reduction to operating lease costs.

Strategic Investments

During the ~~Technology Upgrade Program~~third quarter of 2022, the Company made an $8.3 million investment in a private 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 September 30, 2022.

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 as of the date of investment. The investment is accounted for using the cost minus impairment, if any, adjusted for changes in observable prices and is included as a component of other long-term assets on the consolidated balance sheets. The Company monitors this investment to ~~certain eligible customers, have been determined to be guarantees under applicable accounting guidance.~~evaluate whether any increase or decline in its value has occurred, based on the implied value of recent company financings, public market prices of comparable companies and general market conditions.

Capillary Biomedical Acquisition

On July 21, 2022, the Company acquired Capillary Biomedical, Inc. (Capillary Biomedical) an infusion set developer, for total cash consideration of $24.7 million, and the assumption of $4.7 million of long-term debt. The debt becomes due and payable upon the first sale or license of the commercialized product, and is included as a component of other long-term liabilities on the condensed consolidated balance sheet at September 30, 2022. Capillary Biomedical’s extended-wear infusion set technology is currently in development and is not yet commercially available. The Company funded the purchase price using existing cash balances. The transaction was accounted for as an asset acquisition as substantially all the value of the gross assets were concentrated in a single asset. At the acquisition date, the Company recorded a ~~liability for~~$31.0 million charge representing the ~~estimated fair~~ value of acquired in-process research and development assets with no alternative future use, and acquisition related expenses, in acquired in-process research and development expenses on its condensed consolidated statements of operations.

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 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 ~~guarantees at their inception.~~carrying amount of an asset may not be recoverable. The ~~Program expired on~~Company did not recognize any impairment losses during the nine months ended September 30, 2017, at which time the remaining guarantee liabilities of $1.1 were recognized as sales. For further details regarding these guarantees, see the information included under the heading “Revenue Recognition” within this Note 2, as well as the information in Note 5, “Fair Value Measurements.”

2022 and 2021.

Revenue Recognition

Revenue is generated primarily from sales ~~in the United States~~ of insulin pumps, disposable insulin cartridges and infusion sets to individual customers with third-party insurance coverage and ~~third-party~~through a network of distributors that resell the ~~product~~products to insulin-dependent diabetes customers. The Company ~~is paid directly by customers who use the products, distributors and third-party insurance payors.~~

~~Revenue is recognized~~recognizes revenue when ~~persuasive evidence of an arrangement exists, delivery has occurred and title passed, the price is fixed or determinable, and collectability is reasonably assured.~~

~~Trade-In Rights~~

The Company launched a Technology Upgrade Program in 2016, which expired September 30, 2017. The trade-in rights associated with the Program were accounted for as guarantees or rights to return based on specific factors and circumstances, including the period of time the trade-in rights were exercisable, the likelihood that the trade-in rights would be exercised, and the amountit transfers control of the ~~specified-price trade-in value.~~

~~The Company determined~~promised goods or services to customers in an amount that ~~trade-in rights for t:slim G4 Pump customers were generally guarantees. The Company accounted for~~reflects the ~~guarantees under applicable accounting standards,~~consideration to which require a guarantor to recognize, at the inception of the guarantees, a liability for the estimated fair value of the obligation undertaken in issuing the guarantees. Subsequently, the initial liability recognized for the guarantees was reduced as the Company ~~was released from the risk under the guarantees, which was when the trade-in right was exercised~~expects to be entitled in exchange for those goods or ~~the right expired. The guarantees were accounted for as an element~~services, net of ~~a multiple element arrangement. The~~ estimated fair value of the guarantees was based on various economic and customer behavioral assumptions, including the probability that a trade-in right would be exercised, the specified trade-in amount, the expected fair value of the used t:slim G4 Pump at trade-in and the expected sales price of a t:slim X2 Pump. Upon expiration of the Program at September 30, 2017, the remaining guarantee liabilities of $1.1 were recognized as sales compared to ~~$1.2 million recorded as guarantee liabilities in other current liabilities on the accompanying balance sheets, as of September 30, 2017 and December 31, 2016, respectively.~~

The Company determined that t:slim Pump trade-in rights were in-substance rights to return products. Such rights to return were accounted for pursuant to the right of return accounting guidance. As the Company did not have sufficient history to reasonably estimate returns associated with trade-in rights, all eligible t:slim Pump sales between July 2016 and October 2016, which is when the Company ~~discontinued new shipments of t:slim,~~ were recorded as deferred revenue until the trade-in right was exercised or the right expired. Despite expiration of the Program at September 30, 2017, the Company recorded $0.2 million for upgrades requested but not yet fulfilled compared to $3.2 million as a trade-in rights reserve in deferred revenue on the accompanying balance sheets, as of September 30, 2017 and December 31, 2016, respectively.

returns.

Revenue Recognition for Arrangements with Multiple ~~Deliverables~~

Performance Obligations

The Company considers the individual deliverables in its product offering as separate ~~units of accounting and recognizes deliverables as revenue upon delivery only if (i)~~performance obligations. The transaction price is determined based on the ~~deliverable has standalone~~consideration expected to be received, based either on the stated value ~~and (ii)~~in contractual arrangements or the ~~arrangement includes a general right of return relative~~estimated cash to ~~the delivered item(s) and delivery or performance of the undelivered item(s) is probable and substantially controlled by the Company.~~be collected in non-contracted arrangements. The Company allocates the consideration to the ~~separate units of accounting, unless~~individual performance obligations and recognizes the ~~undelivered elements were~~consideration based on when the performance obligation is satisfied, considering whether or not this occurs at a point in time or over time. Generally, insulin pumps, cartridges, infusion sets, and accessories are deemed ~~perfunctory and inconsequential. The amount~~performance obligations that are satisfied at a point in time when the customer obtains control of the ~~determined guarantee fair value~~promised good, which typically is ~~allocated in full~~upon shipment for our distributor arrangements and upon receipt for sales directly to the guarantee and the remaining allocable consideration is allocated to other separate units of accounting using the relative selling price method, in which allocation of consideration is based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence (“TPE”), or if VSOE and TPE are not available, management’s best estimate of a standalone selling price (“ESP”) for the undelivered elements.

~~The Company offers a cloud-based data management application,~~individual customers. Complementary products, such as t:connect ~~which is made available to customers upon purchase of any of its insulin pumps. In July 2016, the Company received clearance from the FDA to begin offering~~and the Tandem Device Updater, are considered distinct performance obligations that are satisfied over time, as access and support for these products is provided throughout the typical four-year warranty period of the insulin pumps. Accordingly, revenue related to the complementary products is deferred and recognized over a ~~Macand PC-compatible tool~~four-year period. Where there is no standalone value for the ~~remote update of Tandem insulin pump software. Utilizing Tandem Device Updater,~~complementary product, the Company ~~may from time to time provide future unspecified software upgrades~~determines its value by applying the expected cost plus a margin approach and then allocates the residual to the insulin ~~pump’s essential software.~~pumps.

Tandem Choice Program

In September 2022, the Company announced and launched a new technology access program, (Tandem Choice) that provides eligible, in-warranty t:slim X2 customers in the United States with the flexibility to obtain the next generation hardware platform when it is commercially available. Participating customers have the right to purchase the next generation Tandem pump for a fee (the Choice Right). The ~~t:connect service and~~Tandem Choice expires on December 31, 2024.

For purposes of evaluating the ~~embedded right included~~Tandem Choice, in accordance with qualifying insulin pumps to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the product’s essential software are deemed undelivered elements at the time of the insulin pump sale. BecauseASC 606, the Company has ~~neither VSOE nor TPE~~determined that the ability for ~~these deliverables,~~a customer to upgrade to a new technology, represents a material right because the ~~allocation~~pricing inherent in such option provides the customer with a discount that is incremental to the range of ~~revenue is~~discounts that would otherwise be granted for the related goods and services to comparable customers. The standalone selling price for the Choice Right was estimated based on the ~~Company’s ESP. The Company establishes its ESP based on~~adjusted market assessment approach and contemplates the estimated cost to provide such services, including consideration for a reasonable profit margin, which is then corroborated by comparable market data. The Company allocates fair value based on management’s ESP to these elements atlikelihood that the ~~time of sale and recognizes the revenue over a~~ ~~four-year period, which is the hosting period for t:connect and the period that software upgrades are expected to~~respective option will be ~~provided.~~exercised. At September 30, ~~2017~~2022, $0.6 million was allocated to the material right and ~~December 31, 2016, $1.8 million and $1.6 million, respectively, were~~ recorded asin current deferred revenue ~~for these undelivered elements. All other undelivered elements at the time of sale are deemed inconsequential or perfunctory.~~

~~Product Returns~~

~~The Company offers a 30-day~~ right of return to its customers from the date of shipment of any of its insulin pumps, provided a physician’s confirmation of the medical reason for the return is received. Estimated allowances for sales returns are based on historical returned quantities as compared to pump shipments in those same periods of return. The return rate is then applied to the sales of the current period to establish a reserve at the end of the period. The return rates used in the reserve are adjusted for known or expected changes in the marketplace when appropriate. The allowance for product returns is recorded as a reduction of revenue and accounts receivable in the period in which the related sale~~is recorded. The amount recorded~~ on the ~~Company’s~~condensed consolidated balance ~~sheets for product return allowance was~~ $0.2 million and $0.2 million at September 30, 2017 and December 31, 2016, respectively. Actual product returns have not differed materially from estimated amounts reserved in the accompanying condensed financial statements.

sheet.

Warranty Reserve

The Company generally provides a four-year warranty on its insulin pumps to ~~end user~~end-user customers and may replace any pumps that do not function as intended in accordance with the product ~~specifications. Insulin pumps returned to~~specifications within the ~~Company may be refurbished and redeployed.~~ warranty period. 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.~~shipment, and the Company reevaluates the estimate of the warranty reserve obligation at each reporting period. Warranty costs are estimated primarily based on the current expected product replacement cost and expected replacement rates ~~based on~~utilizing historical experience. Insulin pumps returned to the Company may be refurbished and redeployed. Experience has shown that initial data for any given pump version may be insufficient; therefore, the Company’s process relies on long-term historical averages until sufficient data are available. As actual experience becomes available, the Company uses the data to update the historical averages. The Company ~~evaluates the reserve quarterly and makes~~may make further adjustments ~~when appropriate. Changes~~ to ~~the actual replacement rates or the expected product replacement cost could have a material impact on the Company’s warranty reserve.~~

~~At September 30, 2017 and December 31, 2016,~~ the warranty reserve ~~was $4.8 million~~when deemed appropriate, giving additional consideration to the length of time each pump version has been in the field and ~~$5.7 million, respectively.~~ revised 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 ~~change~~changes in product warranty liabilities ~~from~~for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Balance at beginning of the period	$	31,904	$	25,668	$	30,401	$	22,075
Provision for warranties issued during the period	8,744		6,622		23,224		20,538
Settlements made during the period	(6,148)		(4,665)		(17,856)		(13,672)
Increases (decreases) in warranty estimates	110		(80)		(1,159)		(1,396)
Balance at end of the period	$	34,610	$	27,545	$	34,610	$	27,545

As of September 30, 2022 and December 31, ~~2016 through September 30, 2017~~2021, total product warranty reserves were included in the following consolidated balance sheet accounts (in thousands):

Balance at December 31, 2016
$
5,690

Provision for warranties issued during the period

4,110

Settlements made during the period

(5,240
)
Increases in warranty estimates

190

Balance at September 30, 2017
$
4,750

Current portion
$
2,080

Non-current portion

2,670

Total
$
4,750


	September 30, 2022		December 31, 2021

Other current liabilities	$	16,244	$	13,076
Other long-term liabilities	18,366		17,325
Total warranty reserve	$	34,610	$	30,401

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award, and the portion that is ultimately expected to vest is recognized as compensation expense over the requisite service period on a straight-line basis. The Company estimates the fair value of stock options issued under the Company’s Amended and Restated 2013 Stock Incentive Plan ~~(“2013 Plan”)~~(2013 Plan) and ~~shares issued~~the fair value of the employees’ purchase rights under the Company’s 2013 Employee Stock Purchase Plan ~~(“ESPP”)~~(ESPP) using athe Black-Scholes option-pricing model on the date of grant. The Black-Scholes option-pricing model requires the use of ~~subjective~~ assumptions about a number of ~~key~~ variables, including stock price volatility, expected term, dividend yield and risk-free interest ~~rate. For~~rate (see Note 8, “Stockholders’ Equity”). The fair value of restricted stock unit (RSU) awards issued under the 2013 Plan that vest solely based on service is estimated based on the fair market value of the underlying stock on the date of grant. 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, and the awardee’s continuing service through the measurement date, 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. At each reporting period, the Company reassesses the probability of the achievement of ~~service conditions,~~such performance metrics. Any expense change resulting from an adjustment in the ~~Company recognizes expense using~~estimated shares to be released is recorded in the ~~straight-line method less estimated forfeitures based on historical experience.~~

period of adjustment.

Net ~~Loss~~Income (Loss) Per Share

Basic net ~~loss~~income (loss) per share is calculated by dividing the net income or loss by the weighted average number of common shares ~~that were~~ outstanding for the period, without consideration for common stock equivalents.

Diluted net ~~loss~~income (loss) per share ~~is calculated by dividing~~reflects the ~~net loss by the sum of the weighted average number of~~potential dilution that would occur if securities exercisable for or convertible into common ~~shares that~~stock were ~~outstanding~~exercised for ~~the period and the weighted-average number of dilutive~~or converted into common ~~share equivalents outstanding for the period determined using the treasury stock method.~~stock. Dilutive common share equivalents are comprised of ~~warrants,~~stock options and unvested RSUs outstanding under the Company’s ~~equity incentive~~stock plans, ~~and shares subject~~potential awards to ~~issuance~~be granted pursuant to the ~~ESPP.~~ESPP, and common stock warrants, each calculated using the treasury stock method; and shares issuable upon conversion of the convertible senior notes calculated using the if-converted method. For ~~all periods presented, there is no difference~~common stock warrants that are recorded as a liability in the ~~number~~accompanying condensed consolidated balance sheets, the calculation of ~~shares used to calculate basic and~~ diluted ~~shares outstanding due~~loss per share requires that, to the ~~Company’s~~extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrants and the presumed exercise of the warrants is dilutive to loss per share for the period, an adjustment is made to net loss ~~position.~~

used in the calculation to remove the change in fair value of the warrants from the numerator for the period. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any, under the treasury stock method.

For the three and nine months ended September 30, 2022, the net loss used in the calculation of diluted net loss per share was increased by $12,000 and $0.1 million, respectively, to remove the gain recognized from the change in fair value of certain common stock warrants based on the dilutive effect of assumed exercise, and the denominator was increased by 937 shares and 959 shares, respectively, calculated under the treasury stock method. 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, 2021		Nine Months Ended September 30, 2021

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



Weighted average shares outstanding - basic	63,167		62,780
Dilutive common share equivalents:
Options to purchase common stock	1,297		1,239
Unvested restricted stock units	135		17
Warrants to purchase common stock	159		152
Awards to be granted under the ESPP	26		10

Weighted average shares outstanding - diluted	64,784		64,198

Potentially dilutive securities outstanding and not included in the calculation of diluted net loss per share (because inclusion would be anti-dilutive) are as follows (in thousands, in common stock equivalent shares):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Common stock warrants

-

99

-

99

Common stock options

8

293

3

262

ESPP

-

13

-

7

8

405

3

368


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Options to purchase common stock	1,080	3,494	1,250	3,283
Unvested restricted stock units	1,526	—	977	—
Warrants to purchase common stock	195	1	195	1
Awards granted under the ESPP	99	—	73	—
Convertible senior notes (if-converted)	2,554	2,554	2,554	2,554
	5,454	6,049	5,049	5,838

Recent Accounting Pronouncements

In ~~August 2016,~~June 2020, the ~~Financial~~ FASB issued ASU No. 2020-06, Accounting ~~Standards Board (“FASB”)~~ ~~issued~~for Convertible Instruments and Contracts in an Entity’s Own Equity, which is intended to simplify the accounting for convertible instruments. This new guidance eliminated certain models that ~~clarifies how entities should classify~~require separate accounting for embedded conversion features, and eliminated certain ~~cash receipts~~of the conditions for equity classification for contracts in an entity’s own equity. 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 ~~cash payments on the statement~~recognition as derivatives. The new guidance could be adopted through either a modified retrospective method of ~~cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects~~transition or a fully retrospective method of ~~more than one class of cash flows. The guidance~~transition. ASU 2020-06 is effective for public ~~companies~~business entities for fiscal years beginning after December 15, ~~2017, and~~2021, including interim periods within those ~~years. The Company does not believe the adoption of the standard will have a material impact on the Company’s statement of cash flow.~~

~~In June 2016, FASB~~ ~~issued a new credit loss standard that changes the impairment model for most financial assets and certain other instruments.~~ ~~The standard is effective for public business entities for annual periods beginning after December 15, 2019, and interim periods within those~~fiscal years. Early adoption is permitted ~~for all entities~~ ~~for annual periods beginning after December 15, 2018, and interim periods within those years. The Company is in the process of assessing the impact of the adoption of the standard on its financial statements.~~

In March 2016, FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718) (“ASU 2016-09”), which is intended to simplify several areas of accounting for share-based payment arrangements. The amendments in this update cover such areas as the ~~recognition~~ of excess tax benefits and deficiencies, the classification of those excess benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, ~~2016, and~~2020, including interim periods within those ~~annual periods.~~fiscal years. The Company ~~adopted this~~elected to early adopt the new standard inon January 1, 2021 using the ~~first quarter~~modified retrospective method and, accordingly, recorded a net reduction to accumulated deficit of ~~2017. The Company had excess tax benefits for which~~$9.0 million, a ~~benefit could not previously be recognized~~decrease to additional paid-in capital of ~~approximately $656,000 as~~$85.8 million, and an increase to convertible senior notes, net - long-term of ~~December 31, 2016. Upon adoption, the balance of the unrecognized excess tax benefits was reversed with the impact recorded~~$76.8 million to (accumulated deficit) retained earnings, including any change to the valuation allowance as a result of the adoption. Due to the full valuation allowance on the U.S. deferred tax assets as of December 31, 2016, there was no impact to the financial statements as a result of this adoption.

In February 2016, FASB issued final guidance for lease accounting. The new guidance requires lessees to put most leases on their balance sheet but to recognize expenses on their income statement in a manner similar to current accounting principles. The new guidance also eliminates the current real estate-specific provisions for all entities. The standard is effective for public companies for annual periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted for all entities. The Company is in the process of assessingreflect the impact of the ~~adoption of the standard on its financial statements.~~

In May 2014, FASB and the International Accounting Standards Board issued a comprehensive new revenue recognition standard (“Revenue from Contracts with Customers Standard”) that will supersede existing revenue guidance under U.S. GAAP and International Financial Reporting Standards. The Revenue from Contracts with Customers Standard’s core principle is that a company will recognize 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. In doing so, companies will need to use more judgment and make more estimates than under current guidance. The Revenue from Contracts with Customers Standard will be effective for the Company beginning in its first quarter of 2018, and early adoption is permitted.

Subsequently, FASB issued the following standards related to Revenue from Contracts with Customers Standard: Principal versus Agent Considerations; Identifying Performance Obligations and Licensing; and Narrow-Scope Improvements and Practical Expedients (collectively, the “new revenue standards”accounting change (see Note 7, “Debt”). The new revenue standards may be applied retrospectively to each prior period presented (full retrospective method) or retrospectively with the cumulative effect recognized as of the date of adoption (the modified retrospective method). The Company currently expects to adopt the new revenue standards in the first quarter of 2018 utilizing the modified retrospective method. The Company currently believes that the adoption will not have a material impact on the recognition of revenues for the sale of its products through third-party distributors and insurance payors with whom it has contractual arrangements, which generally comprise approximately 99% of its sales. Additionally, the Company has given consideration to the accounting for warranty and commissions and does not anticipate a material change to its current method of expense recognition. As of September 30, 2017, the Company has not determined the full impact the adoption of the new revenue standard may have on its reported revenue or results of operations.

3. Short-Term Investments

The Company invests in ~~investment~~marketable securities ~~principally~~primarily consisting of debt instruments of the U.S. Government, U.S. 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 at September 30, ~~2017~~2022 and December 31, ~~2016~~2021 (in thousands):

At September 30, 2017

Maturity
(in years)

Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Estimated
Fair Value

Trading securities:

Mutual funds held for nonqualified deferred compensation plan participants

$
416

$
43

$
—

$
459

Total

$
416

$
43

$
—

$
459


At September 30, 2022	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Available-for-sale securities:
U.S. Treasury securities	$	259,258	$	—	$	(3,302)	$	255,956
Commercial paper	143,196		—		(290)		142,906
Corporate debt securities	17,549		—		(172)		17,377
U.S. Government-sponsored enterprises	66,953		—		(736)		66,217
Supranational bonds	2,508		—		(23)		2,485
Total	$	489,464	$	—	$	(4,523)	$	484,941

At December 31, 2016

Maturity
(in years)

Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Estimated
Fair Value

Available-for-sale investment securities:

Commercial paper

Less than 1

$
8,483

$
1

$
(2
)

$
8,482

Trading securities:

Mutual funds held for nonqualified deferred compensation plan participants

$
354

$
26

$
(2
)

$
378

Total

$
8,837

$
27

$
(4
)

$
8,860


At December 31, 2021	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Available-for-sale securities:
U.S. Treasury securities	$	222,206	$	—	$	(482)	$	221,724
Commercial paper	218,391		14		(24)		218,381
Corporate debt securities	58,881		—		(45)		58,836
U.S. Government-sponsored enterprises	50,773		1		(88)		50,686
Supranational bonds	3,003		—		—		3,003
Total	$	553,254	$	15	$	(639)	$	552,630

The contractual maturities of available-for-sale debt securities as of September 30, 2022, were as follows (in thousands):


	Years to Maturity
At September 30, 2022	Within One Year		One to Two Years		Estimated Fair Value
U.S. Treasury securities	$	245,708	$	10,248	$	255,956
Commercial paper	142,906		—		142,906
Corporate debt securities	13,125		4,252		17,377
U.S. Government-sponsored enterprises	53,015		13,202		66,217
Supranational bonds	2,485		—		2,485
Total	$	457,239	$	27,702	$	484,941

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 reviews the portfolio of available-for-sale debt securities quarterly 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 September 30, 2022 were primarily due to the recent increase 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 record an allowance for credit losses related to its available-for-sale debt securities at September 30, 2022.

4. ~~Inventory~~

~~Inventory~~Composition of Certain Financial Statement Items

Accounts Receivable

Accounts receivable, net consisted of the following at September 30, ~~2017~~2022 and December 31, ~~2016~~2021 (in thousands):

September 30,

December 31,

2017

2016

Raw materials
$
10,138

$
9,375

Work in process

5,497

4,395

Finished goods

14,350

7,425

Total
$
29,985

$
21,195


	September 30, 2022		December 31, 2021

Accounts receivable	$	117,078	$	114,974
Less: allowance for credit losses	(4,273)		(4,249)
Accounts receivable, net	$	112,805	$	110,725

Allowance for Credit Losses

The ~~increase~~following table provides a reconciliation of the changes in ~~inventory~~the allowance for estimated accounts receivable credit losses for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Balance at beginning of the period	$	4,600	$	3,673	$	4,249	$	3,857
Provision for expected credit losses	965		588		2,955		1,462
Write-offs and adjustments, net of recoveries	(1,292)		(467)		(2,931)		(1,525)
Balance at end of the period	$	4,273	$	3,794	$	4,273	$	3,794

Inventories

Inventories consisted of the following at September 30, ~~2017 as compared to~~2022 and December 31, ~~2016 is primarily due to an increase in infusion set finished goods in connection with the commercial launch of the t:lock infusion set.~~

2021 (in thousands):


	September 30, 2022		December 31, 2021

Raw materials	$	40,841	$	26,911
Work-in-process	19,210		16,612
Finished goods	44,723		25,028
Total inventories	$	104,774	$	68,551

5. Fair Value Measurements

Authoritative guidance on fair value measurements defines fair value, ~~establishes~~and provides a consistent framework for measuring fair value and ~~expands~~for disclosures ~~for~~of each major asset and liability category measured at fair value on either a recurring or a nonrecurring basis. Fair value is intended to reflect an assumed exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:


Level 1:						Observable inputs such as unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or ~~liabilities~~. liabilities.

Level 2:						Inputs, other than quoted prices in active markets, that are observable either directly or indirectly for substantially the full term of the asset or ~~liability~~. liability.

Level 3:						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~~. assumptions.

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, ~~2017~~2022 and December 31, ~~2016,~~2021, and indicates the fair value hierarchy of the valuation techniques ~~utilized~~used by the Company to determine such fair value (in thousands):

Fair Value Measurements at

September 30, 2017

(Level 1)

(Level 2)

(Level 3)

Assets

Cash equivalents ⁽¹⁾

$
16,527

$
16,527

$
—

$
—

Mutual funds held for nonqualified deferred compensation plan participants ⁽²⁾

459

459

—

—

Total assets

$
16,986

$
16,986

$
—

$
—

Liabilities

Deferred compensation ⁽²⁾

$
459

$
459

$
—

$
—

Total liabilities

$
459

$
459

$
—

$
—

Fair Value Measurements at

December 31, 2016

(Level 1)

(Level 2)

(Level 3)

Assets

Cash equivalents ⁽¹⁾

$
39,941

$
39,941

$
—

$
—

Commercial paper

8,482

—

8,482

—

Mutual funds held for nonqualified deferred compensation plan participants ⁽²⁾

378

378

—

—

Total assets

$
48,801

$
40,319

$
8,482

$
—

Liabilities

Deferred compensation ⁽²⁾

$
378

$
378

$
—

$
—

Total liabilities

$
378

$
378

$
—

$
—

~~(1)~~

Generally, cash equivalents include money market funds and investments with a maturity of three months or less from the date of purchase. This asset is included as a component of cash and cash equivalents on the balance sheet, of which $10.0 million is classified as restricted cash – long-term at September 30, 2017.

~~(2)~~

~~The~~ deferred compensation plan is directed by the Company and structured as a Rabbi Trust for the benefit of certain executives and non-employee directors. The investment assets of the Rabbi Trust are valued using quoted market prices multiplied by the number of shares held in each trust account. The related deferred compensation liability represents the fair value of the investment assets.


	Fair Value Measurements at September 30, 2022
	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents(1)	$	76,749	$	76,749	$	—	$	—
U.S. Treasury securities	255,956		255,956		—		—
Commercial paper	142,906		—		142,906		—
Corporate debt securities	17,377		—		17,377		—
U.S. Government-sponsored enterprises	66,217		—		66,217		—
Supranational bonds	2,485		—		2,485		—
Total assets	$	561,690	$	332,705	$	228,985	$	—
Liabilities
Common stock warrants(2)	$	44	$	—	$	—	$	44
Total liabilities	$	44	$	—	$	—	$	44


	Fair Value Measurements at December 31, 2021
	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents(1)	$	48,286	$	48,286	$	—	$	—
U.S. Treasury securities	221,724		221,724		—		—
Commercial paper	218,381		—		218,381		—
Corporate debt securities	58,836		—		58,836		—
U.S. Government-sponsored enterprises	50,686		—		50,686		—
Supranational bonds	3,003		—		3,003		—
Total assets	$	600,916	$	270,010	$	330,906	$	—
Liabilities
Common stock warrants(2)	$	147	$	—	$	—	$	147
Total liabilities	$	147	$	—	$	—	$	147

(1)Generally, cash equivalents include money market funds and investments with a maturity of three months or less from the date of purchase.

(2)Included in other current liabilities on the Company’s condensed consolidated balance sheets.

The Company’s Level 2 financial instruments are valued using market prices on less active markets with observable valuation inputs such as interest rates and yield curves. The Company obtains the fair value of Level 2 financial instruments from quoted market prices, calculated prices or quotes from third-party pricing services. The Company validates these prices through independent valuation testing and review of portfolio valuations provided by the Company’s investment managers. ~~There were no transfers between~~

The Company's Level ~~1 and Level 2 assets during the nine months ended September 30, 2017.~~

~~The Company recorded $1.2 million as guarantee liabilities in other current liabilities on the accompanying condensed balance sheet at December 31, 2016. There were no guarantee~~3 liabilities at September 30, ~~2017. Guarantees were recorded as a reduction of revenue~~2022 and December 31, 2021 included the remaining Series A warrants issued by the Company in the statement of operations and other comprehensive loss. Guarantees are not measured at fair value on a recurring basis, and therefore are not included in the tables above. Guarantees are classified within Level 3 of the fair value hierarchy. The estimated fair value of the guarantees is based on various economic and customer behavioral assumptions, including the probability that a trade-in right will be exercised, the specified trade-in amount, the expected fair value of the used t:slim G4 Pump at trade-in and the expected sales price of t:slim X2 (see Note 2, “Summary of Significant Accounting Policies – Revenue Recognition”). Changes in the probability that a trade-in right will be exercised have the most significant impact on the estimate of the fair value of the liabilities.

In connection with the ~~Term Loan Agreement, on March 7, 2017,~~public offering of common stock in October 2017. The Series A warrants, which expire in October 2022, provide holders the ~~Company issued ten-year warrants~~right to purchase ~~193,788~~ shares of the Company’s common stock at an exercise price of ~~$23.50~~$3.50 per ~~share~~share. As of September 30, 2022 and December 31, 2021, there were Series A warrants outstanding to purchase 1,000 shares 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 using a Black-Scholes pricing model. Variables used in the pricing model include the closing market price of the Company’s common stock at the balance sheet date, as well as estimated stock price volatility, dividend yield, remaining warrant term, and risk-free interest rate. 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 September 30, 2022 and December 31, 2021 are presented below:


	Series A Warrants
	September 30, 2022		December 31, 2021
Risk-free interest rate	2.8	%	0.3	%
Dividend yield	0.0%		0.0%
Expected volatility	71.8	%	39.1	%
Expected term (in years)	0.1		0.8

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, 2022 and 2021 (in thousands):


	Nine Months Ended September 30,
		2022		2021
Balance at beginning of period		$	147	$	14,261
(Gain) loss recognized from the change in fair value of common stock warrants		(103)		1,354
Common stock warrants exercised during the period		—		(15,499)
Balance at end of period		$	44	$	116

6. Leases

The Company's leases consist of operating leases for general office space, research and development, manufacturing and warehouse facilities, and equipment. These noncancellable operating leases have initial lease terms from two years to thirteen years. Leases with an initial term of 12 months or less (Short-term Lease) are expensed as incurred and are not recorded as right-of-use leased assets on the Company’s condensed consolidated balance sheets. The Company is required to recognize operating lease right-of-use assets and liabilities, and begin recording lease expense when the Company takes possession of the leased property (the ~~“Capital Royalty Warrant”)~~Commencement Date). The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Because the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease Commencement Date to determine the operating lease right-of-use assets and liabilities based on the present value of future lease payments over the lease term. The Company used the ~~Black-Scholes option-pricing model~~incremental borrowing rate on January 1, 2019 for operating leases that commenced before that date.

Certain leases include an option to ~~calculate~~renew, with renewal terms that can extend the ~~value~~lease term for additional periods. The exercise of ~~the Capital Royalty Warrant of~~ ~~approximately $3.3 million~~. The Capital Royalty Warrant was recorded as debt discount and stockholders’ equity, as the warrants met the definition of an equity instrument. The Black-Scholes option-pricing model requires the use of subjective assumptions about a number of key variables, including stock price volatility, expected term, and risk-free interest rate.

~~6. Term Loan Agreement~~

~~The Company had $82.3 million and $81.1 million of aggregate borrowings outstanding under the Term Loan Agreement, at September 30, 2017 and December 31, 2016, respectively.~~

~~Under the Term Loan Agreement, interest~~lease renewal options is ~~payable~~ at the Company’s option, (i) in cash at a rate of 11.5% per annum, or (ii) at a rate of 9.5% of the 11.5% per annum in cash and 2.0% of the 11.5% per annum (the “PIK Loan”) to be added to the principal of the loan and subject to accruing interest. Interest-only paymentssole discretion. For renewal options that are ~~due quarterly on March 31, June 30, September 30 and December 31 of each year of the interest-only payment period, which ends on December 31, 2019. The principal balance is due in full~~reasonably certain at the ~~end~~lease Commencement Date of being exercised, the Company includes the renewal option period in the lease term.

Vista Sorrento Lease

In March 2021, the Company entered into a second amendment (Second Amendment) to its lease agreement for office space located on Vista Sorrento Parkway in San Diego, California (Vista Sorrento Lease) covering 59,013 square feet of general administrative office space (Existing Premises). 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. The Company has two options to extend the term of the ~~loan, which~~Vista Sorrento Lease, covering both the Existing Premises and the Expansion Space, with each option providing for an additional period of five years. The Vista Sorrento Lease term was determined assuming the renewal options would not be exercised. The Company recognized operating lease right-of-use assets and corresponding operating lease liabilities of $15.1 million on the condensed consolidated balance sheet in the first quarter of 2021 related to the Second Amendment.

Tech Center 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 (Tech Center 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 Tech Center Lease for operations currently occupying 77,458 square feet of leased space, located on Roselle Street in San Diego, California, that is scheduled to expire in May 2023.

The initial lease term Phase I Commencement Date occurred in March ~~31, 2020~~2022 when the Company was tendered possession of the Phase I portion of the Premises, and rent payments commenced in September 2022 (the ~~“Maturity Date”)~~Phase I Rent Commencement Date). The ~~Company had elected~~Phase II Commencement Date is expected to pay interest in cash at a rate of 11.5% per annum through September 30, 2015. Beginning October 1, 2015, the Company elected to pay interest in cash at a rate of 9.5% per annum and for a rate of 2.0% per annum to be added to the principal of the loan. As a result, $2.3 million was added to the principal of the loan since October 1, 2015, which the Company refers to as PIK Loans.

The term loan is collateralized by all assets of the Company. The principal financial covenants require that the Company attain minimum annual revenues of $80.0 million in 2017 and $95.0 million each year thereafter until the Maturity Date.

~~Pursuant to~~ ~~Amendment No. 3 to~~ ~~Term Loan Agreement (the “Third Amendment”), the Company agreed to pay, on~~occur upon the earlier of (i) the ~~Maturity Date,~~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 Tech Center Lease term expires in April 2035. The Company has two options to extend the ~~date~~term of the lease, with each option providing for an additional period of five years. The Tech Center Lease term was determined assuming the renewal options would not be exercised.

The Tech Center 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 ~~loan~~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 Tech Center 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 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 following the Phase I Rent Commencement Date, and for the Phase II portion of the Premises for months two through five following the Phase II Rent Commencement Date. The Company recognized operating lease right-of-use assets and corresponding operating lease liabilities of $107.5 million on the condensed consolidated balance sheet on the Phase I Commencement Date in the first quarter of 2022.

High Bluff Lease

In May 2021, the Company entered into a lease agreement for approximately 31,372 square feet of general office space located on High Bluff Drive, in San Diego, California (High Bluff Lease). The High Bluff Lease is a direct lease agreement for property the Company previously occupied subject to a sublease agreement. The lease term began in April 2022 following the termination of the High Bluff sublease in March 2022, and is scheduled to expire in March 2024. The Company recognized operating lease right-of-use assets and corresponding operating lease liabilities of $3.0 million on the condensed consolidated balance sheet on the Commencement Date in the second quarter of 2022.

Supplemental Lease Disclosure Information

The Company’s lease costs recorded in the condensed consolidated statements of operations were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating lease cost	$	5,097	$	2,213	$	13,286	$	6,415
Short-term lease cost	36		22		107		67
Total lease cost	$	5,133	$	2,235	$	13,393	$	6,482

Maturities of operating lease liabilities at September 30, 2022 were as follows (in thousands):


Years Ending December 31,
2022 (remaining)	$	2,341
2023	14,614
2024	17,643
2025	17,475
2026	17,528
Thereafter	120,235
Total undiscounted lease payments	189,836
Less: amount representing interest	(50,607)
Present value of operating lease liabilities	139,229
Less: current portion of operating lease liabilities	(12,120)
Operating lease liabilities - long-term	$	127,109

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


	September 30, 2022		December 31, 2021
Weighted-average remaining lease term (in years)	10.9		5.0
Weighted-average discount rate used to determine operating lease liabilities	5.3	%	5.6	%

Cash paid for amounts included in the measurement of lease liabilities, representing operating cash flows from operating leases, was $9.4 million and $7.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Lease For Which Accounting Has Not Yet Commenced

As of September 30, 2022, the Commencement Date for Phase II of the Tech Center Lease had not yet occurred. Accordingly, the condensed consolidated balance sheet at September 30, 2022 does not include operating lease right-of-use assets and operating lease liabilities, and the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 do not include any lease costs, related to Phase II of the Tech Center Lease. In addition, the above disclosures of the Company’s lease costs, maturities of operating lease liabilities, and the weighted-average remaining lease term and weighted-average discount rate, do not include any amounts related to Phase II of the Tech Center Lease.

The Company currently estimates that Phase II Commencement Date will occur in the first quarter of 2025, at which time the Phase II operating lease right-of-use assets and liabilities will be recorded. Future minimum payments for monthly base rent due under Phase II of the Tech Center Lease, are currently estimated to total $34.7 million from 2025 through 2035, subject to a number of factors, including the actual Commencement Date of Phase II. Because the incremental borrowing rate will not be available until the Phase II Commencement Date, we are not yet able to determine the Phase II operating lease right-of-use assets and liabilities.

7. Debt

Convertible Senior Notes

In May 2020, the Company entered into a purchase agreement with certain counterparties for the sale of an aggregate of $287.5 million principal amount of 1.50% Convertible Senior Notes due 2025 (Notes) in a private offering to qualified institutional buyers pursuant to Rule 144A under the ~~Term Loan Agreement becomes due,~~Securities Act of 1933, as amended. The proceeds from the issuance of the Notes were $244.6 million, net of debt issuance costs and ~~(iii)~~cash used to pay the cost of the capped call transactions (Capped Call Transactions) discussed below.

The Notes are the Company’s senior unsecured obligations. Interest is payable in cash semi-annually in arrears beginning on November 1, 2020 at a rate of 1.50% per year. The Notes mature on May 1, 2025 unless repurchased, redeemed, or converted in accordance with their terms prior to the maturity date.

The Notes are convertible into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, at an initial conversion rate of 8.8836 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of $112.57 (Conversion Price) per share of the Company’s common stock. The conversion rate is subject to customary adjustments for certain events as described in the Indenture governing the Notes. The Company expects to settle conversions through a combination settlement, which involves payment in cash equal to the principal portion and delivery of shares of common stock for the excess of the conversion value over the principal portion.

The Company may not redeem the Notes before May 6, 2023. The Company has the option to redeem for cash all or any portion of the Notes on or after May 6, 2023 if the last reported sale price of the Company’s common stock has been at least 130% of the Conversion Price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company ~~makes~~provides notice of redemption, during any 30 consecutive trading day period, at a ~~voluntary pre-payment~~redemption price equal to 100% of the ~~loan, a financing fee equal to 3.0%~~principal amount of the ~~sum~~Notes to be redeemed, plus accrued and unpaid interest. No sinking fund is provided for the Notes.

Holders of ~~(x)~~ the ~~aggregate amount drawn~~Notes may convert all or a portion of their Notes at their option before November 1, 2024, in multiples of $1,000 principal amounts, only under the ~~Third Amendment, which is $50.0 million, and (y) any PIK Loans issued in relation to~~following circumstances:

•if the ~~Third Amendment (collectively, the “Back End Financing Fee”).~~

~~The~~ ~~audit report~~last reported sale price of the Company’s ~~independent registered public accounting firm contained~~common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price of the Notes on each such trading day;

•during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate of the Notes on such trading day;

•if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•on the occurrence of specified corporate events.

On or after November 1, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances.

Holders of the Notes who convert in connection with a make-whole fundamental change or in connection with a redemption are entitled to an increase in the ~~Annual Report included an explanatory paragraph that describes conditions that raise substantial doubt about~~conversion rate. Additionally, in the ~~Company’s ability to continue as a going concern. This explanatory paragraph constituted a potential~~ event of ~~default under~~a fundamental change, holders of the ~~Term Loan Agreement. On March 7, 2017,~~Notes may require us to repurchase all or a portion of the Notes at a price equal to 100% of the principal amount of the Notes, plus any accrued and unpaid interest.

The net carrying amount of the Notes on the condensed consolidated balance sheets consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Principal amount	$	287,500	$	287,500
Unamortized debt issuance costs	(4,713)		(6,033)
Net carrying amount	$	282,787	$	281,467

As of September 30, 2022, the unamortized debt issuance costs of $4.7 million associated with the Notes will be amortized to interest expense, at an effective interest rate of 2.2% over the remaining period of approximately 2.7 years.

The following table details interest expense related to the Notes recognized for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Contractual interest expense	$	1,078	$	1,078	$	3,234	$	3,234
Amortization of debt issuance costs	499		433		1,395		1,292
Total interest expense	$	1,577	$	1,511	$	4,629	$	4,526

The Notes will have a dilutive effect to the extent the average market price per share of common stock for a given reporting period exceeds the conversion price of $112.57. As of September 30, 2022, the if-converted value of the Notes did not exceed the principal amount. As of December 31, 2021, the if-converted value of the Notes exceeded the principal amount by $96.9 million.

Capped Call Transactions

In connection with the issuance of the Notes, the Company entered into ~~Waiver and Amendment No. 4~~Capped Call Transactions in May 2020 with certain counterparties at a net cost of $34.1 million. The Capped Call Transactions are intended to ~~the~~ ~~Term Loan Agreement (the “Fourth Amendment”), which included a limited waiver of the~~reduce potential event of default that could have resulted from the explanatory paragraph. In consideration for the waiver, the Company agreed to: (i) issue the Capital Royalty Warrant, (ii) increase its restricted cash balance from $2.0 milliondilution to $10.0 million, (iii) provide Capital Royalty Partners the same information it makes available to its board of directors, subject to limited exceptions, and (iv) not incur additional third party indebtedness secured solely by accounts receivable, inventory and cash. In addition, the Fourth Amendment includes a covenant requiring the Company to complete financings in which its gross proceeds from the sale of equity securities is at least $30.0 million, no later than January 15, 2018. Furthermore, the Company agreed to increase the Back End Financing Fee to 5.0% of the entire aggregate principal amount of borrowings outstanding, including total PIK Loans issued. The Back End Financing Fee is payable at maturityholders of the Company’s ~~loans and~~common stock beyond the conversion price of $112.57, up to a conversion price of $173.18 on any conversion of the Notes, or to offset any cash payments the Company is required to make in excess of the principal amount of ~~any loans for which it makes an optional prepayment, and~~such converted Notes, as the case may be, with such reduction or offset subject to a cap. The cap price of the Capped Call Transactions is initially $173.18 per share of the Company’s common stock, representing a premium of 100% above the last reported sale price of $86.59 per share of the Company’s common stock on May 12, 2020, and is subject to certain adjustments under the terms of the Capped Call Transactions. Conditions that cause adjustments to the initial strike price of the Capped Call Transactions mirror conditions that result in corresponding adjustments for the Notes.

For accounting purposes, the Capped Call Transactions are separate transactions, and not part of the terms of the Notes, while they are integrated for federal tax purposes. 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 condensed consolidated balance sheet and will not be remeasured.

Line of Credit

On May 18, 2022, the Company entered into a three-year Revolving Line of Credit Agreement that provides the Company with a maximum principal borrowing amount of $100.0 million (the Line of Credit), reduced by any letters of credit issued and outstanding under a $15.0 million letter of credit sub-limit. The Line of Credit allows the Company to request advances thereunder, and to use the proceeds of such advances for general corporate purposes, including working capital and capital expenditures. The Line of Credit matures on the earlier of (i) May 18, 2025 or (ii) the Springing Maturity Date, unless renewed at maturity upon approval by the Company’s board of directors and the lender. The Springing Maturity Date is any date during the 91 days prior to the May 1, 2025 maturity date of the Company’s Convertible Senior Notes, that the Company does not satisfy a predefined liquidity threshold. During the term of the Line of Credit, the Company is required to maintain compliance with two financial maintenance covenants: a minimum consolidated interest coverage ratio and a maximum consolidated net leverage ratio. The Company was in compliance with these financial maintenance covenants as of September 30, 2022. The Line of Credit is secured by a first priority security interest in substantially all of the assets of the Company and its subsidiaries.

Advances drawn under the Line of Credit bear interest at an annual rate of (1) the SOFR Rate (as defined in the Line of Credit); plus (2) an applicable credit spread adjustment ranging from 0.10% to 0.25%; plus (3) an applicable margin ranging from 1.25% to 2.00%, and each advance will be payable on the Maturity Date with the interest on outstanding advances payable quarterly. The Credit Agreement also includes a commitment fee ranging from 0.20% to 0.35% per annum on the average daily unused amount of the Line of Credit, payable quarterly. The Company may, at its option, prepay any borrowings under the Line of Credit, in ~~connection with certain asset sales~~whole or ~~a change of control.~~

in part at any time before the maturity date, without premium or penalty.

As of September 30, ~~2017~~2022, the Company’s outstanding borrowings and December 31, 2016, respectively, the Company had accrued $4.1 million and $1.5 million for the Back End Financing Fee in other long-term liabilities and as contra-debt in notes payable-long-term on the accompanying condensedavailable balance ~~sheets.~~

The Company evaluated execution of the Fourth Amendment as a modification for accounting purposes and concluded that it did not constitute a modification because the present value of the future cash flows under the ~~Fourth~~ ~~Amendment~~ ~~did not exceed the present value~~Line of the future cash flows under the previous terms by more than 10%. The Back End Financing Fee, the value of the Capital Royalty Warrant, and the remaining balance of debt issuance costs and debt discount of the loan are amortized to interest expense over the remaining term of the Term Loan Agreement using the effective interest method.

7.Credit were as follows (in millions):


Available principal amount	$	100.0
Outstanding borrowings	—
Outstanding letters of credit	4.9
Total available balance	$	95.1

8. Stockholders’ Equity

~~Public Offering~~

In the first quarter of 2017, the Company completed a public offering of 1,850,000 shares of its common stock at a public offering price of $12.50 per share. The gross proceeds to the Company from the offering were $23.1 million, before deducting underwriting discounts and commissions and other offering expenses payable by the Company.

~~At The Market (ATM) Program~~

~~In July 2017, the Company entered into an Equity Distribution Agreement implementing an ATM program for aggregate gross proceeds up to $15.0 million. During the~~ ~~three~~ ~~months ended September 30, 2017, the Company sold 464,108 shares of common stock under the ATM program at prices ranging from $5.64 to $10.54.~~ ~~The gross proceeds to the Company from these sales were $4.3 million, before deducting underwriting discounts and commissions and other offering expenses payable by the Company~~.

Shares Reserved for Future Issuance

The following shares of the ~~Company’s~~Company's common stock were reserved for future issuance at September 30, ~~2017~~2022 (in thousands):


Shares reserved for issuance upon conversion of Convertible Senior Notes		2,554
Shares underlying outstanding warrants		195	~~293~~
Shares underlying outstanding stock options		4,582	~~933~~
Shares underlying unvested restricted stock units		1,717
Shares authorized for issuance pursuant to awards granted under the ESPP		1,087
Shares authorized for future equity award grants		211	39
~~Shares authorized for issuance as ESPP awards~~ Total		10,346	—
	~~1,265~~

Common Stock Warrants

Warrants outstanding to purchase shares of the Company's common stock as of September 30, 2022 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

194,788

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 ~~24,408~~zero shares and 5,678 shares of its common stock, respectively, upon the exercise of ~~stock options~~warrants during the three and nine months ended September 30, ~~2017,~~2022, and ~~issued 14,897~~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.

Stock Plans

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. Under the 2013 Plan, the Company may grant stock options, ~~during~~stock appreciation rights, restricted stock and restricted stock units to individuals who are then employees, officers, directors or consultants of the ~~year ended December 31, 2016.~~

Company.

The ESPP enables eligible employees to purchase shares of the Company’s common stock using their ~~after tax~~after-tax payroll deductions, subject to certain conditions. ~~The~~Generally, offerings under the ESPP ~~consists~~consist of a two-year offering period with four six-month purchase periods which begin in May and November of each year. ~~There~~

Stock-Based Compensation

Common Stock Options

Common stock options have an exercise price equal to the closing price of the Company's common stock on the applicable grant date, and have a maximum term of ten years. Stock options granted before the second quarter of 2022, generally vest over a four-year period as to 25% of the underlying shares on the first anniversary of the grant date, with the balance of the options vesting monthly over the following three years. Stock options granted during the second quarter of 2022 and thereafter vest over a three-year period as to 33% of the underlying shares on the first anniversary of the grant date, with the balance of the options vesting monthly over the following two years.

The Company estimates the fair value of stock options using the Black-Scholes option-pricing model on the grant date. The total number of common stock options granted and the respective assumptions used in the Black-Scholes option-pricing model were ~~38,929 shares~~ as follows:



	Nine Months Ended September 30,
		2022			2021
Stock options granted		83,008			355,008
Weighted average grant date fair value (per share)		$	42.16		$	56.89
Risk-free interest rate		2.7		%	1.0		%
Dividend yield		0.0		%	0.0		%
Expected volatility		72.0		%	75.1		%
Expected term (in years)		5.8			6.1

Restricted Stock Units

Restricted stock units (RSUs) have a grant value equal to the closing price of the Company’s common stock ~~purchased under~~on the ~~ESPP~~award date. RSUs granted before March 2022, generally vest over a four-year period based on continued service to the Company 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. RSUs granted in March 2022 and thereafter vest over a three-year period based on continued service to the Company as to 33% of the underlying shares on the first anniversary of the award, with the balance of the RSUs vesting quarterly over the following two years. In addition, the Company granted 53,662 and 25,674 performance-based RSUs, respectively, during the nine months ended September 30, ~~2017,~~2022 and ~~69,502~~ ~~shares~~2021. The performance-based RSUs have a grant value equal to the closing price of the Company’s common stock ~~purchased under~~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.

The total number of RSUs granted, which includes performance-based RSUs, and the respective weighted average grant date fair value were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
RSUs granted	330,807		94,746		1,338,056		437,340
Weighted average grant date fair value (per share)	$	56.49	$	109.63	$	70.33	$	87.98

Employee Stock Purchase Plan

The Company records stock-based compensation expense associated with the ESPP ~~during~~using the ~~year ended December 31, 2016.~~

~~The Company announced~~Black-Scholes option-pricing model. Valuations are performed on the ~~suspension~~grant date at the beginning of the ~~ESPP as~~purchase period, which generally occurs in May and November of May 16, 2017 due to a lack of available shares. The suspension was accounted for as a cancellation of an award with no consideration. The previously unrecognized compensation cost as of the suspension date of $2.4 million was fully expensed during the second quarter of 2017.

~~Stock-Based Compensation~~

each year. The assumptions used in the Black-Scholes option-pricing model ~~are~~for the ESPP were as follows:

	Stock Option
	Three Months Ended						Nine Months Ended
	September 30,						September 30,							Nine Months Ended September 30,
	2017			2016			2017			2016					2022			2021
Weighted average grant date fair value (per share)	$	3.00		$	35.00		$	5.10		$	37.80		Weighted average grant date fair value (per share)		$	26.57		$	29.24
Risk-free interest rate		2.0	%		1.3	%		1.9	%		1.4	%	Risk-free interest rate		2.2		%	0.1		%
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Dividend yield													Dividend yield		0.0		%	0.0		%
Expected volatility		60.3	%		56.1	%		60.0	%		55.5	%	Expected volatility		47.1		%	47.5		%
Expected term (in years)		6.1			6.1			6.1			6.1		Expected term (in years)		1.3			1.3

ESPP

Nine Months Ended

September 30,

2017⁽¹⁾

2016

Weighted average grant date fair value (per share)
N/A

$
26.90

Risk-free interest rate
N/A

0.6
%
Expected dividend yield
N/A

0.0
%
Expected volatility
N/A

56.9
%
Expected term (in years)
N/A

1.3

~~(1)~~

~~There were no grants made pursuant to the ESPP during the three and nine months ended September 30, 2017.~~

The following table summarizes the allocation of stock-based compensation expense included in the condensed consolidated statements of operations for all stock-based compensation arrangements (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016			2022		2021		2022		2021
Cost of sales	$	264	$	267	$	1,022	$	776	Cost of sales	$	1,920	$	1,557	$	5,666	$	4,624
Selling, general & administrative		1,961		2,320		8,423		6,992
Selling, general and administrative									Selling, general and administrative	15,125		11,278		40,711		31,570
Research and development		167		318		1,057		965	Research and development	5,192		2,894		14,100		7,459
Total	$	2,392	$	2,905	$	10,502	$	8,733
Total stock-based compensation expense									Total stock-based compensation expense	$	22,237	$	15,729	$	60,477	$	43,653

The total stock-based compensation expense capitalized as part of the cost of ~~inventory~~the Company’s inventories was ~~$0.3 million and $0.2~~$0.9 million at September 30, ~~2017~~2022, and $1.0 million at December 31, ~~2016,~~2021.

9. Employee Benefits

Employee 401(k) Plan

The Company has a defined contribution 401(k) plan for employees in the United States who are at least 18 years of age. Employees are eligible to participate in the plan beginning on the first day of the calendar month following their date of hire. Unless they affirmatively elect otherwise, employees are automatically enrolled in the plan following 30 days from date of rehire or entry date. Under the terms of the plan, employees may make voluntary contributions as a percent of compensation, and the Company may elect to match a discretionary percentage of employee contributions. The Company did not provide a matching contribution before 2022, but began making a discretionary match in the first quarter of 2022.

10. Income Taxes

For the three and nine months ended September 30, 2022, the Company recognized income tax expense of $1.6 million and $2.0 million, respectively, on a pre-tax loss of $47.3 million and $76.7 million. Income tax expense for the three and nine months ended September 30, 2022 was primarily attributable to federal, 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, 2021, the Company recognized income tax expense of $0.1 million on a pre-tax income of $5.8 million, and an income tax benefit of $2,000 on pre-tax income of $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, offset by state and foreign income tax expense as a result of current taxable income in certain jurisdictions.

The Company calculated the provision (benefit) for income taxes for the three and nine months ended September 30, 2022 and 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.

The Company continues to maintain a full valuation allowance against its net deferred tax assets as of September 30, 2022, based on the current assessment that it is not more likely than not these future benefits will be realized before expiration.

11. Business Segment and Geographic Information

Segment Reporting

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 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.

Disaggregation of Revenue

The Company primarily sells its products through national and regional distributors in the United States on a non-exclusive basis, and through distribution partners outside the United States, including in select European countries, Canada, Australia, New Zealand, Saudi Arabia and South Africa. In the United States and Canada, the Company uses a direct sales force. The Company disaggregates its revenue by geography and by major sales channel as management believes these categories best depict how the nature, amount and timing of revenues and cash flows are affected by economic factors.

Revenues by Geographic Region and Customer Sales Channel

During the three and nine months ended September 30, 2022 and 2021, 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 (in thousands).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	146,035	$	133,106	$	422,985	$	364,025
Outside the United States	58,512		46,521		157,731		128,778
Total Sales	$	204,547	$	179,627	$	580,716	$	492,803

Sales to distributors accounted for 66% and 68% of the Company’s total United States sales for the three months ended September 30, 2022 and 2021, respectively, and 65% and 68% of the Company’s total United States sales for the nine months ended September 30, 2022 and 2021, respectively. Sales to distributors accounted for 96% and 96% of the Company’s total sales outside the United States for the three months ended September 30, 2022 and 2021, respectively, and 96% and 95% of the Company’s total sales outside the United States for the nine months ended September 30, 2022 and 2021, respectively.

12. Commitments and Contingencies

Legal and Regulatory Matters

In May 2020, the Company was named as a defendant in three California state court class action lawsuits arising from a phishing incident that occurred in January 2020. Collectively, these lawsuits seek statutory, compensatory, actual, and punitive damages; equitable relief, including restitution; pre- and post-judgment interest; injunctive relief; and attorney fees, costs, and expenses from the Company. On July 24, 2020, these three lawsuits were consolidated into a single case in the Superior Court of the State of California in the County of San Bernardino entitled Joseph Deluna et al. v. Tandem Diabetes Care, Inc. The consolidated case alleges violations of the Confidentiality of Medical Information Act (CMIA), California Consumer Privacy Act (CCPA), California’s Unfair Competition Law (UCL), and breach of contract. The Company filed a demurrer seeking dismissal of all claims, which was heard by the Court on October 27, 2020, and which resulted in the following outcome: (i) the demurrer to the CMIA claim was denied; (ii) the demurrer to the CCPA claim was sustained; and (iii) the demurrer to the UCL and contract claims were sustained with leave to amend the pending complaint. A second demurrer was heard by the Court on March 29, 2021 with the following outcome: (i) the demurrer to the CMIA claim was denied; and (ii) the demurrer to the UCL and contract claims was sustained without leave to amend as to three of the named plaintiffs. The plaintiffs filed a motion for class certification on January 7, 2021 and the Company filed a motion for summary adjudication on plaintiffs’ CMIA claim on April 7, 2022. Both motions are fully briefed. The Company anticipates the Court will hear argument on both motions in the fourth quarter of 2022 or the first quarter of 2023. Although the Company continues to vigorously defend against these claims, there is no guarantee that the Company will prevail. The Company presently is unable to determine the ultimate outcome of these lawsuits or determine the amount (or range) of possible losses associated with the lawsuits.

From time to time, the Company ~~may be subject to~~is involved in various other legal proceedings, regulatory ~~encounters~~matters, and other disputes or ~~other matters~~claims arising infrom or related to the ~~ordinary~~normal course of its business activities, including actions with respect to intellectual property, data privacy, employment, regulatory, product liability and contractual matters. ~~In connection~~Although the results of legal proceedings, disputes and other claims cannot be predicted with ~~these matters,~~certainty, the Company ~~assesses, on~~believes it is not currently a ~~regular basis,~~party to any other legal proceeding(s) which, if determined adversely to the ~~probability and range of possible loss based~~Company, would, individually or taken together, have a material adverse effect on the ~~developments in these matters. A liability is recorded in the~~Company’s business, operating results, financial ~~statements if it is determined that it is probable that a loss has been incurred, and that the amount~~condition or ~~range~~cash flows. However, regardless of the ~~loss can be reasonably estimated. Because~~merit of the ~~uncertainties related to~~claims raised or the ~~occurrence, amount, and range of loss~~outcome, legal proceedings may have an adverse impact on ~~any pending actions,~~ the Company ~~is currently unable to predict their ultimate outcome,~~as a result of defense and ~~with respect to any pending litigation or claim where no liability has been accrued, to make a meaningful estimate~~settlement costs, diversion of ~~the reasonably possible loss or range~~management time and resources, and other factors.

Except as set forth above, as of ~~loss that could result from an unfavorable outcome. At~~ September 30, ~~2017 and December 31, 2016,~~2022, there were no legal proceedings, regulatory ~~encounters~~matters, or other ~~matters~~disputes or claims for which ~~the negative outcome~~a material loss was considered probable or for which the amount ~~or range~~(or range) of loss was reasonably estimable.

~~9. Subsequent Event~~

~~On October 9, 2017,~~ 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 ~~effected a 1-for-10 reverse stock split~~because of ~~its issued and outstanding shares of common stock. The par value per share and the authorized number of shares of common stock and preferred stock were not adjusted~~ as a result of ~~the reverse stock split. All common stock share~~defense and ~~per-share amounts for all periods presented in these condensed financial statements have been adjusted to reflect the reverse stock split. The number~~settlement costs, diversion of ~~authorized shares of common stock remains at 100 million shares.~~

~~On October 17, 2017, the Company completed a registered public offering of 4,630,000 shares of its common stock, Series A warrants to purchase up to 4,630,000 shares of its common stock~~management time and Series B warrants to purchase up to 4,630,000 shares of its common stock, at a public offering price of $3.50 per share and accompanying warrants. The gross proceeds to the Company from the offering were approximately $16.2 million, before deducting underwriting discounts and commissionsresources, and other ~~offering expenses payable by the Company.~~ factors.

Letters of Credit

The ~~Series A warrants have an exercise price of $3.50 per share, are immediately exercisable,~~Company leases general office space, research and ~~will expire on the 5-year anniversary~~development, manufacturing and warehouse facilities, and equipment under noncancelable operating leases for use in its operations (see Note 6, “Leases”). In connection with one of the date of issuance. The Series B warrants have an exercise price of $3.50 per share, are immediately exercisable, and will expire on the 6-month anniversary of the date of issuance. As a result of the completion of the financing,operating leases, the Company has ~~satisfied~~a $4.9 million unsecured irrevocable standby letter of credit arrangement with a bank, under which the ~~equity financing covenant~~landlord of the building is the beneficiary. The Company is required to maintain the standby letter of credit throughout the term of the lease, which expires in ~~the Term Loan Agreement, although it remains subject to additional covenants.~~

April 2035.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with our financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q for the ~~period~~quarter ended September 30, ~~2017, or this Quarterly Report.~~

2022 (Quarterly Report).

This Quarterly Report contains forward-looking statements within the meaning of the federal securities ~~laws.~~laws, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report, other than statements of historical fact, are forward-looking statements. You can identify forward-looking statements by the use of words such as “may,” “will,” “could,” “anticipate,” “expect,” “intend,” “believe,” “continue” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to such statements. In particular, forward-looking statements contained in this Quarterly Report may relate to, among other things, our future or assumed financial condition, ~~(including our ability to continue as a going concern),~~ results of operations, liquidity, trends impacting our financial results, business forecasts and plans, research and product development plans, manufacturing plans, strategic plans and objectives, capital needs and financing plans, product launches, geographic expansion, distribution plans, production capacity, clinical trials, regulatory approvals, competitive position and the impact of changes in the competitive environment, the impact of the COVID-19 global pandemic on our business, supply chain, and the businesses of our contract manufacturers and suppliers, integration of acquisitions and partner technologies, and the application of accounting guidance. We caution you that the foregoing list may not include all of the forward-looking statements made in this Quarterly Report.

Our forward-looking statements are based on our management’s current assumptions and expectations about future events and trends, which affect or may affect our business, strategy, operations or financial performance. Although we believe that these forward-looking statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties and are made in light of information currently available to us. Our actual financial condition and results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below in the section entitled “Risk Factors” in Part II, Item 1A, and elsewhere in this Quarterly ~~Report.~~Report, as well as the other public filings we make with the Securities and Exchange Commission. You should read this Quarterly Report with the understanding that our actual future financial condition and results may be materially different from and worse ~~from~~than what we expect.

Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Forward-looking statements speak only as of the date they were made and, except to the extent required by law or the rules of the ~~NASDAQ~~Nasdaq Global Market, we undertake no obligation to update or review any forward-looking statement because of new information, future events or other factors.

We qualify all of our forward-looking statements by these cautionary statements.

Overview

We are a medical device company ~~with an innovative approach to~~focused on the design, development and commercialization of ~~products~~technology solutions for people living with ~~insulin-dependent~~ diabetes. ~~We believe that our competitive advantage~~Diabetes management can vary greatly from person-to-person, creating multiple market segments based on clinical needs and personal preferences. Our goal is ~~rooted~~to lead in ~~our unique consumer-focused approach~~insulin therapy management across multiple of these market segments by providing a portfolio of delivery devices, software, and ~~proprietary technology platform. This allows us to deliver innovative hardware and software~~data insight solutions to ~~meet the various needs and preferences of~~ people living with diabetes, as well as their caregivers and ~~their~~ healthcare providers.

Since our initial commercial launch, we have rapidly innovated and brought more products to market than our competitors. We ~~manufacture and sell~~have commercially launched seven insulin pump ~~products~~configurations in the United States ~~that are designed to address large~~since 2012 and ~~differentiated segments of the insulin-dependent diabetes market. Our~~three insulin pump ~~products include:~~

configurations outside the United States since 2018. Today, our software-updatable t:slim X2 Insulin Delivery System ~~or t:~~(t:slim ~~X2,~~X2) hardware platform represents 100% of our ~~next-generation flagship product that is updatable and designed to display Dexcom G5 continuous glucose monitoring, or CGM, sensor information directly on~~new pump shipments. In the ~~pump Home Screen; and~~

~~the t:flex Insulin Delivery System, or t:flex, for people with greater insulin needs.~~

~~We have~~four-year period ended September 30, 2022, we shipped more than ~~60,000~~400,000 insulin pumps, ~~since~~which is representative of our ~~initial launch in August 2012,~~estimated global installed customer base, assuming the typical four-year reimbursement cycle. More than 280,000 of ~~which nearly 56,000~~these pumps ~~have been~~were shipped ~~within the four years ended September 30, 2017. For the past three consecutive years, our company has been ranked #1 by insulin pump users~~to customers in the United States ~~for customer~~and over 120,000 were shipped in the more than 20 countries in which we operated in the third quarter of 2022 outside the United States.

Our manufacturing, sales and support ~~in an independent survey by dQ&A, a leading diabetes research firm.~~

~~We have successfully launched five insulin~~activities principally focus on our flagship pump ~~products, beginning with~~platform, the commercialization of our first pump, the t:slim Insulin Delivery System, or t:slim, in August 2012. During 2015, we commenced commercial sales of two additional insulin pumps: t:flex and the t:slim G4 Insulin Delivery System, or t:slim G4, the first continuous glucose monitoring, or CGM, enabled pump with touchscreen simplicity. In October 2016, we commenced commercial sales of t:slim X2 and ~~discontinued new sales of t:slim. In August 2017, we commenced commercial sales of~~our complementary product offerings. Our simple-to-use t:slim X2 ~~with Dexcom G5 Mobile CGM integration~~is based on our proprietary technology platform and ~~discontinued new sales of t:slim G4.~~

~~Our insulin pumps are compatible with~~is the ~~Tandem Device Updater, a revolutionary new tool that allows pump users to update their pumps’ software quickly and easily from a personal computer. Remote updatability for~~smallest durable insulin pump ~~software is a unique feature not~~ available in ~~competitive pump offerings, meaning~~ the ~~Tandem Device Updater provides~~United States. We have commercially offered two different automated insulin dosing (AID) algorithms on t:slim X2, including our ~~customers access~~Control-IQ technology, which is an advanced hybrid-closed loop feature, designed to ~~new and enhanced features faster than~~help increase a user's time in their targeted glycemic range. It was the ~~industry has been able to in the past. Its~~ first system cleared ~~use~~ by the U.S. Food and Drug Administration ~~or FDA, was~~(FDA) to ~~update t:slim Pumps purchased before April 2015~~deliver automatic correction boluses in addition to adjusting insulin to help prevent high and low blood sugar based on continuous glucose monitoring (CGM) readings. Our Control-IQ technology launched in the ~~latest software. In August 2017,~~United States in the first quarter of 2020, and is now available in all of the countries in which we ~~received FDA approval to permit~~operate. Our Control-IQ technology uses information from Dexcom Inc.’s (Dexcom) G6 sensor, which is the third generation of Dexcom CGM that we have integrated and commercially launched with our pump technology.

The t:slim X2 ~~customers~~is unique in that it is the only pump on which remote software updates have been made commercially available in the United States. Now available in the countries we serve worldwide, our Tandem Device Updater (TDU) is a revolutionary tool that allows people to update their ~~pumps’~~t:slim X2 software from a personal computer. In July 2022, we launched a new pump software update though TDU to allow ~~integration with the Dexcom G5 Mobile CGM system. We are currently offering this update free of charge to our 12,000 customers that purchased a~~all t:slim X2 ~~prior~~pump users in the United States to ~~us receiving FDA approval~~bolus insulin using our smartphone app that is available on both iOS and Android device models.

Our insulin pump products are generally considered durable medical equipment and have an expected lifespan of at least four years. In addition to insulin pumps, we sell disposable products that are used together with our pumps and are replaced every few days, including cartridges for ~~G5 integration. As of September 30, 2017, approximately one third of these customers have elected~~storing and delivering insulin, and infusion sets that connect the insulin pump to ~~update their pump. Of the t:slim X2 Pump users who have updated their pump’s software, more than 85% indicated they were satisfied or extremely satisfied~~a user’s body. Additionally, we sell accessories such as belt clips and cases for use with ~~the update process.~~pumps which are designed to enhance usability. In the ~~future, the Tandem Device Updater has the potential to enable~~United States, we also offer t:connect, our data management web application that provides users, ~~to add other new features and functionality to their pumps, such as automated insulin delivery, or AID, algorithms, independent of the typical four-year insurance pump replacement cycle.~~

~~In September 2017, we commenced commercial sales of products using the t:lock~~^TM Connector, or t:lock, which replaces the standard Luer-lok connector that historically joined an infusion set to our cartridge. t:lock incorporates a smaller inner cavity than the Luer-lok connector, which reduces the amount of insulin used in the process and reduces the time required to fill the infusion set tubing.

Our innovative approach to product design and development is consumer-focused and based on our extensive market research, as we believe the user is the primary decision maker when purchasing an insulin pump. Our market research consists of interviews, focus groups and online surveys to understand what people with diabetes, their caregivers and their healthcare providers are seeking in order to improve diabetes therapy management. We also apply the science of human factors to our design and development process, which seeks to optimize our devices, allowing users to successfully operate our devices in their intended environment.

~~We developed our products to provide the specific features that people~~ with insulin-dependent diabetes seek in a next-generation insulin pump. Our proprietary pumping technology allows us to design the slimmest and smallest durable insulin pumps on the market, without sacrificing insulin capacity. Our insulin pump platform features our patented Micro-Delivery technology, and a miniaturized pumping mechanism that draws insulin from a flexible bag within the pump’s cartridge, rather than relying on a syringe and plunger mechanism. It also features an easy-to-navigate software architecture, a vivid color touchscreen and, with the t:slim X2, it also features an advanced Bluetooth radio capable of communicating with multiple compatible devices, such as a CGM sensor, blood glucose meter or mobile device applications. Our insulin pump platform has a micro-USB connection that supports a rechargeable battery and software updates through the Tandem Device Updater, as well as uploads to t:connect Diabetes Management Application, or t:connect. t:connect is our custom cloud-based data management application that provides customers and healthcare providers a fast, easy, and visual way to display diabetes therapy management data from ~~the pump~~our pumps, integrated CGMs and supported blood glucose meters. ~~In April 2017, we launched~~

COVID-19 Global Pandemic Impact and Considerations

Our business has been impacted in a variety of ways since the ~~t:connect® HCP Portal, which is designed to streamline healthcare providers’ use~~onset of the ~~original t:connect Application~~COVID-19 global pandemic in early 2020, and ~~improve office efficiency.~~

Wewill likely continue to be impacted for the remainder of 2022. Specific factors that have ~~rapidly increased sales since~~influenced our ~~commercial launch by expanding~~financial results and the way in which we operate include fluctuations in shelter-in-place restrictions, supply chain constraints, generalized labor shortages impacting global markets, the timing and extent of vaccine availability and surges in infection and hospitalization rates as new COVID variants have emerged. Most notably, our sales ~~clinical~~results reflected a high degree of variability across the quarters during this time, unlike historical seasonal trends. Our raw material costs and ~~marketing infrastructure, by developing, commercializing~~inventory levels have also fluctuated as we respond to supply chain constraints due to the timing of availability of components from the various suppliers we use to build our products. In addition, we experienced extended regulatory review timelines for new product submissions in the United States. Throughout this time, we have responded to each of these unique challenges, while prioritizing the health and ~~marketing multiple differentiated~~safety of our employees and customers and working diligently to maintain a continuous supply of products, ~~that utilize our technology platform~~training and ~~consumer-focused approach, and by providing strong~~ customer support. In

Overall, we anticipate that our ~~research, approximately 86%~~sales and operating results will continue to be impacted and subject to unpredictable variability. The full extent of ~~healthcare providers surveyed believe that providing great customer support~~the impact of the pandemic on our future business and operations is difficult to estimate and will depend on a number of factors including the ~~most important company attribute. We believe that by demonstrating our product benefits~~scope and duration of the COVID-19 global pandemic, and the ~~shortcomings~~relative impact of ~~existing insulin therapies, more people will choose~~COVID-19 on the business operations of our ~~insulin pumps for their therapy needs, allowing us~~contract manufacturers, suppliers and competitors and any resulting changes to ~~further penetrate~~general economic conditions in the countries in which we operate and ~~expand the market. We also believe we are well positioned to address consumers’ needs and preferences with~~sell our ~~current products and products under development and by offering customers a pathway to our future innovations through the Tandem Device Updater as they are approved by the FDA.~~

In July 2017, we announced plans to begin commercialization of t:slim X2 outside the United States in select geographies during 2018. Unlike our approach domestically, we currently plan to partner with distributors who will carry out the selling efforts, as well as the service and support of customers in geographies outside the United States.

products.

Products ~~under~~Under Development

Our products under development support our strategy of focusing on both consumer and clinical needs. We intend to leverage our consumer-focused approach and proprietary technology platform to continue to develop products that have the features and functionality that will allow us to target people in different segmentsdeveloping insulin delivery systems as part of ~~the insulin-dependent diabetes market. Our current pump products under development include:~~

•

t:slim X2 with PLGS – Our first generation AID system is expected to include a predictive low glucose suspend, or PLGS, algorithm that utilizes Dexcom G5 sensor values. During 2016, we completed a feasibility study of our PLGS algorithm. The data from this feasibility study was used in an IDE submission for a pivotal study, which was approved by the FDA in May 2017. We commenced a pivotal study for our t:slim X2 with PLGS in the third quarter of 2017 and anticipate that it will conclude by the end of 2017. Once reports from the clinical trial sites are finalized, we intend to use the results in a PMA submission with the FDA. Based on this timing, and subject to future FDA approval, our goal is to launch the product in the summer of 2018.

t:slim X2 with TypeZero – Our second generation AID system is expected to integrate the t:slim X2 pump with the treat-to-range technology that we licensed from TypeZero Technologies LLC, as well as Dexcom’s G6 sensor. With TypeZero’s technology, our product is intended to both increase and decrease basal insulin based on a person’s predicted blood glucose levels, as well as deliver automated correction boluses. In November 2016, we announced that we are working with Dexcom and TypeZero on the integration of our technologies into the National Institute of Health funded International Diabetes Closed Loop Trial, or IDCL Trial. We anticipate that a portion of the trial will utilize a t:slim X2 integrated with TypeZero’s inControl AID algorithmstherapy management portfolio that is designed to ~~automatically adjust~~improve patient experience and outcomes. Our product development efforts fall into three pillars of innovation: delivery devices, device software including algorithms, and data and insights.

Delivery Devices

We are developing a family of delivery device solutions to meet the varying needs of people living with type 1 and type 2 diabetes by providing choice within our own portfolio. Preferences in the size, shape, and mode of operation that comprise an insulin pump’s hardware often impact a person’s ~~insulin based on information from a Dexcom G6 sensor. We intend~~pump purchasing decision and overall user experience.

Mobi

Formerly referred to ~~use the results from this portion of the trial in a PMA submission with the FDA. Subject to both the timely completion of a successful IDCL Trial and future FDA approval, our goal~~by its development name, t:sport, Tandem Mobi is ~~to launch this product in the first half of 2019.~~

~~t:sport Insulin Delivery System – This product is expected to be~~approximately half the size of our t:slim X2 pump, and is being designed for people who seek even greater discretion and flexibility with the use of their insulin pump. ~~The timing of~~In addition to being waterproof, Mobi’s features include a 200-unit cartridge, an on-pump bolus button, inductive charging, and an AID algorithm. We anticipate that Mobi will be our first insulin pump to support full pump-control from our mobile application.

t:slim X3

Advancing our flagship t:slim platform, the ~~commercialization~~t:slim X3 is being designed to provide a modernized user interface and even greater usability for our planned feature updates. It is also being designed to include enhanced technology, such as greater processing power and capacity to support our advanced algorithms, as well as increased battery life, improved durability, and wireless software update capabilities.

Mobi: Tubeless

This offering is being developed to provide an alternative tubeless infusion site option for Mobi pump users. A goal of this design is to allow people living with diabetes to customize the way they wear their pump with each cartridge change to best suit their personal preferences and lifestyle.

Patch

Our patch pump design is in its early stages and is being developed for people living with diabetes who want a disposable tubeless solution.

Infusion Sets

Infusion sets provide additional choice and flexibility to people living with diabetes. Our goals for infusion set innovations focus on solutions that extend wear time and enhance user experience, while reducing occlusions, body burden and waste. In support of this effort, in July 2022 we acquired infusion set developer, Capillary Biomedical, Inc. (Capillary Biomedical). Capillary Biomedical’s unique extended wear infusion set technology is currently in development.

Device Software

Our device software is used to control our pumps either directly through the pump’s interface or through our mobile application. It also includes our AID technology and the software used to support remote pump updatability.

Control-IQ Advancements

We are driving innovation in our algorithms, emphasizing automation, personalization and simplification, all intended to continue to improve therapeutic outcomes and provide a positive patient experience characterized by simplicity and ease of use. Additionally, we have initiated clinical studies to expand the indications of our Control-IQ technology to include people with type 1 diabetes ages 2 to 5 years old, as well as people living with type 2 diabetes. We are also researching the use of different insulins with our Control-IQ technology.

Mobile Control

We are working to expand our mobile control capability. In the future, our t:connect mobile app is planned to include additional pump control features, such as full operation of our Mobi pump.

Integration

Building a robust ecosystem and portfolio around our flagship insulin pumps requires product development efforts to integrate, add, and enhance complementary system components.

Dexcom CGM: In November 2020, we entered into an agreement with Dexcom to extend our current collaboration to include integration with their future G7 CGM technology. Following integrated product development work, and required regulatory clearances or approvals, this will be ~~based~~the fourth generation of Dexcom CGM that we intend to integrate with our devices.

Abbott CGM: In June 2020, we announced an agreement with Abbott Laboratories (Abbott), to develop and commercialize integrated diabetes solutions that combine Abbott’s CGM technology with our insulin delivery systems. Following the completion of our integrated product development work, and after obtaining required regulatory clearances or approvals, we intend to focus our initial commercial activities on integrated products in the U.S. and Canada, with additional geographies considered in the future.

Data and Insights

Our goal is to innovate across our ~~prioritization~~digital health platforms by using the vast amount of ~~resources~~data that we collect, in combination with technology such as artificial intelligence or machine learning, to provide information and ~~ongoing dialogue~~insights to people living with diabetes, their caregivers and healthcare providers and insurance payors. Key areas of development include making these insights easy to understand, provided in a flexible format with mobile or web apps, and available real time. In addition, we are working to integrate health-related information from third-party sources and use our data to support current and future products under development.

Tandem Source

Expanding the ~~FDA.~~

~~Mobile~~capabilities of our t:connect data management application ~~- We are currently developing a mobile~~available for customers in the United States, Tandem Source is our second-generation web-based data management application that is being designed to ~~utilize the capability~~be deployed globally. This application enhances clinical data visualization, and provides added interface customization for users to personalize how they engage with their data and for healthcare providers to better manage their care.

Settings Automation

Our automation research and development activities center around opportunities for enhanced user and healthcare provider experience and improved clinical outcomes. In support of ~~the Bluetooth radio~~this effort, we are working to ~~wirelessly upload~~automate our pump ~~data~~settings adjustments to ~~t:connect, receive notification~~further enhance ease of ~~pump alerts~~use and ~~alarms, integrate other health-related information from third party sources, and support future pump-control capabilities for our products under development. We intend to launch the first generation~~expand adoption of our ~~mobile application~~insulin pump products.

Pump Shipments

From inception in 2012 through June 2018, ~~with a subset of these features.~~

~~Pump Shipments~~

~~Since inception,~~ we ~~have~~ derived nearly all of our sales from the shipment of insulin pumps and associated supplies to customers in the United States. Starting in the third quarter of 2018, we began selling our t:slim X2 insulin pump in select geographies outside the United States and now offer our technology solutions in more than 20 countries worldwide. We consider the number of insulin pump units shipped ~~per quarter~~ to be an important metric for managing our business. We

Insulin pumps in the markets we serve worldwide are generally subject to a four-year reimbursement cycle, imposed by the third-party insurance carrier, government plan or healthcare system that serves as the primary payor. In the past four years, we have shipped more than ~~60,000~~400,000 insulin pumps ~~since~~worldwide, which is representative of our initial launch in August 2012, of which nearly 56,000 pumps have been shipped within the four years ended September 30, 2017. Pump shipments are broken down by product and by fiscal quarter as follows:

Pump Units Shipped for Each of the Three Months Ended in Respective Years⁽¹⁾⁽²⁾

Total

March 31

June 30

September 30

December 31

Total

2012

—

9

204

844

1,057

2013

852

1,363

1,851

2,406

6,472

2014

1,723

2,235

2,935

3,929

10,822

2015

2,487

3,331

3,431

6,234

15,483

2016

4,042

4,582

3,896

4,418

16,938

2017

2,816

3,427

3,868

N/A

10,111

t:slim

March 31

June 30

September 30

December 31

Total

2012
N/A

9

204

844

1,057

2013

852

1,363

1,851

2,406

6,472

2014

1,723

2,235

2,935

3,929

10,822

2015

2,487

2,957

2,390

1,658

9,492

2016

1,255

1,498

1,965

76

⁽⁴⁾

4,794

t:slim X2⁽³⁾

March 31

June 30

September 30

December 31

Total

2016
N/A

N/A

N/A

3,699

3,699

2017

2,576

3,209

3,709

N/A

9,494

t:flex

March 31

June 30

September 30

December 31

Total

2015
N/A

374

555

569

1,498

2016

371

493

389

354

1,607

2017

195

199

152

N/A

546

t:slim G4

March 31

June 30

September 30

December 31

Total

2015
N/A

N/A

486

4,007

4,493

2016

2,416

2,591

1,542

289

⁽⁴⁾

6,838

2017

45

19

7

N/A

71

~~(1)~~

~~This table does not reflect returns or exchanges of pump products that occur in the ordinary course of business.~~

~~(2)~~

~~This table does not reflect the impact of approximately 3,000 trade-ins fulfilled under the Technology Upgrade Program (discussed below) related~~estimated global in-warranty installed customer base. Our estimated worldwide installed base has increased approximately 35% compared to ~~our commercial launch of t:slim X2.~~

~~(3)~~

~~t:slim X2 includes shipments of t:slim X2 with G5, which was approved by the FDA and began shipping in August 2017.~~

~~(4)~~

~~The decrease in t:slim and t:slim G4 shipments coincided with our commercial launch of t:slim X2.~~

~~Technology Upgrade Program~~

In the third quarter of ~~2016, we launched~~2021.

At the end of the typical four-year reimbursement cycle, customers may be eligible for the purchase of a Technology Upgrade Program that provided eligible t:slim and t:slim G4 customers a path towards ownership of t:slim X2 or, as of August 2017, t:slim X2 with G5, by offering customers the right to exchange their t:slim or t:slim G4 for t:slim X2 or t:slim X2 with G5, under a variable pricing structure. The Program expired on September 30, 2017.

~~Due~~new insulin pump, subject to the ~~high degree~~rules and requirements of ~~accounting complexity,~~their primary insurance payor. While warranties generally expire four years from the ~~Technology Upgrade Program created unpredictable financial results under~~original pump shipment date, our typical renewal cycle, or time from original pump purchase to a subsequent pump purchase by the same customer, averages five years. The majority of our insulin pump sales through the current period have been generated by new customers, but the opportunity for existing customers to purchase a renewal insulin pump increases each period as additional customer warranties expire. With programs dedicated to customer retention efforts, we expect such renewal purchases to represent a more significant portion of our shipments in the long-term.

More than 280,000 pumps were shipped to customers in the United States ~~generally accepted accounting principles, or GAAP,~~in the past four years, which aligns with the standard four-year warranty period. Pump shipments to customers in the United States by fiscal quarter for the ~~duration of~~last five years, which aligns more closely with our typical renewal cycle, were as follows:


	United States Pump Unit Shipments for Each of the Three Months Ended in Respective Years
	March 31	June 30	September 30	December 31	Total





2017	2,816	3,427	3,868	6,950	17,061
2018	4,444	5,447	7,379	12,935	30,205
2019	9,669	12,799	13,814	17,453	53,735
2020	13,158	14,735	18,380	24,552	70,825
2021	16,644	20,665	20,296	25,712	83,317
2022	18,658	20,818	20,394	N/A	59,870

Since commencing sales outside the ~~Program. The accounting treatment for the Program required the deferral of up to 100% of sales and cost of sales for shipments of eligible pumps beginning~~United States in the third quarter of ~~2016. The amount~~2018, we shipped over 120,000 pumps to customers in more than 20 countries, and are only beginning to complete a full four-year reimbursement cycle in certain of ~~sales and cost of sales deferred varied based on a number of factors, including the model of pump involved and the timing~~our markets outside of the ~~initial sales relative~~United States. Pump shipments to customers outside the ~~availability of certain future products. In general, the deferrals required~~United States by ~~the Program had the effect of initially decreasing our GAAP sales, primarily in 2016, even when the number of our pump shipments increased.~~

~~We recognized the deferred amount of sales and cost of sales at the earlier of when the obligations under the Technology Upgrade Program~~fiscal quarter were satisfied or upon the expiration of the Program. If a customer elected to participate in the Program, we recognized any upgrade fees that we received and the associated costs at the time of fulfilling the given obligation. We recognized the majority of the remaining deferred sales and cost of sales in the quarter ended September 30, 2017, when the Program expired. At September 30, 2017, we had $0.2 million of current liabilities for deferred sales associated with the Program, as ~~well as $0.2 million of deferred cost of sales, associated with upgrade requests received that will be fulfilled in the fourth quarter of 2017.~~

~~Historical Financial Results~~

~~For the nine months ended September 30, 2017 and 2016, our sales were $67.3 million and $55.3 million, respectively. For the nine months ended September 30, 2017, this included~~ ~~incremental net sales of~~ ~~$4.8 million with a corresponding increase of $3.2 million in gross profit as a result of the Technology Upgrade Program. For the nine months ended September 30, 2016, this included a~~ ~~deferral of sales of~~ $8.4 million with a corresponding deferral of $1.4 million in cost of sales as a result of the Program. For the nine months ended September 30, 2017 and 2016, our net loss was $61.6 million and $68.6 million, respectively. ~~Our accumulated deficit as of September 30, 2017 was $466.2 million.~~

follows:


	Outside the United States Pump Unit Shipments for Each of the Three Months Ended in Respective Years
	March 31	June 30	September 30	December 31	Total
2018	N/A	N/A	1,055	3,233	4,288
2019	5,063	8,459	4,025	2,149	19,696
2020	4,220	3,952	3,641	8,133	19,946
2021	8,708	13,152	11,262	11,873	44,995
2022	9,437	11,296	12,113	N/A	32,846

Trends Impacting Financial Results

Overall, we have experienced considerable sales growth each year since the commercial launch of ~~t:slim~~our first product in the third quarter of 2012, ~~while incurring~~only recognizing an operating ~~losses since our inception.~~profit on a full year basis for the first time in 2021. Our operating results ~~fluctuate~~have historically fluctuated on a quarterly or annual basis, particularly in ~~the~~ periods surrounding anticipated ~~and actual~~ regulatory approvals, ~~and initial stages of commercialization of our new products and those of our competitors. These fluctuations were more pronounced for the duration of the Technology Upgrade Program.~~

~~In particular, we believe that the timing of~~ the commercial launch of ~~t:slim X2,~~new products by us and our competitors, the commercial launch of our products in geographies outside of the United States and due to general seasonality in the United States. We expect these periodic fluctuations in our operating results to continue.

We believe that our financial condition and operating results, as well as the ~~launch~~decision-making process of our current and regulatory approval of competitive products, impacted our quarterly pump shipments since the second half of 2016. In the period leading up to the commercial launch of t:slim X2 in October 2016, we believe there was an increasing number of potential customers, ~~who delayed their purchasing decision until they could include t:slim X2~~has been and ~~competitive products in their decision-making process. In addition, pump shipments were impacted by a decision by UnitedHealthcare that restricted a majority of their members from accessing our pumps.~~

~~In the third quarter of 2017, we~~ ~~believe our sales results were~~will continue to be impacted by a number of ~~additional factors, including:~~

•

Hurricanes Harvey and Irma adversely impacted the normal business activities of our sales force, distributors, healthcare providers and potential customers in Texas, Florida and other impacted regions. For instance, the daily inflow to the insurance verification and approval portion of our sales pipeline decreased in early September compared to August, which coincided with the hurricanes. We also experienced a measurable decrease in our sequential monthly pump shipments for the Gulf Coast region for the month of September as compared to the month of August, whereas for all other sales regions we saw either relatively stable volumes or increases in monthly pump shipments for the same two months. In addition, we have two independent distributors located within the affected areas that experienced operational disruptions during the periods around the time of the hurricanes.

•

We received FDA approval to market the t:slim X2 with G5 on August 25, 2017. Although we immediately began commercial efforts to market this product, we do not believe that third quarter pump sales benefitted significantly because of the timing of the approval within the quarter, and the number of days typically required to complete the insurance verification and approval phase of the sales process. However, we did see a meaningful increase in the daily inflow to our insurance verification and approval phase during the last two weeks of the third quarter.

~~Prior to announcing our plans to launch~~general trends, including the t:lock Connector, only a small percentage of our customers and distributors purchased infusion sets from us as compared to purchases of our cartridges. Following our announcement, we have seen, and expect to continue to see, a substantial increase in the number of infusion sets sold both in absolute terms and relative to the number of cartridges sold. In particular, the ratio of our sales volume of infusion sets relative to sales volume of cartridges during the third quarter was approximately 66%, as compared to 61% during the second quarter of 2017, 51% during the first quarter of 2017 and 31% for all of 2016.

following:

•

We continue to be subject to negative perceptions regarding our financial stability relative to that of our competitors, including concerns among healthcare providers and potential customers regarding our ability to sustain our business operations on a long-term basis. In some cases, these perceptions and concerns have caused potential customers to delay the purchase of our products or purchase competitors' products and have negatively impacted the willingness of healthcare providers to recommend our products over those of our competitors.

~~In addition to the factors discussed above, we expect our financial results will fluctuate in the future due to a variety of factors, including:~~

•market acceptance of our products and competitive ~~products;~~

products by people with insulin-dependent diabetes, their caregivers and healthcare providers;

•the ~~timing~~introduction of new products, treatment techniques or technologies for the ~~sale~~treatment of ~~our products;~~

seasonality associated with summer vacations, annual deductibles and coinsurance requirements associated with most medical insurance plans utilized by our individual customers and the individual customers of our distributors;

~~the buying patterns of our distributors and other customers;~~

diabetes, including the timing of the commercialization of new products by us orand our competitors;

•seasonality in the United States associated with annual insurance deductibles and coinsurance requirements of the medical insurance plans used by our customers and the customers of our distributors;

•incidence of disease or illness, including the COVID-19 global pandemic, that may impact customer purchasing patterns or disrupt our supply chain, or create uncertainty or delay with respect to regulatory approvals;

•global economic and market uncertainty such as recessionary concerns, rising inflation rates, changes in discretionary spending, increased interest rates, and other macroeconomic factors;

•the timing of holidays and summer vacations, which may vary by geography and may be further influenced by the lifting or relaxation of COVID-19 related restrictions and broader availability of vaccines;

•the buying patterns of our distributors and other customers;

•changes in the competitive landscape, including as ~~other~~a result of companies ~~enter~~entering or ~~exit~~exiting the diabetes ~~medical device~~therapy market;

•access to adequate coverage and reimbursement for our current and future products by third-party payors, and reimbursement decisions by third-party payors;

•the magnitude and timing of any changes to our facilities, manufacturing operations and other ~~infrastructure;~~infrastructure, and

factors impacting our ability to access our facilities;

•the impact of any potential claims, investigations, information requests, or legal, regulatory or administrative proceedings with respect to potential or asserted violations of law, including: sales and marketing practices, anti-corruption and the Foreign Corrupt Practices Act, antitrust, securities, employment, product liability, environmental, data privacy breaches and patent infringement, which may subject us to fines, penalties, expenses, or reputational harm;

•anticipated and actual regulatory approvals of our products and competitive products; and

•product recalls impacting, or the suspension or withdrawal of regulatory clearance or approval relating to, our products or the products of our competitors.

In addition to these general trends, we believe the following specific factors have materially impacted, and could continue to materially impact, our business going forward:

•changes in customer purchasing behavior due to the economic environment such as inflation or threat of recession;

•anticipated new ~~products.~~

~~We expect the combined effect of~~product launches and the timing of their commercial availability;

•our recently announced Tandem Choice program and its related financial and accounting impact;

•the disruptions caused by the COVID-19 global pandemic on suppliers, third-party manufacturers, healthcare providers, distributors and our existing or potential customers;

•continued increase in demand following the commercial launch of t:slim X2 with G5Control-IQ technology in additional geographies, and the ability to access new pump software using our ~~expectation that~~Tandem Device Updater;

•increased opportunity to achieve customer renewals as customers ~~will largely return~~become eligible for insurance reimbursement to ~~their historical decision-making patterns will once again result in our sales being heavily weighted towards the second half of the year. We expect seasonality will have~~purchase a ~~similar impact on our sales in 2017 as in years prior to launch of the Technology Upgrade Program, excluding approximately $4.8~~ ~~million of deferred sales and upgrade fees received associated with our Technology Upgrade Program that we recognized in the third quarter of 2017.~~

~~Recent Developments~~

~~Commercial Launch of t:slim X2 with G5 Integration~~

In late August 2017, the FDA approved, and we commercially launched our t:slim X2 Insulin Pump with Dexcom G5 Mobile CGM integration. The t:slim X2 with G5 is our first sensor-augmented insulin pump approved to allow users to make treatment decisions without pricking their finger. The pump conveniently displays a user’s insulin delivery activity and Dexcom G5 Mobile CGM data together on one single device. The t:slim X2 with G5 has been approved for users ages six and older.

~~Commercial Launch of t:lock Connector~~

In September 2017, we commenced commercial sales of our insulin pump cartridges and infusion sets with our t:lock Connector. t:lock was designed to look and feel like the previous Luer-lok connector. However, t:lock incorporates a smaller inner cavity, which reduces the amount of insulin used in the process and reduces the time required to fill the infusion set tubing, improving efficiency and customer experience.

~~Animas Will Discontinue the Manufacture and Sale of Insulin Pumps~~

~~On October 5, 2017, Johnson & Johnson announced that~~ it intends to discontinue the operations of Animas Corporation and to exit the insulin pump business entirely, and that, in connection with these activities, it designated Medtronic as a preferred partner to facilitate the transition of Animas insulin pump customers. As part of this transition, Medtronic is offering a portion of Animas customers the option of acquiring a prior-generation Medtronicnew insulin pump at ~~no charge. We now offer~~ the ~~only alternative durable insulin pump~~end of the typical four-year reimbursement cycle;

•ability to ~~Medtronic~~enter into, maintain agreements, and accomplish continued success in current and future product integrations with CGM partners;

•expansion and new product launches in select geographies outside the United ~~States. While this announcement represents a significant change within our industry,~~States, including initial orders to stock inventories; and ~~we have experienced a recent increase in inquiries from current Animas customers following the announcement, it is too early~~

•ability to ~~know how it will ultimately influence our business or the competitive landscape in which we operate, although we expect the impact may be dependent on one or more of the following factors:~~

The offer to Animas customers for a free Medtronic pump is currently limited to customers with a warranty expiration date later than September 30, 2019, and the offer is not available until May 2018. It remains uncertain how many Animas customers will avail themselves of this offer.

•

While Medtronic will have direct access to all Animas customers during the transition period, as those customers' pumps come up for renewal and they make new pump purchasing decisions, they may consider alternative pump options. According to recent surveys from dQ&A, when making renewal decisions, Animas customers have historically chosen their pump or a Tandem pump rather than a Medtronic offering. Recent surveys from dQ&A have also shown that only 5% of patients acquiring a Medtronic pump during the past six quarters were previous Animas customers, and 80% of new purchasers of Medtronic pumps were customers who upgraded from a current Medtronic pump rather than switching from an alternative brand. For these reasons, and based on our own customer data that shows a high number of customers switching to our products from an Animas pump, we believe our pumps are an attractive alternative to both Animas and Medtronic pumps.

We believe one of the product features that have made Animas pumps attractive to their customers is the integration of the Animas Vibe with Dexcom’s CGM technology. We now provide the only commercially available pump that is integrated with Dexcom’s technology.

~~Reverse Stock Split~~

At a special meeting of our stockholders, held on September 7, 2017, our stockholders approved an amendment to our amended and restated certificate of incorporation to effect a reverse stock split of our issued and outstanding shares of common stock at a ratio of not less than 1-for-8 and not greater than 1-for-12, with the exact ratio to be set within that range by our board of directors, without further approval or authorization of our stockholders. On October 4, 2017, our board of directors approved the reverse stock split at a ratio of 1-for-10, and on October 9, 2017, we filed an amendment to our amended and restated certificate of incorporation with the Delaware Secretary of State to effect the reverse stock split.

~~Unless otherwise noted, all share and per share amounts set forth in this Quarterly Report have been adjusted to reflect the impact of the reverse stock split.~~

~~Registered Public Offering~~

On October 17, 2017, we completed a registered public offering of 4,630,000 shares of our common stock, Series A warrants to purchase up to 4,630,000 shares of our common stock and Series B warrants to purchase up to 4,630,000 shares of our common stock at a public offering price of $3.50 per share and accompanying warrants, which we refer to as the October Financing. The gross proceeds to the Company from the October Financing were approximately $16.2 million, before deducting underwriting discounts and commissions and other offering expenses payable by the Company. The Series A warrants have an exercise price of $3.50 per share, are immediately exercisable, and will expire on the 5-year anniversary of the date of issuance. The Series B warrants have an exercise price of $3.50 per share, are immediately exercisable, and will expire on the 6-month anniversary of the date of issuance. Each series of warrants, if exercised by all holders in full, may result in additional gross proceeds to us of $16.2 million.

~~Additional Financing~~

~~From inception through September 30, 2017, we have primarily financed~~effectively scale our operations ~~through sales of equity securities, and, to a lesser extent, debt financings. The continued growth of our business, including the expansion of our customer care infrastructure~~ to support rapid growth, including expanding our ~~growing base of customers, additional~~facilities, advancing our research and development ~~activities,~~efforts, increasing manufacturing capacity through third-party manufacturers, financial impact and integration of acquired assets or businesses, and hiring and retaining employees in customer service and support functions.

In addition to working to achieve our sales growth expectations, in the ~~transition~~long-term we intend to ~~our new manufacturing facility, will~~ continue to ~~increase~~leverage our ~~expenses~~infrastructure investments to realize additional manufacturing, sales, marketing and ~~capital needs.~~

Onadministrative cost efficiencies with the ~~date that~~goal of improving our ~~financial statements~~operating margins and ultimately achieving sustained profitability. While we have achieved profitability in ~~this Quarterly Report~~each fourth quarter since 2018, we were ~~issued, our management believed that we did not have sufficient cash to fund our operations~~profitable for the ~~next twelve months without additional financing, and therefore, we concluded there was substantial doubt about our ability to continue as~~first time on a ~~going concern within one year after the date the financial statements were issued.~~ We ~~expect we will be required to raise additional capital~~full-year basis in order to continue as a going concern, meet our minimum liquidity requirements, and execute on our business strategy. We may seek additional capital from public or private offerings of our capital stock (including pursuant to our ATM offering), or we may elect to borrow additional amounts under new debt financing arrangements or from other sources. We expect our ability to raise additional financing may be negatively impacted by a number of factors, including our recent and projected financial results, recent changes in and volatility of our stock price, perceptions about the dilutive impact of our recent financing transactions, concerns regarding our ability to maintain the continued listing of our common stock on the NASDAQ Global Market, or NASDAQ, our current level of indebtedness and debt service costs, our conclusion that there is substantial doubt about our ability to continue as a going concern and the competitive environment in our industry.

~~Term Loan Agreement~~

In March 2017, we entered into Waiver and Amendment No. 4 to the Term Loan Agreement, or the Fourth Amendment. The Fourth Amendment includes a limited waiver of a potential event of default that could have resulted from the inclusion of an explanatory paragraph in the audit report of our independent registered public accounting firm included in our Annual Report on Form 10-K for the year ended December 31, 2016 (“Annual Report”) that describes conditions that raise substantial doubt about our ability to continue as a going concern.

Under the Term Loan Agreement, we are required to complete one or more financings in which our aggregate gross proceeds from the sale of equity securities was at least $30.0 million, no later than January 15, 2018. As a result of the public offering of our common stock in March 2017, the sale of our common stock pursuant to our ATM offering, and the public offering of our common stock and warrants in the October Financing, we have satisfied our obligations pursuant to this equity financing covenant, although we remain subject to additional covenants.

~~For additional information about the Term Loan Agreement, see the section entitled “Indebtedness” below.~~

~~Leverage from Technology Platform~~

2021. We believe we can ultimately achieve sustained profitability ~~because our proprietary technology platform will allow us to maximize efficiencies~~by driving incremental sales growth in the development, production, sale and marketing of multiple differentiated products. By offering products that are all based on our proprietary technology platform, in combination with the flexibility provided by the Tandem Device Updater, we believe we can develop and bring to market products and functionality more rapidly, while significantly reducing our per-unit design and development costs. Due to shared product design features, our production system is adaptable to new products and we intend to leverage our shared manufacturing infrastructure to drive operational efficiencies. Further, we expect to continue to increase production volume and to reduce the per-unit production overhead cost formarkets worldwide, meeting our pump ~~products~~renewal sales objectives, maximizing manufacturing efficiencies on increased production volumes, and ~~their associated disposable cartridges over time.~~ ~~We anticipate that~~leveraging the ~~transition to our recently launched t:lock Connector will continue to increase~~investments made in our sales, ~~of infusion sets.~~ ~~By expanding our product offerings to address people in different segments of the large~~clinical, marketing and ~~growing insulin-dependent diabetes market, we believe we can increase the productivity of our sales, clinical and marketing organization, as well as our~~ customer support ~~infrastructure, thereby improving our operating margin over the long term.~~

organizations.

Components of Results of Operations

Sales

We offer products for people with insulin-dependent diabetes. We commenced commercial sales of our original t:slim insulin pump platform in the United States in the third quarter of ~~2012. We launched our second insulin pump product, t:flex, in~~2012 and continued to launch various iterations of that platform during the ~~second quarter of 2015, and launched our third insulin pump product, t:slim G4, in the third quarter of 2015.~~ following years. In October 2016, we began shipping our flagship pump platform, the t:slim X2 ~~our next generation flagship product, at which time we discontinued sales of t:slim. In August 2017, we commenced commercial sales of~~insulin pump. The t:slim X2 insulin pump platform with G5remote software update capabilities, now represents 100% of our new pump shipments and ~~discontinued new sales~~is used by nearly all of ~~t:slim G4.~~ our in-warranty customers. Our products ~~currently~~also include ~~these~~disposable insulin ~~pumps,~~cartridges and infusion sets, as well as ~~disposable cartridges~~our complementary t:connect, TDU and ~~infusion sets.~~mobile application products. We also offer additional accessories including protective cases, belt clips, and power ~~adapters. Sales~~adapters, although sales of ~~accessories since commercial launch have~~these products are not ~~been~~ significant.

In the United States, we primarily sell our products through national and regional distributors on a non-exclusive basis. These distributors are generally providers of medical equipment and supplies to individuals with diabetes. Our primary end customers are people with insulin-dependent diabetes. Similar to other durable medical equipment, the primary payor is generally a third-party insurance carrier and the customer is usually responsible for any medical insurance plan copay or coinsurance requirements. We believe ~~our existing sales, clinical and marketing infrastructure will allow us to~~we can continue to increase sales by ~~allowing us to promote~~promoting our products to a greater number of potential customers, caregivers and healthcare ~~providers.~~

providers, although pressures related to the broader economic environment, new competitive product launches and the COVID-19 global pandemic have had, and may continue to have, an adverse impact on our sales.

In ~~general,~~the third quarter of 2018, we began the launch of our t:slim X2 hardware platform through distribution partners outside the United States. Our products are now sold in more than 20 countries, including in Canada, France and Germany. Today, distributor orders are primarily fulfilled in the United States. In the first half of 2022, we laid the commercial and operational groundwork, as well as the IT infrastructure, to begin working with a third-party logistics service provider in the Netherlands to support our distributors in Europe with the intent to scale utilization in the next twelve months. Our independent distributor partners outside the United States and Canada perform all sales, customer support and training in their respective markets. In Canada, we market with a direct sales force and, similar to the United States, use a distributor partner for certain billing and fulfillment activities. Historically, we have experienced consistent levels of reimbursement for our products in the United States, but we expect the average sales price will vary in markets outside the United States based on a number of factors, such as the geographical mix, nature of the reimbursement environment, government regulations and ~~expect~~the extent to ~~continue~~which we rely on distributor relationships to ~~experience, product~~provide sales, clinical and marketing support.

In general, in the United States we have experienced pump shipments being weighted heavily towards the second half of the year, with the highest percentage of ~~product~~pump shipments expected in the fourth quarter due to the nature of the ~~year.~~reimbursement environment. Consistent with ~~prior results, we also expect product~~these historical seasonality trends, our pump shipments in the United States have typically decreased significantly from the fourth quarter to the following first ~~quarter~~quarter. Outside the United States, we do not expect this same impact from seasonality associated with reimbursement, although the quarterly sales trends may be impacted by a number of other factors, including summer vacations, the timing of product launches into new geographies and variability in the ordering patterns of our distributor partners.

Since early 2020, the COVID-19 global pandemic had a major impact on businesses around the world, as well as our own quarterly trends. Initially, the impact on our business was relatively consistent worldwide but we have since seen varying degrees of impact in individual markets based on local conditions. We anticipate that our sales may not follow historical trends and may continue to ~~decrease significantly.~~

~~In addition,~~be subject to unpredictable variability across the markets in which we operate. The full extent of the impact of the COVID-19 global pandemic on our business and operations will depend on a number of factors, including the scope and duration of the pandemic, varying government responses to the pandemic and potential delays to product development timelines.

Separate from any impacts of the COVID-19 global pandemic, our quarterly sales have historically fluctuated, and may continue to fluctuate substantially in the periods surrounding anticipated and actual regulatory approvals and commercial launches of new products by us or our competitors. ~~For instance,~~We believe customers may defer a purchasing ~~decision~~decisions if they believe ~~that~~ a new product may be launched in the future. Additionally, upon the announcement of ~~the~~ FDA approval or commercial launch of a new product, ~~whether our own~~either by us or one of our competitors, potential new customers may reconsider their purchasing ~~decision~~decisions or take additional time to consider ~~the anticipated or new~~such FDA approval or product launch inbefore making their purchasing ~~decision. For example,~~decisions.

In September 2022, we ~~believe~~launched Tandem Choice, a technology access program that ~~our pump shipments were negatively impacted during the second half of 2016 and first half of 2017, as we announced the launches of~~provides in-warranty eligible t:slim X2 ~~and~~customers a path towards ownership of the ~~Technology Upgrade Program~~next generation hardware platform for a fee when available. Tandem Choice expires on December 31, 2024.

The accounting treatment for Tandem Choice has a high degree of complexity. Initially, the program requires the deferral of some portion of sales for shipments of eligible pumps beginning in the third quarter of ~~2016, and one~~2022. If a customer elects to participate in Tandem Choice upon launch of our ~~competitors announced~~next generation hardware platform, we will recognize the ~~future availability~~existing deferral, fees received and the associated costs of ~~two~~providing the new ~~products with financial incentives for adoption. However,~~hardware at the time of fulfillment. Any remaining deferrals will be recognized at program expiration. At this time, we are not able to ~~quantify~~estimate the ~~extent~~financial impact for the duration of ~~the impact of these or similar events, including the launch of t:slim X2 with G5 and the transition to our t:lock Connector, on future purchasing decisions.~~

Tandem Choice.

Cost of Sales

~~We manufacture our pumps and disposable cartridges at our manufacturing facilities in San Diego, California. Infusion sets and pump accessories are manufactured by third-party suppliers.~~

Cost of sales includes raw materials, labor costs, manufacturing overhead expenses, product training costs, royalties, freight, reserves for expected warranty costs, costs of supporting our digital health platforms, scrap and ~~inventory~~charges for excess and ~~obsolescence.~~obsolete inventories. Manufacturing overhead expenses include expenses relating to quality assurance, manufacturing engineering, material procurement, inventory control, facilities, equipment, information technology and operations supervision and management.

Historically, ~~cost~~we have manufactured our pumps and disposable insulin cartridges at our manufacturing facility in San Diego, California. In early 2020, our third-party cartridge manufacturer completed validation and commenced commercial-scale manufacturing to supplement our existing cartridge manufacturing capacity. By the end of ~~sales has also included royalty costs associated with sales~~2021, the majority of our t:slim ~~G4.~~ ~~In August 2017,~~cartridge manufacturing capacity transitioned to our partner to create capacity for Tandem Mobi cartridge manufacturing in the future. Infusion sets and pump accessories are manufactured by third-party suppliers.

Over the long term, we ~~commenced commercial sales of t:slim X2 with G5, which has no royalty obligation, and discontinued new sales of t:slim G4.~~ ~~We anticipate that our cost of sales will continue to increase as our products continue to gain broader market acceptance and our product sales increase.~~

We expect our overall gross margin percentage, which for any given period is calculated as sales less cost of sales divided by sales, to improve, ~~over the long term,~~ as our pump sales increase, as we launch new portfolio products with lower costs to manufacture, improved average selling prices and ~~we have more opportunities to spread~~leverage of our fixed overhead ~~costs over larger production volumes.~~costs. We expect ~~that~~ we will be able to achieve this leverage ~~our manufacturing cost structure across our~~with products that ~~utilize~~use the same ~~proprietary~~ technology platform and manufacturing infrastructure, ~~and will be able to further reduce costs with~~as well as increased automation, process improvements and raw materials cost reductions. We also expect our warranty ~~costs~~cost per unit to decrease as we release additional product features and functionality ~~utilizing~~using the Tandem Device Updater. ~~However, we also expect~~

Pumps have, and are expected to continue to have, a higher gross margin percentage than our pump-related supplies. Therefore, the percentage of pump sales relative to total sales could have a significant impact on our overall gross margin topercentage. In the event that customers delay their pump purchasing decisions or physicians pause in prescribing new pumps, it is possible that we may experience a higher percentage of pump-related supply sales than anticipated, which in turn could adversely impact our overall gross margin percentage. However, our overall gross margin percentage may fluctuate in future quarterly periods as a result of numerous factors ~~besides~~aside from those associated with production ~~volumes. Specifically, in 2017,~~volumes and product mix. For instance, as a result of the COVID-19 global pandemic, we are ~~increasing~~experiencing higher costs as we manage global supply challenges and anticipate that this will continue for the remainder of 2022 and first half of 2023. In addition, as demand for our products increases, we may continue to make additional investments in manufacturing capacity ~~by relocating~~or increase our ~~manufacturing operations and related functions to~~reliance on third parties for manufacturing-related services, either of which could have a ~~new facility over a period of several quarters, which may add duplicative and incremental cost in the short-term and pressure~~negative impact on our ~~overall~~ gross ~~margin for the duration of the transition.~~ ~~In general, we expect the gross margin on insulin pumps to be higher than the gross margin on pump-related supplies, which would be consistent with our historical experience.~~margins.

Other factors impacting our overall gross margin percentage may include ~~the changing mix of products sold with different gross margins,~~ the changing percentage of products sold to distributors versus directly to individual customers, varying levels of reimbursement among third-party payors in individual markets worldwide, the timing and success of new regulatory approvals and product launches, changes in warranty ~~and~~estimates, training costs, licensing and royalty costs, cost to support our digital health platforms, cost associated with excess and obsolete inventories, and changes in our manufacturing processes, capacity, costs or output.

Selling, General and Administrative

Our selling, general and administrative ~~or SG&A,~~(SG&A) expenses primarily consist of salary, cash-based incentive compensation, fringe benefits and non-cash stock-based compensation for our ~~executive, financial,~~sales, marketing ~~sales,~~and administrative functions, which also includes our clinical, customer ~~care,~~support, technical services, insurance verification and regulatory affairs ~~and administrative functions. In particular, our~~personnel. We had approximately 110 sales ~~and clinical organization consisted~~territories in the United States in the third quarter of 2022, up from approximately 7095 in 2021. Our existing territories ~~as of September 30, 2017. Territories~~ are generally maintained by sales representatives and field clinical specialists, and supported by managed care liaisons, additional sales management and other customer support ~~personnel.~~ personnel, which have also been rapidly expanding to support our growing installed base. Our operations in Canada are comprised of approximately ten sales territories.

Other significant SG&A expenses typically include those incurred for product demonstration samples, commercialization activities associated with new product launches, travel, trade shows, outside legal fees, independent auditor fees, outside consultant fees, insurance premiums, facilities costs and information technology costs. ~~Although~~While we ~~do not contemplate an increase~~experienced reduced spending in areas such as travel and trade shows in 2021 due to the ~~number of sales territories in the near term,~~COVID-19 global pandemic, we may experience additional costs as our employees return to work at our offices and as we adapt to alternative hybrid work models, or as needed to respond to general labor shortages and heightened competition for employees with specialized skills. Overall, we expect our SG&A expenses, including the cost of our customer ~~care~~support infrastructure, to continue to increase as our customer base ~~grows. Our~~grows worldwide. In addition, we will continue to evaluate, and may further increase, the number of our field sales and clinical personnel to optimize the coverage of our existing territories. In the longer term, SG&A expenses may also increase due to anticipated costs associated with additional compliance and regulatory reporting requirements.

Research and Development

Our research and development ~~or R&D,~~(R&D) activities primarily consist of engineering and research programs associated with our hardware, software and digital health products under development, as well as activities associated with our core technologies and processes. R&D expenses are primarily related to employee compensation, including salary, cash-based incentive compensation, fringe benefits and non-cash stock-based ~~compensation and temporary employee expenses.~~compensation. We also incur R&D expenses for supplies, development prototypes, outside design and testing services, depreciation, allocated facilities and information services, clinical trial costs, payments under our licensing, development and commercialization agreements and other indirect ~~costs~~.costs. We expect our R&D expenses ~~including clinical trial costs,~~ to increase as we advance our products under development, ~~and~~ develop new products and ~~technologies.~~

technologies and support more clinical trials.

Acquired In-process Research and Development (IPR&D) Expenses

Acquired IPR&D reflects costs of external research and development projects acquired directly in a transaction other than a business combination, that do not have an alternative future use.

Other Income and Expense

~~Our other~~

Other income and expense primarily consists of interest expense ~~and~~which includes the amortization of debt ~~discount and~~ issuance costs ~~associated with~~related to our 1.50% Convertible Senior Notes due 2025, interest earned on our cash equivalents and short-term investments, and changes in the ~~Term Loan Agreement. At September 30,~~fair value of certain common stock warrants which were issued in October 2017 ~~there was $82.3 million~~and expire in October 2022. We expect interest income in future quarters to fluctuate depending on the total amount of ~~outstanding principal under the Term Loan Agreement, which accrues~~cash equivalents and short-term investments and market interest ~~at a rate of 11.5% per annum.~~ rates. We expect interest expense in future quarters to ~~increase~~be comparable with the amount expensed in ~~2017~~2021, through the date of conversion or redemption of the Notes.

Income Tax Expense (Benefit)

Because the Company maintains a full valuation allowance against its net deferred tax assets, income tax expense is expected to primarily consist of current state and foreign cash tax expense as a result of ~~a higher outstanding balance under the Term Loan Agreement as compared~~taxable income anticipated or incurred in those jurisdictions. Income tax expense (benefit) may fluctuate in future quarters due to ~~2016~~ ~~(see the section below entitled “Indebtedness”).~~

adjustments related to non-recurring transactions and changes in certain tax assessments.

Results of Operations

	Three Months Ended						Nine Months Ended
	September 30,						September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except percentages)	2017			2016			2017			2016			(in thousands, except percentages)	2022			2021			2022			2021
Sales	$	27,003		$	12,293		$	67,306		$	55,336
Sales:													Sales:
United States													United States	$	146,035		$	133,106		$	422,985		$	364,025
Outside the United States													Outside the United States	58,512			46,521			157,731			128,778
Total sales													Total sales	204,547			179,627			580,716			492,803
Cost of sales		15,131			13,870			40,680			41,809		Cost of sales	100,122			82,882			283,252			230,317
Gross profit (loss)		11,872			(1,577	)		26,626			13,527
Gross profit													Gross profit	104,425			96,745			297,464			262,486
Gross margin		44	%		(13	)%		40	%		24	%	Gross margin	51		%	54		%	51		%	53		%
Operating expenses:													Operating expenses:
Selling, general and administrative		20,125			20,683			65,077			63,768		Selling, general and administrative	84,104			64,923			237,989			190,009
Research and development		4,914			6,154			14,910			14,464		Research and development	36,798			24,102			103,529			62,562
Acquired in-process research and development													Acquired in-process research and development	31,016			—			31,016			—
Total operating expenses		25,039			26,837			79,987			78,232		Total operating expenses	151,918			89,025			372,534			252,571
Operating loss		(13,167	)		(28,414	)		(53,361	)		(64,705	)
Operating income (loss)													Operating income (loss)	(47,493)			7,720			(75,070)			9,915
Other income (expense), net:													Other income (expense), net:
Interest and other income		60			34			179			258
Interest and other expense		(2,928	)		(1,434	)		(8,446	)		(4,177	)
Total other expense, net		(2,868	)		(1,400	)		(8,267	)		(3,919	)
Net loss	$	(16,035	)	$	(29,814	)	$	(61,628	)	$	(68,624	)
Interest income and other, net													Interest income and other, net	1,708			31			2,858			721
Interest expense													Interest expense	(1,576)			(1,511)			(4,629)			(4,526)

Change in fair value of common stock warrants													Change in fair value of common stock warrants	12			(392)			103			(1,354)
Total other income (expense), net													Total other income (expense), net	144			(1,872)			(1,668)			(5,159)
Income (loss) before income taxes													Income (loss) before income taxes	(47,349)			5,848			(76,738)			4,756
Income tax expense (benefit)													Income tax expense (benefit)	1,621			54			2,003			(2)
Net income (loss)													Net income (loss)	$	(48,970)		$	5,794		$	(78,741)		$	4,758

Comparison of the Three Months Ended September 30, ~~2017~~2022 and ~~2016~~

2021

Sales.For the three monthsended September 30, 2022,sales were $204.5 million, which included $58.5 million of sales outside the United States. For the three months ended September 30, ~~2017,~~ ~~sales were $27.0 million, including the recognition of $3.3~~2022, we deferred $0.6 million of pump sales ~~originally deferred in prior periods and upgrade fees received~~ as athe result of ~~the Technology Upgrade Program.~~our recently launched Tandem Choice. Sales were ~~$12.3~~$179.6 million for the same period in ~~2016,~~2021, which ~~reflect the deferral of $8.4~~included $46.5 million of ~~pump~~ sales outside the United States.

The increase in worldwide sales of $24.9 million in the third quarter of 2022, compared to the third quarter of 2021, was primarily driven by a 25% increase in pump-related supply sales. Sales of pump-related supplies increased primarily due to the 35% growth in our estimated worldwide installed base of customers. Pump sales increased 5% in the third quarter of 2022, net of the deferral associated with the ~~Technology Upgrade Program.~~

Tandem Choice, which began during the third quarter of 2022.

Sales by product in the United States were as follows (in thousands):


	Three Months Ended September 30,
	2022		2021
Pump	$	80,696	$	78,771
Infusion sets	44,839		37,725
Cartridges	20,122		16,289
Other	378		321
Total Sales in the United States	$	146,035	$	133,106

Pump sales in the United States were $80.7 million for the third quarter of 2022, compared to $78.8 million in the third quarter of 2021 as pump shipments increased 1% and pump average selling prices improved compared to the same period in 2021. Pump shipments in the United States were 20,394 in the third quarter of 2022, compared to 20,296 in the third quarter of 2021. Pump shipments were driven by continued demand for our t:slim X2 insulin pump with Control-IQ technology even with the presence of new competitive product launches during the quarter. We also faced challenging marketplace dynamics and economic conditions brought on by the global pandemic and a deteriorating macroeconomic environment, with inflation and the threat of recession beginning to impact pump purchasing decisions. Sales of ~~insulin pumps were $18.0 million~~pump-related supplies increased primarily due to a 28% increase year over year in our estimated installed base of customers in the United States. Sales to distributors accounted for 66% and ~~$6.9 million, respectively,~~68% of our total sales in the United States for the three months ended September 30, ~~2017~~2022 and ~~2016. For~~2021, respectively, which contributed to modest improvement in average selling prices across all products.

Sales by product outside the United States were as follows (in thousands):


	Three Months Ended September 30,
	2022		2021
Pump	$	27,385	$	23,762
Infusion sets	21,964		16,175
Cartridges	8,996		6,269
Other	167		315
Total Sales Outside the United States	$	58,512	$	46,521

Pump sales outside the United States were $27.4 million for the third quarter of 2022, compared to $23.8 million in the third quarter of 2021. Pump shipments increased 8% compared to the same period in the prior year due to continued strong demand for our t:slim X2 insulin pump with Control-IQ technology, which is now available in all of the markets we serve. The increase in pump sales was also attributable to an increase in average selling prices. Sales of pump-related supplies benefited from a 57% increase in our estimated installed base of customers outside the United States. The ordering patterns of our distributors outside the United States for pumps and supplies has been, and may continue to be, highly variable from period to period as distributors continue to gain familiarity with the markets in which they operate and the acceptance of our products in those markets evolves. This variability has been compounded by the differing levels of impact from the global pandemic with regard to access to both physicians and customers, as well as shipping logistics. Sales to distributors accounted for 96% and 96% of our total sales outside the United States for the three-month periods ended September 30, 2022 and 2021, respectively.

Cost of Sales and Gross Profit.Our cost of sales for the three monthsended September 30, ~~2017,~~2022was $100.1 million, resulting in gross profit of $104.4 million, compared to cost of sales of ~~pump-related supplies were $8.7~~$82.9 million and gross profit of ~~which $3.5~~$96.7 million were sales of cartridges and $5.0 million were sales of infusion sets. For the three months ended September 30, 2016, sales of pump-related supplies were $5.3 million, of which $3.0 million were sales of cartridges and $2.2 million were sales of infusion sets. The ratio of the number of infusion sets shipped to the number of cartridges shipped increased to 66% in the three months ended September 30, 2017 from 27% in the comparable quarter of the prior year. Sales of accessories were not significant in either of the reported periods.

Excluding the impact of the Technology Upgrade Program, the increase in sales was primarily driven by an increase in sales of infusion sets to our distributors, as well as an increase in the sale of pump-related supplies to ~~our growing customer base.~~ ~~Pump shipments were relatively flat in the three months ended September 30, 2017 at 3,868 compared to 3,896~~ for the same period in ~~2016, which we believe~~2021. The gross margin for the three monthsended September 30, 2022 and 2021 was ~~the result of a number of factors including the highly competitive market, the impact of the hurricanes~~51% and 54%, respectively.

The increase in ~~the Southeast region of the United States, the timing of FDA approval of t:slim X2 with G5 within the third quarter, and negative perceptions regarding~~ our ~~financial stability compared to that of our competitors.~~

Our percentage of sales to distributors versus individual customers is principally determined by the mix of customers ordering our products within the period and whether or not we have a contractual arrangement with their underlying third-party insurance payor. ~~Sales to distributors accounted for 74% and 67% of our total sales~~gross profit for the three months ended September 30, ~~2017~~2022 was primarily the result of the $24.9 million increase in total sales, driven by increased supply sales. Gross margin benefits from progress in underlying fundamentals, including an increase in average selling prices and ~~2016, respectively. Sales deferred under~~manufacturing efficiencies, as well as leverage of fixed overhead, were more than offset by increased costs associated with global supply chain challenges. More specifically, gross margin was pressured by approximately 2 percentage points from increased pump material costs due to the ~~Technology Upgrade Program decreased~~use of alternative sourcing for certain raw materials to reduce the risk of component shortages in the near-term and higher freight costs consistent with our experience in the second quarter of 2022. We anticipate continued pressure from increased supply chain and material costs through the end of this year into next year as we continue to navigate the challenges of the global pandemic and the challenging economic environment. Other factors that have and may continue to impact the gross margin percentage are changes in product and geographical mix. Pump sales, which have the highest gross margin, were 53% of total worldwide sales in the third quarter of 2022, versus 57% in the third quarter of 2021.

Selling, General and Administrative Expenses. SG&A expenses increased 30% to ~~distributors~~$84.1 million for the three months ended September 30, ~~2016 by five percentage points, while there was not a significant impact to the percentage of sales to distributors in the three months ended September 30, 2017.~~ ~~Excluding this impact in 2016, the percentage of sales to distributors increased slightly in 2017.~~

~~Cost of Sales and Gross Profit (Loss)~~. ~~Our cost of sales~~2022, from $64.9 million for ~~the three months~~ ~~ended September 30, 2017~~ ~~was $15.1 million,~~ ~~resulting in gross profit of $11.9 million, compared to $13.9 million cost of sales and gross loss of $1.6 million in 2016. The gross margin~~ ~~for the three months~~ ~~ended September 30, 2017 was 44% compared to negative 13% in~~ the same period in ~~2016.~~

2021.Employee-related expenses for ourSG&Afunctions comprise the majority of SG&A expenses.The increase compared to 2021 was primarily the result of an $11.8 million increase in salaries, incentive compensation, non-cash stock-based compensation, and other employee benefits due to an increase in personnel to support additional sales territories, higher sales and other services in support of our ~~gross profit (loss)~~growing installed customer base. Non-cash stock-based compensation expense allocated to SG&A was $15.1 million for the three months ended September 30, ~~2017~~2022, compared to $11.3 million in the same period in ~~2016 was primarily the result of the impact of the Technology Upgrade Program. During~~2021. We also experienced a $7.4 million increase in facilities and other non-employee discretionary spending, including outside consulting, outside services, travel, and equipment costs.

Research and Development Expenses. R&D expenses increased 53% to $36.8 million for the three months ended September 30, 2017, our gross profit included a net recognition of $2.6 million of gross profit that had been deferred in prior periods, partially offset by an immaterial cost incurred for the fulfillment of upgrades. In the same period of 2016, our gross profit was reduced by a net deferral of $7.0 million of pump sales under the terms of the Program. Additionally, we recorded a $1.1 million charge in the three months ended September 30, 2016 for inventory obsolescence as a result of the commercialization of the t:slim X2 Pump, launch of the Technology Upgrade Program and associated decrease in the overall demand for our t:slim G4 Pump. This charge negatively impacted our gross margin during the three months ended September 30, 2016 by nine percentage points.

Gross profit and gross margin also increased as a result of per unit manufacturing cost improvements, including significant raw material cost reductions for our pumps and overall manufacturing efficiencies in labor and overhead for both pumps and cartridges. Other non-manufacturing costs, which primarily consist of warranty, freight and training, also reflected improvement, most notably demonstrated by a decrease in warranty expense as a result of improvements in our warranty trends and warranty replacement costs.

~~The gross margin was also impacted by an increase in sales of pump-related supplies, which generally have lower gross margins than our insulin pumps.~~ However, we continue to experience a positive gross margin associated with our pump-related supplies as a whole, after first achieving a positive gross margin in the fourth quarter of 2016. We have maintained a positive quarterly gross margin since that time. We expect to continue to see improvements in the gross profit and gross margin associated with our pump-related supplies as we manufacture higher volumes of cartridges to support our growing installed base and continue to increase sales of infusion sets to distributors with the launch of our t:lock Connector.

~~Selling, General and Administrative Expenses.~~ ~~SG&A expenses decreased 3% to $20.1 million for the three months ended~~ ~~September 30, 2017~~2022 from ~~$20.7~~$24.1 million for the same period in ~~2016.~~

~~Employee-related expenses for our~~ ~~SG&A~~ ~~functions comprise the majority of the SG&A expenses.~~2021. The decrease in SG&A expenses compared to 2016 was primarily a result of a reduction in our headcount-related costs in the third quarter of 2017, compared to the same period of 2016. Our SG&A headcount declined 8% compared to 2016. Additionally, we have implemented efforts to control other spending, resulting in decreases in travel and entertainment, outside services, supplies and consulting.

~~Research and Development Expenses. R&D expenses decreased 20% to $4.9 million for the three months ended~~ ~~September 30, 2017~~ ~~from $6.2 million for the same period in 2016. The decrease~~increase in R&D expenses was primarily the result of ~~higher~~an increase of $8.1 million in salaries, incentive compensation, non-cash stock-based compensation, and other employee benefits due to an increase in personnel to support our product development efforts. Non-cash stock-based compensation expense allocated to R&D was $5.2 million for the three months endedSeptember 30, 2022, compared to $2.9 million in the same period in 2021. We also experienced a $4.6 million increase in other non-employee discretionary spending, including outside consulting and services, clinical trial expenses, information technology and equipment costs attributable to R&D.

Acquired In-Process Research and Development Expenses. Acquired IPR&D expenses of $31.0 million for the three months ended September 30, 2022 represented the value of assets acquired, and acquisition related expenses, in ~~2016 associated~~connection with ~~product pipeline development efforts,~~our acquisition of Capillary Biomedical.

Other Income (Expense), Net. Total other income (expense), net for the three months ended September 30, 2022 was $0.1 million income, compared to $1.9 million expense in the same period in 2021. Other income, net for the three months ended September 30, 2022 primarily consisted of $1.7 million of interest income earned on our cash equivalents and short-term investments, partially offset by $1.6 million of interest expense which included the amortization of debt issuance costs related to ~~supplies and technology license fees~~.

our Convertible Senior Notes. Other expense, net for the three months ended September 30, 2021 primarilyconsisted of $1.5 million of interest expense which included the amortization of debt issuance costs related to our Notes.

Income ~~and~~Tax Expense (Benefit). ~~Other~~We recognized income tax expense of $1.6 million on a pre-tax loss of $47.3 million for the three months ended September 30, 2022, compared to income tax expense of $0.1 million on pre-tax income of $5.8 million for the three months ended September 30, 2021. Income tax expense for the three months ended September 30, ~~2017~~2022 was primarily attributable to federal, state and ~~2016 was $2.9 million and $1.4 million, respectively. Other~~foreign income tax expense as a result of current taxable income in certain jurisdictions. Income tax expense for ~~both periods~~the three months ended September 30, 2021 was primarily ~~comprised~~attributable to state and foreign income tax expense as a result of ~~interest expense associated with the Term Loan Agreement. The outstanding principal balances under the Term Loan Agreement were $82.3 million and $45.8 million as of~~ ~~September 30, 2017~~ ~~and September 30, 2016, respectively. Other~~current taxable income ~~for both periods presented was not significant.~~

in certain jurisdictions.

Comparison of the Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~

2021

Sales.For the nine months ~~ended~~ ~~September 30, 2017,~~ sales were $67.3 million, including the recognition of $4.8 million pump sales originally deferred in prior periods and upgrade fees received as a result of the Technology Upgrade Program. Sales were $55.3 million for the same period in 2016, which reflect the deferral of $8.4 million pump sales associated with the Technology Upgrade Program.

~~Sales of insulin pumps were $43.9 million and $41.2 million, respectively, for the nine months~~ ended September 30, ~~2017 and 2016.~~2022,sales were $580.7 million, which included $157.7 million of sales outside the United States. For the nine months ended September 30, ~~2017, sales of pump-related supplies were $23.0~~2022 we deferred $0.6 million of ~~which $9.7 million were~~pump sales as a result of ~~cartridges and $13.0 million were sales of infusion sets.~~Tandem Choice, launched in late September 2022. For the nine months ended September 30, ~~2016,~~2021, sales were $492.8 million, which included $128.8 million of sales outside the United States.

The increase in worldwide sales of ~~pump-related supplies were $14.2~~$87.9 million in the first nine months of ~~which $8.2 million were sales of cartridges and $5.8 million were sales of infusion sets. The ratio of the number of infusion sets shipped~~2022 compared to the ~~number~~first nine months of ~~cartridges shipped increased~~2021, was driven by a 34% increase in pump-related supply sales, primarily due to ~~60%~~35% growth in our estimated worldwide installed base of customers. We also had a 7% increase in worldwide pump sales in the first nine months ~~ended September 30, 2017 from 25% in~~of 2022, compared to the same period in ~~2016. Sales of accessories were not significant in either~~2021, net of the ~~reported periods.~~

~~Excluding~~deferral associated with the ~~impact~~Tandem Choice.

Sales by product in the United States were as follows (in thousands):


	Nine Months Ended September 30,
	2022		2021
Pump	$	235,849	$	221,724
Infusion sets	128,490		97,251
Cartridges	57,502		44,136
Other	1,144		914
Total Sales in the United States	$	422,985	$	364,025

Pump sales in the United States were $235.8 million for the first nine months of 2022, compared to $221.7 million in the ~~Technology Upgrade Program, the decrease in pump sales was primarily driven by a 19% decrease in aggregate~~first nine months of 2021, as pump shipments ~~from 12,520 for the nine months ended September 30, 2016~~increased 4% compared to ~~10,111 for~~ the same period in ~~2017 for reasons similar to those described~~the prior year, net of the deferral associated with the Tandem Choice, which began during the third quarter of 2022. Pump average selling prices also improved over the prior period. Domestic pump shipments were 59,870 in the ~~three month discussion above. Additionally,~~first nine months of 2022 compared to 57,605 in the ~~period ended June 30, 2016 represented the last period in which all UnitedHealthcare members had access to our products~~ first nine months of 2021. Sales of pump-related supplies increased primarily due to their decision to designate one of our competitors as their preferred, in-network durable medical equipment provider of insulin pumps for most customers over the age of 18, which was effective July 1, 2016~~. The decrease in pump sales was partially offset by an~~a 28% increase in ~~sales~~our estimated domestic installed base of ~~infusion sets~~customers compared to ~~our distributors, as well as overall pump-related supplies to~~ ~~our growing customer base.~~

September 30, 2021. Sales to distributors accounted for ~~73%~~65% and ~~74%~~68% of our total domestic sales for the nine months ended September 30, ~~2017~~2022 and ~~2016, respectively.~~

2021, respectively, which contributed to modest improvement in average selling prices across all products.

Sales outside the United States by product were as follows (in thousands):


	Nine Months Ended September 30,
	2022		2021
Pump	$	75,515	$	70,300
Infusion sets	57,258		41,074
Cartridges	24,539		16,878
Other	419		526
Total Sales Outside the United States	$	157,731	$	128,778

Pump sales outside the United States were $75.5 million for the first nine months of 2022, compared to $70.3 million in the first nine months of 2021, as the 1% decrease in pump shipments was more than offset by an increase in average selling prices compared to the same period in the prior year. Sales of pump-related supplies increased 41% primarily due to a 57% increase in our estimated installed base of customers outside the United States. The ordering patterns of our distributors outside the United States for pumps and supplies is highly variable from period to period, as distributors continue to gain familiarity with the markets in which they operate and the acceptance of our products in those markets. This variability was compounded during the period by the differing levels of impact from the global pandemic with regard to both access to physicians and customers, as well as shipping logistics across the more than 20 markets in which we operate outside the United States. Sales to distributors accounted for 96% of our total sales outside the United States for the nine month period ended September 30, 2022, and 95% for the same period in 2021.

Cost of Sales and Gross Profit ~~(Loss)~~.Our cost of sales for the nine monthsended September 30, ~~2017~~2022was ~~$40.7~~$283.3 millionresulting in gross profit of ~~$26.6~~$297.5 million, compared to ~~$41.8 million~~ cost of sales of $230.3 million and gross profit of ~~$13.5~~$262.5 million for the same period in ~~2016.~~2021. The gross margin for the nine monthsended September 30, ~~2017~~2022 was ~~40%~~51% compared to ~~24%~~53% in the same period in ~~2016.~~

2021.

The increase in our gross profit for the nine months ended September 30, ~~2017 compared to the same period in 2016~~2022 was primarily the result of the ~~Technology Upgrade Program. During~~$87.9 million increase in total sales. Gross profit benefited from an increase in average selling prices as well as improvement in manufacturing efficiencies and leverage of fixed overhead. Gross margin was pressured by approximately 2 percentage points from increased pump material costs due to the use of alternative sourcing for raw materials to reduce the risk of component shortages in the near-term and higher freight costs we are experiencing in 2022. We anticipate continued pressure from increased supply chain and material costs through the end of this year into next year as we continue to navigate the challenges of the global pandemic and the economic environment. Other factors that have and may continue to impact the gross margin percentage are changes in product and geographical mix and the level of non-cash stock-based compensation allocated to cost of sales. Pump sales, which have the highest gross margin, were 54% of total worldwide sales in the first nine months ~~ended September 30, 2017, our gross profit included $3.5 million that had been deferred~~of 2022 compared to 59% in ~~prior periods, partially offset by $0.3 million incurred for the fulfillment of upgrades. In~~ the same period ~~of 2016, our gross profit was reduced by a net deferral of $7.0 million of pump sales eligible under the Program. Additionally, we recorded a $1.1 million charge~~ in ~~the nine months ended September 30, 2016 for inventory obsolescence as described previously.~~

Gross profit and gross margin also increased as a result of manufacturing cost improvements, including raw material cost reductions for our pumps and increased cartridge production volumes and cartridge labor and manufacturing efficiencies, as well as a decrease in warranty expense as a result of improvements in our warranty trends and warranty replacement costs.

~~The gross margin was also impacted by an increase in sales of pump-related supplies, which generally have lower gross margins than our insulin pumps.~~

2021.

Selling, General and Administrative Expenses. SG&A expenses increased 2%25% to ~~$65.1~~$238.0 million for the nine months ended September 30, ~~2017~~2022, from ~~$63.8~~$190.0 million for the same period in ~~2016.~~

2021. Employee-related expenses for our SG&A functions comprise the majority of ~~the~~ SG&A expenses. The increase ~~in SG&A expenses~~compared to 2021 was primarily the result of a ~~$1.1~~$34.7 million increase in salaries, incentive compensation, non-cash stock-based compensation, ~~charge associated with the suspension~~and other employee benefits due to an increase in personnel to support additional sales territories, higher sales and other services in support of our ~~ESPP in 2017, as well as other net increases in employee expenses of $0.9 million. Other~~growing installed customer base. Non-cash stock-based compensation expense allocated to SG&A ~~expenses, including costs for outside services, marketing and promotional activities, tradeshows and travel, decreased $0.7 million between periods.~~

~~Research and Development Expenses. R&D expenses increased 3% to $14.9~~was $40.7 million for the nine months ended September 30, ~~2017~~2022, compared to $31.6 million in the same period in 2021. We also experienced a $13.3 million increase in facilities and non-employee discretionary spending, including outside services, travel, and software maintenance and supplies costs.

Research and Development Expenses. R&D expenses increased 65% to $103.5 million for the nine months ended September 30, 2022, from ~~$14.5~~$62.6 million for the same period in ~~2016.~~2021. The increase in R&D expenses was primarily the result of an increase of $24.4 million in salaries, incentive compensation, non-cash stock-based compensation, and other employee benefits due to an increase in personnel to support our product development efforts. Non-cash stock-based compensation expense allocated to R&D was $14.1 million for the nine months ended September 30, 2022, compared to $7.5 million in the same period in 2021. We also experienced a $16.6 million increase in other non-employee discretionary spending, including outside consulting and services, clinical trial expenses, information technology, facilities and equipment costs attributable to R&D.

Acquired In-Process Research and Development Expenses. Acquired IPR&D expenses of $31.0 million for the nine months ended September 30, 2022 represented the value of IPR&D assets acquired, and acquisition related expenses, in connection with our acquisition of Capillary Biomedical.

Other Income (Expense), Net. Total other expense, net for the nine months ended September 30, 2022 and 2021 was $1.7 million and $5.2 million, respectively. Other expense, net for the nine months ended September 30, 2022 primarily consisted of $4.6 million of interest expense which included the amortization of debt issuance costs related to our Convertible Senior Notes, partially offset by $2.9 million of interest income earned on our cash equivalents and short-term investments. Other expense, net for the nine months ended September 30, 2021 primarilyconsisted of $4.5 million of interest expense which included the amortization of debt issuance costs related to our Notes, and a $1.4 million revaluation loss from the change in the fair value of certain common stock warrants, offset by $0.7 million of ~~employee-related expenses, which includes a $0.4~~interest income earned on our cash equivalents and short-term investments.

Income Tax Expense (Benefit). We recognized income tax expense of $2.0 million ~~non-cash stock-based compensation charge~~ ~~associated with the suspension~~ on pre-tax loss of ~~our ESPP in 2017. This increase was offset by a reduction in non-employee-related expenses, primarily consulting and supplies,~~$76.7 million for the ~~advancement~~nine months ended September 30, 2022, compared to an income tax benefit of ~~our product pipeline.~~

~~Other~~$2,000 on pre-tax income of $4.8 million for the nine months ended September 30, 2021. Income ~~and Expense. Other~~tax expense for the nine months ended September 30, ~~2017 and 2016 was $8.4 million and $4.2 million, respectively. Other expense for both periods~~2022 was primarily ~~comprised~~attributable to federal, state and foreign income tax expense as a result of ~~interest expense associated with~~current taxable income in certain jurisdictions. The benefit for income taxes for the ~~Term Loan Agreement. The outstanding principal balances under the Term Loan Agreement were $82.3 million and $45.8 million as of~~ nine months ended September 30, ~~2017~~ 2021 was primarily attributable to excess tax benefits from stock compensation, offset by state and ~~September 30, 2016, respectively. Other~~foreign income ~~for both periods presented was not significant.~~

tax expense as a result of current taxable income in certain jurisdictions.

Liquidity and Capital Resources

At September 30, ~~2017,~~2022, we had ~~$22.5~~$608.7 million in cash and cash equivalents and short-term investments. In addition, we had a total available balance of $95.1 million at September 30, 2022 under our Revolving Line of Credit (the Line of Credit), which expires in May 2025 (see Note 7, “Debt”). We believe that our cash and cash equivalents, short-term investments, ~~which included $10.0 million~~borrowing availability under the Line of ~~restricted~~ Credit, and future cash ~~as required by the Term Loan Agreement. At the date the financial statements in this Quarterly Report were issued, our management believed that we did not have~~flows from operations will be sufficient ~~cash~~ to fund our operations for the next twelve months without additional financing and, therefore, we concluded there was substantial doubt about our ability to continue as a going concern within one year after the date the financial statements were issued. ~~The financial statements included in this Quarterly Report have been prepared on a basis that assumes that we will continue as a going concern,~~ which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and these financial statements do not include any adjustments that may result from the outcome of this uncertainty.

ongoing core business activities.

Historically, our principal sources of cash have included cash collected from product sales, private ~~placements~~ and public offerings of equity securities, ~~the Term Loan Agreement,~~exercises of employee stock awards, and ~~cash collected from product sales.~~ debt financing.

Our historical cash outflows have primarily been associated with cash used for operating activities such as the development and commercialization of our products, the expansion and support of our sales, marketing, clinical and ~~marketing infrastructure, increase in~~customer support organizations, the expansion of our R&D activities, the expansion of our commercial activities to select geographies outside the United States, the acquisition of intellectual property, equity investments and acquired assets, expenditures related to ~~equipment and improvements used to increase~~increases in our manufacturing capacity and ~~improve~~improvements to our manufacturing efficiency, overall ~~facility~~ expansion of our facilities and operations, and other working capital needs.

~~During 2017,~~ Additionally, we have ~~completed~~used cash to pay the interest expense associated with our convertible senior notes.

The following ~~financings:~~

~~In March 2017, we completed~~table shows a ~~registered public offering of 1,850,000 shares~~summary of our ~~common stock at a public offering price of $12.50 per share. The gross proceeds to us from~~cash flows for the ~~offering were approximately $23.1 million, before deducting underwriting discounts and commissions and other offering expenses payable by us.~~

~~During the three~~nine months ended September 30, ~~2017, we sold 464,108 shares~~2022 and 2021 (in thousands):


	Nine Months Ended September 30,
	2022		2021
Net cash provided by (used in):
Operating activities	$	44,644	$	91,724
Investing activities	(2,609)		(110,058)
Financing activities	10,777		36,046
Effect of foreign exchange rate changes on cash	(207)		50
Net increase in cash and cash equivalents	$	52,605	$	17,762

Operating Activities. Net cash provided by operating activities was $44.6 million for the nine months ended September 30, 2022, compared to $91.7 million in the same period in 2021. The reduction in net cash provided by operating activities for 2022 compared to 2021 was primarily a result of the $83.5 million increase in net loss as well as working capital changes. Working capital changes during the nine months of 2022, primarily consisted of increases in inventories, accounts payable and accrued expenses, and operating leases and other current liabilities. Accounts receivable increased to $112.8 million at September 30, 2022, from $110.7 million at December 31, 2021. Inventories increased to $104.8 million at September 30, 2022 from $68.6 million at December 31, 2021.

Investing Activities. Net cash used in investing activities was $2.6 million for the nine months ended September 30, 2022,which was primarily related to $362.5 million of purchases of short-term investments, $28.5 million in purchases of property and equipment, and $25.7 million paid for the acquisition of Capillary Biomedical, including $1.0 million transaction cost. (see Note 2, “Summary of Significant Accounting Policies”), offset by $422.9 million in proceeds from maturities and sales of short-term investments. Net cash used by investing activities was $110.1 million for the nine months ended September 30, 2021, which was primarily related to $542.8 million of purchases of short-term investments, and $8.4 million in purchases of property and equipment, offset by $450.5 million in proceeds from maturities and sales of short-term investments.

Financing Activities. Net cash provided by financing activities was$10.8million for the nine months ended September 30, 2022, which primarily consisted of proceeds from the issuance of common stock under our ~~ATM offering program at prices ranging from $5.64 to $10.54. The gross~~stock plans. Net cash provided by financing activities was $36.0 million for the nine months ended September 30, 2021, which primarily consisted of proceeds ~~to us~~ from the ~~offering were $4.3 million, before deducting underwriting discounts~~issuance of common stock under our stock plans.

Our liquidity position and ~~commissions~~capital requirements are subject to fluctuation based on a number of factors. In particular, our cash inflows and outflows are principally impacted by the following:

•our ability to generate sales, the timing of those sales, the mix of products sold and the collection of receivables from period to period;

•the timing of any additional financings, and the net proceeds raised from such financings;

•the timing and amount of the exercise of outstanding warrants, and proceeds from the issuance of equity awards pursuant to employee stock plans;

•fluctuations in gross margins and operating margins;

•fluctuations in working capital, including changes in accounts receivable, inventories, accounts payable, employee-related liabilities, and operating lease liabilities; and

•the impacts and disruptions caused by the COVID-19 global pandemic.

Both our primary short-term and long-term capital needs are expected to include expenditures related to:

•support of our commercialization efforts related to our current and future products;

•expansion of our customer support resources for our growing installed customer base;

•research and product development efforts, including clinical trial costs;

•acquisitions, leasing or licensing of equipment, technology, intellectual property and other ~~offering expenses payable by us.~~

assets;

•additional facilities leases and related tenant improvements;

•investments for the development, improvement and acquisition of manufacturing, testing and packaging equipment to support business growth and increase capacity; and

~~On October 17, 2017,~~•payments under licensing, development and commercialization agreements.

•acquisition and subsequent integration of businesses, products and technologies.

Although we ~~completed~~believe the ~~October Financing, pursuant to which~~foregoing items reflect our most likely uses of cash in the short-term, we ~~sold 4,630,000 shares~~cannot predict with certainty all of our ~~common stock, Series A warrants~~particular cash uses or the timing or amount of cash used. In addition, from time to ~~purchase up~~time we may consider opportunities to ~~4,630,000 shares~~acquire or license other products or technologies that may enhance our product platform or technology, expand the breadth of our ~~common stock~~markets or customer base, or advance our business strategies. Any such transaction may require short-term expenditures that may impact our capital needs. If for any reason our cash and ~~Series B warrants~~cash equivalents balances, or cash generated from operations is insufficient to ~~purchase up~~satisfy our working capital requirements, we may in the future be required to ~~4,630,000 shares~~seek additional capital from public or private offerings of our ~~common stock at a public offering price~~equity or debt securities, or we may elect to borrow capital under the Line of ~~$3.50 per share and accompanying warrants. The gross proceeds to us~~Credit, new credit arrangements or from ~~the October Financing were approximately $16.2 million, before deducting underwriting discounts and commissions and~~ other ~~offering expenses payable by us. Each series of warrants, if exercised by all holders in full,~~sources. We may ~~result in additional gross proceeds to us of $16.2 million.~~

~~Management currently believes that it will be necessary for us~~also seek to raise additional ~~funding. However,~~capital from such offerings or borrowings on an opportunistic basis when we ~~expect~~believe there are suitable opportunities for doing so. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, we may incur significant financing or debt service costs, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. There can be no assurance that financing will be available on acceptable terms, or at all. Our ability to raise additional financing may be negatively impacted by a number of factors, including our recent and projected financial results, recent changes in and volatility of our stock price, perceptions about the ~~recent completion~~dilutive impact of a public offering of our common stock and warrants, concerns regarding our ability to maintain the continued listing of our common stock on NASDAQ, our current level of indebtedness and debt service costs, our conclusion that there is substantial doubt about our ability to continue as a going concern,financing transactions, the competitive environment in our industry, uncertainties regarding the regulatory environment in which we operate and ~~accounting complexities brought about by~~conditions impacting the capital markets more generally, including economic weakness, inflation, political instability, war and terrorism, natural disasters, incidence of illness or disease, or other events beyond our ~~Technology Upgrade Program. There can be no assurance that we will be able to complete any financing on acceptable terms or at all.~~

~~We expect that, in addition to~~control.

Indebtedness

In May 2020, the outcome of any additional financing activities, our sales performance and the resulting operating income or loss, as well as the status of each of our new product development programs, will significantly impact our cash management decisions.

~~The following table shows~~Company entered into a ~~summary of our cash flows~~purchase agreement with certain counterparties for the ~~nine months ended September 30, 2017 and 2016:~~

Nine Months Ended September 30,

(in thousands)
2017

2016

Net cash provided by (used in):

Operating activities
$
(54,495
)

$
(47,591
)
Investing activities

4,201

5,873

Financing activities

17,695

16,586

Total
$
(32,599
)

$
(25,132
)

~~Operating activities~~sale of an aggregate of $287.5 million principal amount of 1.50% Convertible Senior Notes due 2025 in a private offering to qualified institutional buyers (the Notes). ~~Net cash used in operating activities was $54.5 million for the nine months ended September 30, 2017, compared to $47.6 million for the same period in 2016.~~ The ~~increase in net cash used in operating activities was~~ ~~primarily associated with changes in working capital, partially offset by a decrease in net loss.~~The changes in working capital were primarily due to decreases in deferred revenue and guarantee liabilities associated with the Technology Upgrade Program, lower cash collections from accounts receivable and increased inventory associated with the launch of t:lock, as well as other net changes associated with the timing of payments.

~~Investing activities~~. Net cash provided by investing activities was $4.2 million for the nine months ended September 30, 2017, which was primarily related to sales and maturities of short-term investments of $8.5 million, partially offset by the purchase of $4.3 million of ~~property and equipment~~. ~~Net cash provided by investing activities was $5.9 million for the~~ ~~nine months ended~~ September 30, 2016, which was primarily related to the purchase of $25.9 million of short-term investments and $6.2 million of property and equipment, offset by proceeds from sales and maturities of short-term investments of $38.0 million.

~~Financing activities.~~ Net cash provided by financing activities was $17.7 million for the nine months ended September 30, 2017, which was primarily the result of net proceeds of approximately $25.7 million from the issuance of common stock~~, partially offset by an increase in our restricted cash balance of $8.0 million as required by the Fourth Amendment to our Term Loan Agreement~~. Net cash provided by financing activities was $16.6 million for the nine months ended September 30, 2016, which was primarily the result of net proceeds of $15.0 million under the Term Loan Agreement and ~~$1.6 million in~~ proceeds from the issuance of ~~common stock associated with our ESPP, as well as~~ the ~~exercise~~Notes were $244.6 million, net of ~~outstanding stock options and warrants.~~

~~Our liquidity position and capital requirements are subject to fluctuation based on a number of factors. In particular, our cash inflows and outflows are principally impacted by the following:~~

●

~~our ability to generate sales, the timing of those sales and the collection of receivables generated from those sales from period to period;~~

●

~~the timing and amount of any additional financings, including the exercise of the warrants issued in the October Financing;~~

●

~~fluctuations in gross margins and operating margins; and~~

●

~~fluctuations in working capital.~~

~~Our primary short-term capital needs, which are subject to change, include expenditures related to:~~

●

~~support of our commercialization efforts related to our current and future products;~~

●

~~expansion of our manufacturing facilities and improvements in our manufacturing efficiency;~~

●

~~new research and product development efforts, including clinical trial costs;~~

●

~~payment of interest due under the Term Loan Agreement;~~

●

~~acquisition of equipment and other fixed assets; and~~

●

~~payments under our licensing, development and commercialization agreements.~~

Although we believe the foregoing items reflect our most likely uses of cash in the short-term, we cannot predict with certainty all of our particular short-term cash uses or the timing or amount of cash used. We expect we will need to raise additional funding in order to continue as a going concern, meet our minimum liquidity requirements, and execute on our business strategy~~. We intend to seek additional capital from public or private offerings of our capital stock (including pursuant to our ATM offering) or we may elect to borrow additional amounts under new~~ debt ~~financing arrangements or from other sources.~~ ~~If we issue equity or convertible debt securities to raise additional funding, our existing stockholders may experience dilution, we may incur significant financing~~issuance costs and cash used to pay the ~~new equity or convertible debt securities may have rights, preferences and privileges~~cost of the Capped Call Transactions (see Note 7, “Debt”). The Notes are the Company’s senior to those of our existing stockholders. If we issue debt securities to raise additional funding, we would incur additional debt service obligations, we could become subject to additional restrictions limiting our ability to operate our business, and we may be required to further encumber our assets. Our ability to continue as a going concern, meet our minimum liquidity requirements, satisfy the covenants under the Term Loan Agreement, and execute our business strategy is dependent on our ability to raise additional capital, of which there can be no assurance. If we cannot generate sufficient revenues from the sale of our products or secure additional financing on acceptable terms, we may be forced to significantly alter our business strategy, substantially curtail or modify our current operations, or cease operations altogether.

~~Indebtedness~~

~~Term Loan Agreement~~

~~We had $82.3 million and $81.1 million of aggregate borrowings outstanding under the Term Loan Agreement at September 30, 2017 and December 31, 2016, respectively.~~

~~Under~~ ~~the Term Loan Agreement, interest~~unsecured obligations. Interest is payable ~~at our option, (i)~~ in cash semi-annually in arrears beginning on November 1, 2020 at a rate of ~~11.5%~~1.50% per ~~annum~~year. The Notes mature on May 1, 2025 unless repurchased, redeemed, or ~~(ii)~~converted in accordance with their terms prior to the maturity date.

Cash payments due by calendar year for our Convertible Senior Notes at ~~a rate of 9.5% of the 11.5% per annum~~September 30, 2022 are as follows (in thousands):


	Total		Remaining in 2022		2023		2024		2025
Contractual interest	$	12,938	$	2,156	$	4,313	$	4,313	$	2,156
Principal amount of convertible senior notes(1)	287,500		—		—		—		287,500
Total	$	300,438	$	2,156	$	4,313	$	4,313	$	289,656

(1) The Convertible Senior Notes may be settled in cash, and 2.0% of the 11.5% per annum to be added to the principal of the loan and subject to accruing interest. Interest-only payments are due quarterly on March 31, June 30, September 30 and December 31 of each year of the interest-only payment period, which ends on December 31, 2019. The principal balance is due in full on the maturity date of the Term Loan Agreement, which is March 31, 2020. We had elected to pay interest in cash at a rate of 11.5% per annum through September 30, 2015. Beginning October 1, 2015, we elected to pay interest in cash at a rate of 9.5% per annum and to have 2.0% per annum added to the principal of the loan. As a result, $2.3 million was added to the principal of the loan since October 1, 2015, which we refer to as PIK Loans.

The loan is collateralized by all of our assets. The principal financial covenants require that we attain minimum annual revenues of $80.0 million in 2017 and $95.0 million each year thereafter until the end of the term of the loan.

In connection with the Third Amendment, we previously agreed to pay, on the earlier of (i) the maturity date of the Term Loan Agreement, which is March 31, 2020, (ii) the date that the loan under the Term Loan Agreement becomes due, and (iii) the date on which we make a voluntary pre-payment of the loan, a financing fee equal to 3.0% of the sum of (x) the aggregate amount drawn under the Third Amendment, and (y) any PIK Loans issued in relation to the Third Amendment, which we refer to as the Back End Financing Fee.

The audit report and opinion of our independent registered public accounting firm contained in the Annual Report includes an explanatory paragraph that describes conditions that raise substantial doubt about our ability to continue as a going concern. This explanatory paragraph constitutes a potential event of default under the Term Loan Agreement. On March 7, 2017, we entered into the Fourth Amendment, which included a limited waiver of the potential event of default. In consideration for the waiver, we agreed to: (i) issue the Capital Royalty Warrant, (ii) increase our restricted cash balance from $2.0 million to $10.0 million, (iii) provide Capital Royalty Partners the same information we make available to our board of directors, subject to limited exceptions, and (iv) not incur additional third party indebtedness secured solely by accounts receivable, inventory and cash. In addition, the Fourth Amendment includes a covenant requiring us to complete financings in which our gross proceeds from the sale of equity securities is at least $30.0 million, no later than January 15, 2018. ~~As a result of the public offering~~shares of our common stock, ~~in March 2017, the sale~~or a combination of cash and shares of our common stock, ~~pursuant to~~at our ATM offering, and the public offering of our common stock and warrants in the October Financing, we have satisfied our obligations pursuant to this equity financing covenant, although we remain subject to additional covenants.

Pursuant to the Fourth Amendment, we have agreed to increase the Back End Financing Fee to 5.0% of the entire aggregate principal amount of borrowings outstanding, including total PIK Loans issued, under the Term Loan Agreement. The Back End Financing Fee is payable at maturity of our loans and on the principal amount of any loans for which we make an optional prepayment, and may be payable in connection with asset sales not permitted under the Term Loan Agreement or in connection with a change of control. As of September 30, 2017, we had accrued $4.1 million for the Back End Financing Fee.

election.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with ~~U.S. GAAP.~~accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these consolidated financial statements requires management to make estimates and judgments, which present a significant level of estimation uncertainty and that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes as of the date of the consolidated financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about our financial condition and results of operations that are not readily apparent from other sources. Actual results may differ from these ~~estimates.~~ estimates and have a material impact on our financial condition and results of operations.

There have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies Involving Management Estimates and Assumptions,” included in our Annual Report on Form 10-K for the ~~Annual~~year ended December 31, 2021, except for the accounting policies and estimates related to an asset acquisition and Tandem Choice, which are included in Note 2, “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report.

Off-Balance Sheet Arrangements

As of September 30, ~~2017,~~2022, we ~~did not have any off-balance sheet arrangements.~~

are a party to certain standby letter of credit arrangements in support of our operating lease obligations. For a description of the arrangements we consider significant, see Note 12 “Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Credit and Interest Rate Risks

We invest our excess cash in marketable securities consisting primarily inof commercial paper, ~~government-sponsored enterprise~~corporate debt securities, U.S. Treasury securities and U.S. ~~government treasury~~Government-sponsored enterprise securities. Some of the financial instruments in which we invest ~~have~~subject us to market risk, ~~associated with them,~~ in that a change in prevailing interest rates may cause the principal amount of the instrument to fluctuate. Other financial instruments in which we invest ~~potentially~~ subject us to credit risk, in that the value of the instrument may fluctuate based on the issuer’s ability to pay.

As a result of the COVID-19 global pandemic and the perceived increased credit risks associated with certain securities, credit rating agencies have, from time to time, issued downgrades or revised outlooks to negative for certain issuers of the debt securities held in our short-term investments portfolio. Unrealized losses on available-for-sale debt securities at September 30, 2022 were primarily due to the recent increase in market interest rates. Based on the credit quality of the available-for-sale debt securities that are in an unrealized loss position, and our current estimates of future cash flows to be collected from those securities, we believe the unrealized losses were not credit losses (see Note 3, “Short-Term Investments”).

The primary objectives of our investment activities are to maintain liquidity and preserve principal while maximizing the income we receive from our financial instruments without significantly increasing risk. We have established guidelines regarding approved investments and maturities of investments, which are primarily designed to maintain liquidity and preserve principal.

Because of the short-term maturities of our financial instruments, we do not believe that an increase or decrease in market interest rates would have any significant impact on the realized value of our investment portfolio. If a 10% change in interest rates were to have occurred on September 30, ~~2017, this change~~2022, it would not have had a material effect on the fair value of our investment portfolio as of that date.

~~The~~

In May 2020, we issued $287.5 million principal amount of Convertible Senior Notes, which bear interest at a fixed rate ~~under the Term Loan Agreement is fixed and~~of 1.50% per year. Accordingly, we are not subject to ~~changes in market~~ interest ~~rates.~~

rate risk as a result of the Convertible Senior Notes (see Note 7, “Debt”).

Foreign Currency Exchange Rate Risk

Our operations are primarily located in the United States. In addition, we have a sales and marketing office in Canada and, beginning in 2022, a distribution center in the Netherlands. Our sales to customers in the United States are made in U.S. dollars. With the exception of sales from our distribution center in the Netherlands and ~~nearly all~~a portion of our sales ~~since inception have been~~in Canada, our sales to customers outside of the United States are currently made to independent distributors under agreements denominated in U.S. dollars. Accordingly, we ~~do not currently have any material~~believe our exposure to foreign currency rate ~~fluctuations. From~~fluctuations is currently limited to our operations in Canada and the Netherlands, where fluctuations in the rate of exchange between the U.S. dollar and the local currency could adversely affect our financial results. As we expand and further develop our operations in markets outside the United States, particularly in Europe, we will be exposed to additional foreign currency exchange rate risk. In addition, from time to time, we may have foreign currency exchange risk ~~associated with currency exposure~~ related to existing assets and liabilities, committed transactions and forecasted future cash flows. In certain circumstances, we may seek to manage such foreign currency exchange risk by using derivative instruments such as foreign currency exchange forward contracts to hedge our ~~risks.~~risk. In general, we may hedge ~~material~~ foreign currency exchange exposures up to 12 months in advance. However, we may choose not to hedge some exposures for a variety of reasons, including prohibitive economic costs.

~~Item 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures,, as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities and~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”)~~ that are designed to ensure that information required to be disclosed in ~~our periodic and current~~the reports ~~that~~ we file with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow ~~for~~ timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As of September 30, ~~2017,~~2022, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal

financial officer concluded that our disclosure controls and procedures were effective at ~~the~~a reasonable assurance level as of September 30, ~~2017.~~

2022.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control over Financial Reporting

T~~here~~

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended September 30, ~~2017~~2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal ~~Proceedings~~

Proceedings.

In May 2020, the Company was named as a defendant in three California state court class action lawsuits arising from a phishing incident that occurred in January 2020. Collectively, these lawsuits seek statutory, compensatory, actual, and punitive damages; equitable relief, including restitution; pre- and post-judgment interest; injunctive relief; and attorney fees, costs, and expenses from the Company. On July 24, 2020, these three lawsuits were consolidated into a single case in the Superior Court of the State of California in the County of San Bernardino entitled Joseph Deluna et al. v. Tandem Diabetes Care, Inc. The consolidated case alleges violations of the Confidentiality of Medical Information Act (CMIA), CCPA, California’s Unfair Competition Law (UCL), and breach of contract. The Company filed a demurrer seeking dismissal of all claims, which was heard by the Court on October 27, 2020, and which resulted in the following outcome: (i) the demurrer to the CMIA claim was denied; (ii) the demurrer to the CCPA claim was sustained; and (iii) the demurrer to the UCL and contract claims were sustained with leave to amend the pending complaint. A second demurrer was heard by the Court on March 29, 2021 with the following outcome: (i) the demurrer to the CMIA claim was denied; and (ii) the demurrer to the UCL and contract claims was sustained without leave to amend as to three of the named plaintiffs. The plaintiffs filed a motion for class certification on January 7, 2021 and the Company filed a motion for summary adjudication on the CMIA claim on April 7, 2022. Both motions are fully briefed. The Company anticipates the Court will hear argument on both motions in the fourth quarter of 2022 or the first quarter of 2023.

Although we intend to vigorously defend against these claims, there is no guarantee that we will prevail. Accordingly, we are unable to determine the ultimate outcome of these lawsuits or determine the amount or range of potential losses associated with the lawsuits.

From time to time, we are involved in various other legal proceedings, ~~disputes~~regulatory matters, and other disputes or claims arising infrom or related to claims incident to the ~~ordinary~~normal course of our ~~business.~~business activities, including actions with respect to intellectual property, data privacy, employment, regulatory, product liability and contractual matters. Although the results of such legal proceedings and claims cannot be predicted with certainty, we believe we are not currently ~~believe that the final outcome of these ordinary course matters will not,~~a party to any legal proceeding(s) which, if determined adversely to us, would, individually or ~~in the aggregate,~~taken together, have a material adverse effect on our business, operating results, financial ~~position, results of operations~~condition or cash flows. However, regardless of the merit of the claims raised or the outcome, legal proceedings ~~can~~may have an adverse impact on us ~~because~~as a result of ~~legal~~defense and settlement costs, diversion of management time and resources, and other factors.

Item 1A. Risk ~~Factors~~

The following sets forth certain risk factors associated with our business. The risk factors set forth below marked with an asterisk (*) next to the title contain changes to the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of the Annual Report.

Factors.

An investment in our common stock, or in securities convertible into or exchangeable for our common stock, involves ~~risks.~~a high degree of risk. You should carefully consider ~~carefully~~ the risks described below, together with all of the other information included in this Quarterly Report, as well as in our other filings with the SEC, in evaluating our business. If any of the following risks actually occur, our business, financial condition, operating results and future prospects could be materially and adversely affected. In that case, the trading price of our common stock may decline and you might lose all or part of your investment. The risks described below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results, liquidity, and future prospects. Certain statements below are forward-looking statements.

For additional information, see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report.

The risk factors set forth below marked with an asterisk (*) next to the title contain changes to the description of the risk factors previously disclosed in Part I, Item 1A of our Annual Report.

Summary of Risk Factors

An investment in our common stock, or in securities convertible into or exchangeable for our common stock, involves a high degree of risk. Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, as well as other risks that we face, can be found below, after this summary.

Risks ~~Relating~~Related to Our Business and Our Industry

•We have incurred significant operating losses since inception and may not achieve sustained profitability.

•We currently rely on sales of insulin pump products to generate a significant portion of our revenue, and any factors that negatively impact sales of these products may adversely affect us.

•Uncertainty in current global economic and political conditions could adversely affect our ability to predict product demand and impact our financial results.

•Our ability to maintain and grow our revenue depends on retaining a high percentage of our customer base.

•Failure to secure or retain adequate coverage or reimbursement for our products by third-party payors could adversely affect our business.

•We may fail to meet our sales forecasts if we are unable to maintain our existing sales, marketing, clinical and customer service infrastructure.

•If we are unable to maintain or expand our network of independent distributors, our sales may be negatively affected.

•Our failure to successfully complete clinical trials and development-stage testing could prevent us from obtaining regulatory approvals for or commercializing our products.

•We depend on a limited number of third-party suppliers for certain components and products.

•Any disruption at one of our facilities could adversely affect our business and operating results.

•Global economic and market uncertainty may adversely impact our business, financial condition and operating results.

Risks Related to Our Future Financings and Financial Results

•We may need to raise additional funds in the future and funds may not be available on commercially reasonable terms.

•Our operating results may fluctuate significantly from quarter to quarter.

Risks Related to Our Intellectual Property and Potential Litigation

•Our ability to comprehensively protect our intellectual property and proprietary technology is uncertain.

•Patent litigation is not uncommon in the medical device industry, and we may be subject to such litigation.

•We may be subject to damages resulting from claims that we have wrongfully used or disclosed patient health information, personal information, or trade secrets, or are in breach of non-competition or non-solicitation agreements.

Risks Related to Our Legal and Regulatory Environment

•Our products and operations are subject to extensive governmental regulation, and regulatory approvals could be denied or delayed.

•New products or modifications to our existing products may require new regulatory approvals, or require us to cease marketing or recall modified products.

•If we or our third-party suppliers, contract manufacturers or service providers fail to comply with manufacturing regulations, it could impair our ability to market our products.

Risks Related to Our Common Stock

•The price of our common stock may continue to fluctuate significantly.

•Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

•We may fail to maintain an effective system of internal control over financial reporting.

Risks Related to Our Convertible Senior Notes

•The Notes could adversely affect our financial condition.

•We may not have sufficient cash flow from our business to service the Notes.

•We may take actions which could limit our ability to make payments on the Notes.

Risks Related to Our Business and ~~our~~Our Industry

We have incurred significant operating losses since inception and cannot assure you that we will achieve sustained profitability.*

Since our inception in January 2006, we have incurred a significant net loss. As of September 30, ~~2017,~~2022, we had an accumulated deficit of ~~$466.2~~$713.3 million. To date, we have ~~financed~~funded our operations primarily through cash collected from product sales, private and public ~~and private sales~~offerings of our equity securities, and debt ~~financing with Capital Royalty Partners II, L.P. and its affiliated funds, or Capital Royalty Partners, and sales of our products.~~financing. We have devoted substantially all of our resources to the design, development and commercialization of our products, the scaling of our manufacturing and business operations, and ~~commercial organization,~~ the research and development of our current products and products under ~~development, and the assembly of a management team to manage our business.~~

development.

We began commercial sales of our first ~~commercial~~ product, t:slim, in August 2012 and our current flagship pump platform, t:slim X2, in October 2016. The t:slim X2 insulin pump now represents 100% of new pump shipments. Until the third quarter of ~~2012. We began commercial sales of t:flex~~2018 we were selling our products only in the ~~second quarter of 2015~~United States and ~~t:slim G4~~have since launched our products in the third quarter of 2015. In October 2016, we discontinued new shipments of t:slim and launched t:slim X2, our next-generation flagship pump. In August 2017, we commenced commercial sales of t:slim X2 with G5 integration and discontinued new sales of t:slim G4. select international geographies.

Since the first quarter of 2013, we have been able to manufacture and sell our insulin pump products at a cost and in volumes sufficient to allow us to achieve a positive overall gross margin. For the years ended December 31, ~~2016~~2021 and ~~2015,~~2020, our gross profit was ~~$23.6~~$376.2 million and ~~$26.6~~$260.5 million, respectively. Although we have achieved a positive overall gross margin and generated net income on an annual basis for the first time for the year ended December 31, 2021, we may still operate at a ~~significant~~ net loss ~~and expect that we will continue~~from time to ~~do so for the next several years.~~

time due to fluctuations in our business.

To implement our business strategy and achieve consistent profitability, we need to, among other things, increase sales ~~and gross profits~~ of our products and the gross profit associated with those sales, maintain an appropriate customer service, training and support infrastructure, fund ongoing ~~research and development~~R&D activities, ~~improve and expand~~create additional efficiencies in our manufacturing ~~capabilities,~~processes while adding to our capacity, and obtain regulatory clearance or approval to commercialize our products currently under ~~development. Our~~development both in the United States and the more than 20 countries in which we operate outside the United States. We expect our expenses ~~may~~will continue to increase as we pursue these objectives and make investments in our business. Additional increases in our expenses without commensurate increases in sales could significantly increase our operating losses.

The extent of our future operating losses and the timing of our profitability are highly uncertain in light of a number of factors, including the timing of the launch of new products and product features by us and our competitors, market acceptance of our products and competitive products by people with insulin-dependent diabetes, their caregivers and healthcare providers, ~~and~~ the timing of regulatory approval of ~~new products.~~our products and the products of our competitors, the actual efficiencies gained in our manufacturing processes, general economic conditions, and the scope and duration of the impacts caused by the COVID-19 global pandemic. Any additional operating losses will have an adverse effect on our stockholders’ equity, and we cannot assure you that we will ~~ever~~ be able to ~~achieve or~~ sustain profitability.

We currently rely on sales of insulin ~~pumps~~pump products to generate a significant portion of our revenue, and any factors that negatively impact sales of ~~our insulin pump~~these products may adversely affect our business, financial condition and operating results.*

We generate ~~a significant majority~~nearly all of our revenue from the sale of ~~our insulin pump products. During 2017, our insulin pump products have included our~~ t:slim X2 ~~t:flex~~insulin pumps and ~~t:slim G4 products. In August 2017, we received FDA approval for t:slim X2 with G5,~~the related insulin cartridges and ~~discontinued sales of t:slim G4 in connection with our launch of t:slim X2 with G5 during the three months ended September 30, 2017.~~infusion sets. Sales of ~~our insulin pumps~~these products may be negatively impacted by many factors, including:

●

~~the potential that other technological breakthroughs for the monitoring, treatment or prevention of diabetes may render our insulin pump products obsolete or less desirable;~~

•market acceptance of the insulin pumps and related products manufactured and sold by our key competitors, including Medtronic;

●

~~adverse regulatory or legal actions relating to our insulin pump products or similar products or technologies;~~

•the potential that breakthroughs for the monitoring, treatment or prevention of diabetes may render our insulin pumps obsolete or less desirable;

●

failure of our Tandem Device Updater to accurately and timely provide customers with remote access to new product features and functionality as anticipated, or our failure to obtain regulatory approval for any such updates;

•adverse regulatory or legal actions relating to our products, or similar products or technologies of our competitors;

●

changes in reimbursement rates or policies relating to insulin pumps or similar products or technologies by third-party payors, such as the decision by UnitedHealthcare during 2016 that restricted a majority of its members from accessing our pumps;

•failure of our Tandem Device Updater to accurately and timely provide customers with remote access to new product features and functionality as anticipated, or our failure to obtain regulatory approval for any such updates;

●

~~our inability to enter into contracts with third-party payors on a timely basis and on acceptable terms;~~

•changes in reimbursement rates or policies relating to insulin pumps or similar products or technologies by third-party payors;

●

~~problems arising from the expansion of our manufacturing capabilities, or destruction, loss, or temporary shutdown of our manufacturing facility; and~~

•our inability to enter into contracts with third-party payors on a timely basis and on acceptable terms;

●

~~claims that any of our insulin pump products, or any component thereof or related supplies, infringes on patent rights or other intellectual property rights of third parties.~~

•problems arising from the expansion of our manufacturing capabilities and commercial operations, or destruction, loss, or temporary shutdown of our manufacturing facilities;

•concerns regarding the perceived safety, reliability or cybersecurity of any of our products, or any component thereof, particularly in connection with the launch of additional mobile app features and functionality and other software products; and

•claims that any of our products, or any component thereof, infringes on patent rights or other intellectual property rights of third parties.

In addition, sales of any of our current or future insulin pump products with CGM integration are subject to the continuation of our applicable agreements with Dexcom, Abbott, or other third parties which, under some circumstances, ~~are~~may be subject to termination, ~~by Dexcom,~~ with or without cause, on relatively short notice.

~~Furthermore, sales~~ Sales of our current or future products may also be negatively impacted in the event of any regulatory or legal actions relating to CGM products that are compatible with our pumps, or in the event of any disruption to the availability of the applicable CGM-related supplies, such as sensors or transmitters, in a given market in which our products are sold. Sales of our products may also be adversely impacted ~~by negative perceptions regarding~~if the CGM products that are compatible with our ~~financial stability relative~~pumps are not viewed as superior to that of our competitors, and our ability to sustain our business operations on a long-term basis. These perceptions may cause people with insulin-dependent diabetes, their caregivers and healthcare providers, as well as independent distributors and third-party payors, to question our ability to continue to sellcompeting CGM products in markets where our products ~~provide customer service, support our commercial organization, and fulfill our strategic objectives. These concerns may arise from a number~~are sold, or if the price of ~~factors, including our recent and projected financial results, recent changes~~these products is not competitive with similar products available in ~~and volatility of our stock price, concerns regarding our ability to maintain~~ the continued listing of our common stock on the NASDAQ Global Market, or NASDAQ, perceptions about the recent completion of a public offering of our common stock and warrants, our current level of indebtedness and debt service costs, our conclusion that there is substantial doubt about our ability to continue as a going concern, the competitive environment in our industry, and accounting complexities brought about by our Technology Upgrade Program, and uncertainties regarding the regulatory environment. Any such concerns, whether actual or perceived, could cause consumers to delay the purchase of our products or to purchase competitive products.

market.

Because we currently rely on sales of our t:slim X2 insulin pump and related products to generate a significant majority of our revenue, any factors that negatively impact sales of these products (or negatively impact the products or components integrated with these products), or result in sales of these products increasing at a lower rate than expected, could adversely affect our business, financial condition and operating results.

We believe the COVID-19 global pandemic has had, and that it may continue to have, an adverse impact on sales of our products. Furthermore, any disruption in our supply chain could negatively impact our ability to manufacture or otherwise supply sufficient product quantities to meet current customer demand, or any unexpected increase in demand, which could also have the effect of magnifying the negative impact of any of the factors described above.

Uncertainty in current global economic and political conditions could adversely affect our ability to predict product demand and impact our financial results.

Our operations and performance depend in part on worldwide economic and political conditions. Many of the jurisdictions in which our products are sold have experienced and could continue to experience unfavorable general economic conditions, such as a recession or economic slowdown, which could negatively affect the affordability of, and consumer demand for, our products. Under difficult economic conditions, consumers may seek to modify spending priorities and reduce discretionary spending by delaying purchases of our products, which could reduce our profitability and could negatively affect our overall financial performance. Other financial uncertainties in our major markets and unstable political conditions in certain markets, including civil unrest and governmental changes, could undermine global consumer confidence and reduce consumers’ purchasing power, thereby reducing demand for our products. We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery, worldwide, in the United States, or in our industry. These and other economic factors could have a material adverse effect on our business, financial condition, and results of operations.

Public health threats, such as the COVID-19 global pandemic, have had and could continue to have a material adverse effect on our operations, the operations of our business partners, and the global economy as a whole.*

Public health threats and other highly communicable diseases and outbreaks could adversely impact our operations, the operations of our customers, suppliers, distributors and other business partners, as well as the healthcare system in general. The overall scope of the COVID-19 global pandemic and its impacts continue to fluctuate, and in some instances worsen, in various regions worldwide. Although the overall negative impact from the COVID-19 global pandemic on our business is difficult to estimate, our sales and operating results have been adversely impacted, and we anticipate that they will continue to be impacted and subject to unpredictable variability in future periods. Further, certain development activities, such as human factors studies associated with our product development efforts, activities to support the manufacturing scale-up for new products and the recruitment of participants in ongoing clinical studies, were modified or delayed due to impacts of the COVID-19 global pandemic, which has and continues to impact our development timelines and regulatory strategies and also could have a negative impact on our product commercialization efforts and the future demand for our products.

The COVID-19 global pandemic, or other similar outbreaks or epidemics, may have an adverse effect on the overall productivity of our workforce, and we expect to continue to take appropriate measures to protect the health and safety of our employees and our business partners and reduce the risk of disruptions to our operations. We temporarily increased our staffing in certain operations in order to mitigate potential risks associated with increases in unplanned employee absences or illness. Our adoption of these preventive measures has resulted in incremental costs that have negatively impacted our gross margin, and could impact future periods. In addition, for the duration of the COVID-19 global pandemic, some of our employees may be required to continue to operate within a remote work environment for extended periods of time due to illness, travel restrictions, government-imposed orders, school closures or for other reasons, any of which could result in reduced productivity of our workforce. As the COVID-19 global pandemic improves, we anticipate adapting to a hybrid work model, and we may experience additional costs as our employees return to work, or as we respond to general labor shortages and heightened competition for employees with specialized skills.

In addition to the foregoing impacts, disruptions from the COVID-19 global pandemic, or other similar outbreaks or epidemics, could result in delays in or the suspension of our manufacturing operations, research and product development activities, regulatory work streams, clinical development programs and other important commercial functions. In particular, if we or our third-party manufacturers are required to delay or suspend our manufacturing operations, we may encounter severe product shortages, which would adversely affect our results of operations and harm our reputation. We are also dependent upon our third-party suppliers for many of our product components and for our manufacturing-related equipment, and the COVID-19 global pandemic has and could continue to have a material adverse impact on the operations of one or more of our suppliers. These adverse impacts on our suppliers could prevent them from delivering products to us or supporting our requirements for manufacturing-related equipment on a timely basis, or at all. Additionally, we have been and may continue to be negatively impacted by global shortages of semiconductors and copper, which could limit our insulin pump manufacturing capacity. If we continue to experience these or similar manufacturing challenges, or if these challenges worsen in the future, it could increase our manufacturing costs, disrupt our manufacturing operations, negatively impact our product sales and harm our reputation.

The full extent of the impact of the COVID-19 global pandemic on our business and operations is highly uncertain and subject to change, and will continue to depend on a number of factors, including the scope and duration of the pandemic and any resulting changes to general economic conditions in the countries in which we operate and sell our products. Further spread or escalation of the COVID-19 global pandemic, a resurgence of the pandemic in the United States, or even the threat or perception that this could occur, or any protracted duration of decreased economic activity or increase in inflation, could have a material adverse impact on our business, operations and financial results and could negatively impact or disrupt our plans to have employees return to our facilities.

Our ability to maintain and grow our revenue depends in part on retaining a high percentage of our customer base.*

A key to maintaining and growing our revenue is the retention of a high percentage of our customers due to the potentially significant revenue generated from ongoing purchases of disposable infusion sets, insulin cartridges and other supplies. In addition, our pumps are designed and tested to remain effective for at least four years and a customer may consider purchasing another product from us when the time comes to replace the pump. We have developed retention programs aimed at our customers, their caregivers and healthcare providers, which include training specific to our products, ongoing support by our sales and clinical employees, and technical support and customer service. Demand for our products from our existing customers could decline or could fail to increase as anticipated or projected as a result of a number of factors, including the introduction of competitive products, breakthroughs for the monitoring, treatment or prevention of diabetes, changes in reimbursement rates or policies, manufacturing problems, perceived safety or reliability issues with our products or components or the products of our competitors, the failure to secure regulatory clearance or approvals for products or product features in a timely manner or at all, product development or commercialization delays, the impacts and disruptions caused by the COVID-19 global pandemic, or for other reasons.

Further, the COVID-19 global pandemic has resulted in substantial restrictions on our engagement efforts with customers and healthcare providers, including the cancellation or postponement of company-sponsored educational events, as well as third-party conferences, trade shows and similar events. The impact continues even as some third-party conferences, trade shows and events are being held remotely from time to time, which restricts our engagement with customers and healthcare providers. In addition, varying COVID-19 case rates can limit our in-person access to healthcare provider offices and also result in staffing shortages in the practices we serve. Collectively, these restrictions have negatively impacted, and are likely to continue negatively impacting, our ability to promote our new products and features to customers and healthcare providers, which could adversely impact our product sales and customer retention rates, as well as the strength of our brand.

The failure to retain a high percentage of our customers and increase sales to these customers consistent with our forecasts would have a material adverse effect on our business, financial condition and operating results.

We operate in a very competitive industry and if we fail to compete successfully against our existing or potential competitors, ~~many of whom have greater resources than us,~~or if the competitive environment harms our ~~sales~~business partners, our financial condition and operating results may be negatively affected.*

The medical device industry is intensely competitive, subject to rapid change and highly sensitive to the introduction of new products, treatment techniques or technologies, oras well as other activities of industry participants. We believe our products compete, and will continue to compete, directly with a number of traditional insulin pumps, as well as other methods for the treatment of diabetes, including multiple daily injection ~~or MDI,~~(MDI) therapy.

Our primary competitors are major medical device companies that are ~~either~~ publicly traded companies or divisions or subsidiaries of publicly traded ~~companies. For instance, Medtronic MiniMed,~~companies, including Insulet and Medtronic. In addition, Eli Lilly has announced a ~~division of Medtronic, Inc., has been the market leader for many years and has the majority share of the traditional~~collaboration to commercialize an existing third-party insulin pump ~~market in~~as part of a to-be-developed system and Becton Dickinson and Company recently completed the ~~United States. However, the market for~~spin off its diabetes care business as a separate publicly-traded company, Embecta. There are also a number of other companies developing and marketing their own insulin delivery systems and/or related software applications, including insulin pumps ~~continues~~and Bluetooth-enabled insulin pens to experience significant changes. For instance, in 2016, Roche Diabetes Care, a division of F. Hoffman-La Roche, discontinued sales of new insulin pumps in the United States. On October 5, 2017, Johnson & Johnson announced that it is planning to discontinue the operations of Animas Corporation and to exit the insulin pump business entirely. Both Roche and Animas designated Medtronic as a preferred partner to facilitate the transition of their respective insulin pump customers.support MDI therapy. While these industry changes are significant, it is ~~too early~~difficult to know how itthey will ~~influence~~impact our business or the competitive landscape in which we operate.

Our key competitors, most notably Medtronic, enjoy several competitive advantages over us, including:

●

~~greater financial and human resources for sales and marketing, product development, customer service and clinical resources;~~

•greater financial and human resources for sales and marketing, product development, customer service and clinical resources;

●

~~greater financial resources to respond to competitive pressures and regulatory uncertainty;~~

•greater ability to respond to competitive pressures, regulatory uncertainty, or challenges within the financial markets;

●

~~established relationships with healthcare providers, third-party payors and regulatory agencies;~~

•established relationships with healthcare providers, third-party payors and regulatory agencies;

●

~~established reputation and name recognition among healthcare providers and other key opinion leaders in the diabetes industry;~~

•established reputation and name recognition among healthcare providers and other key opinion leaders in the medical industry generally and the diabetes industry in particular;

●

~~greater market share and established base of customers;~~

•larger and more established distribution networks;

●

~~products supported by long-term clinical data;~~

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

●

~~larger and more established distribution networks;~~

•more experience in conducting R&D, manufacturing, clinical trials, and obtaining regulatory approval or clearance.

●

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

●

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

In some instances, our competitors offer products that include features that we do not currently offer. For instance, Medtronic offers a traditional insulin pump that is integrated with a CGM system with a threshold suspend feature. In addition, Medtronic recently commenced the commercialization of a new insulin pump product with additional automated insulin delivery functionality and a new CGM system. Similarly, Insulet offers an insulin pump with a tubeless delivery system that does not utilize an infusion ~~set. These specific features may make~~set and Medtronic is selling a connected insulin pen delivery device. Additionally, Medtronic recently announced the ~~competitive products more desirable~~launch in select European countries of an infusion set that can be worn for up to ~~customers and healthcare providers, which could negatively impact sales of our products.~~

seven days.

In addition, the competitive environment in which we operate has resulted and may continue to result in competitive pressures on our manufacturers, suppliers, distributors, collaboration partners and other business constituents. For example, we have entered into development agreements with Dexcom, which provide us non-exclusive licenses to integrate various generations of Dexcom CGM technology with our insulin pump products. Abbott ~~Laboratories recently announced FDA approval of a new blood~~also offers glucose ~~monitoring system,~~sensors which ~~is expected to~~ compete with ~~the~~ Dexcom ~~technology.~~CGMs. Further, we have entered into an agreement with Abbott to develop and commercialize integrated diabetes solutions using Abbott’s glucose sensor. There can be no assurance that our collaborations with Dexcom and Abbott will be successful or that we will not experience delays, business disputes, or other unanticipated challenges. Competitive pressures within our industry, ~~have impacted~~as well as the impacts and ~~may continue to~~disruptions associated with the COVID-19 global pandemic, could negatively impact the financial condition of our business partners and impact their ability to fulfill contractual obligations to us, which could negatively impact our ~~relationship with these partners, impact their ability to fulfil their obligations to us,~~product sales, result in delays in obtaining regulatory approvals for new products, harm our reputation, and result in harm to our financial condition and operating results.

For these and other reasons, we may not be able to compete successfully against our current or potential future ~~competitors. As a result, our product sales may be negatively affected,~~competitors, which could have ana material adverse impact on our financial condition and operating results.

Competitive products or other technological developments and breakthroughs for the monitoring, treatment or prevention of diabetes may render our products obsolete or less desirable.

Our ability to grow our business and achieve our strategic objectives will depend, among other things, on our ability to develop and commercialize products for the treatment of diabetes that offer distinct features and functionality, are easy-to-use, provide superior treatment outcomes, receive adequate coverage and reimbursement from third-party payors, and are otherwise more appealing than available alternatives. Our primary competitors, as well as a number of other companies and medical researchers ~~and pharmaceutical companies~~ are pursuing new delivery devices, delivery technologies, sensing technologies, treatment techniques, procedures, drugs and other therapies for the monitoring, treatment and prevention of diabetes. Any ~~technological~~ breakthroughs in diabetes monitoring, treatment or prevention could reduce the potential market for our products or render our products obsolete altogether, which would significantly reduce our sales or cause our sales to grow at a slower rate than we currently expect. In addition, even the perception that new products may be introduced, or that technological or treatment advancements could occur, could cause consumers to delay the purchase of our products.

Because the insulin-dependent diabetes market is large and growing, we anticipate ~~that~~ companies will continue to dedicate significant resources to developing competitive ~~products.~~products and technologies. The ~~frequent~~ introduction by competitors of products that are or claim to be superior to our products may create market confusion that may make it difficult to differentiate the benefits of our products over competitive products. In addition, some of our competitors employ aggressive pricing strategies, including the use of discounts, rebates, ~~low cost~~low-cost product upgrades or other financial incentives that could adversely affect sales of our products. If a competitor develops a product that competes with or is perceived to be superior to our products, or if competitors continue to utilize strategies that place downward pressure on pricing within our industry, our sales may decline, our operating margins could be reduced and we may fail to meet our financial projections, which would materially and adversely affect our business, financial condition and operating results.

Moreover, we have designed our hardware products to resemble modern consumer electronic devices to address certain embarrassment and functionality concerns consumers have raised with respect to traditional pumps. ~~The~~Similarly, our newer mobile software applications are being designed to incorporate features and functions that are common to other consumer-oriented applications. These consumer ~~electronics industry is itself~~industries are themselves highly competitive, and characterized by continuous new product introductions, rapid developments in technology, and subjective and changing consumer preferences. If, in the future, consumers cease to view our products as contemporary or convenient as compared to then-existing consumer ~~electronics~~ technology, our products may become less desirable.

The Technology Upgrade Program has resulted in accounting complexities that may be difficult for investors to understand and may lead to confusion when comparing our historical and future financial results.

The Technology Upgrade Program has resulted in a number of accounting complexities that will make comparisons of our historical and future financial results more difficult. In particular, United States generally accepted accounting principles, or GAAP, prevent us from recognizing, at the time of sale, up to 100% of the sales and cost of sales associated with the sale of t:slim and t:slim G4 made to eligible customers during the term of the Technology Upgrade Program. Instead, depending on the type of pump sold, we are required to defer some or all of the sales and cost of sales until a later date, which will generally be the earlier of when our obligations under the Technology Upgrade Program are satisfied or when the program expires. The amount and timing of the deferred sales and cost of sales will depend on multiple factors that are based on future events that are difficult to estimate or predict, especially because we have not offered a similar trade-in program in the past. For example, we do not currently have sufficient history to reasonably estimate the ~~likelihood that the trade-in rights will be exercised, or the timing of any trade-in decisions~~. Accordingly, it is very difficult for us to estimate the amount of the deferrals with any level of certainty, which makes it very difficult for us to predict our GAAP results, including revenues and operating margins.

Despite our efforts to explain the required accounting treatment for the Technology Upgrade Program, it is possible that investors or analysts will view the accounting treatment or the resulting impact on our GAAP financial results negatively, and there may be confusion when comparing our historical and future financial results, which may cause our stock price to decline. In addition, the complexities associated with the accounting treatment, or with the Technology Upgrade Program generally, may cause investors to avoid purchasing our common stock until the impact of the program is better understood or our financial results and trends are more predictable, which also may adversely impact our stock price.

Our ability to achieve profitability will depend, in part, on our ability to reduce the per unit cost of our products by increasing production volume and manufacturing efficiency, including by reducing raw material, labor, product-training, expected warranty and manufacturing overhead costs per unit.*

~~We believe that our ability to reduce the per-unit cost~~failure of our insulin pump ~~products~~ and related ~~cartridges will have a significant impact on our ability to achieve profitability.~~ ~~Our cost of sales includes~~ raw material procurement costs, labor costs, product-training expenses and expected warranty expenses. It also includes manufacturing overhead costs, including expenses relating to quality assurance, inventory control, facilities, equipment, information technology, and operations management. If we are unable to sustain or reduce our overall cost of sales, including through arrangements such as volume purchase discounts, negotiation of improved pricing, more efficient training programs for customers, and improved warranty performance, it will be difficult to reduce our per unit costs and our ability to achieve profitability will be constrained. The per unit cost of our products is significantly impacted by our overall production volumes, and any factors that cause our production volumes to decline, or to grow at a slower rate than we expect, would significantly impact our expected per unit costs. In addition, we may experience disruption in our manufacturing productivity or incur duplicative or incremental costs as we manage the planned relocation of our manufacturing facility over the next several months. Furthermore, while we currently believe our proprietary technology platform will allow us to gain efficiencies in the design and development of new products, changes in the market that require us to modify or replace our existing platform will reduce the amount of efficiency gained through our platform and increase our per unit costs. If we are unable to effectively manage our overall costs, while increasing our production volumes, we may not be able to achieve or sustain profitability, which would have an adverse impact on our business, financial condition and operating results.

~~The failure of our~~ products to achieve and maintain market acceptance could result in us achieving sales below our expectations, which would cause our business, financial condition and operating results to be materially and adversely affected.*

Our current business and growth strategy is highly dependent on our insulin pump and related products achieving and maintaining market acceptance. ~~Our products include t:slim X2 with G5 integration and t:flex.~~ In order for us to sell our products to people with insulin-dependent diabetes, we must convince them, their caregivers and healthcare providers that our products are an attractive alternative to competitive products for the treatment of diabetes, including traditional insulin pump products and MDI therapies, as well as alternative ~~insulin~~diabetes monitoring, treatment or prevention methodologies. Market acceptance and adoption of our products depends on educating people with diabetes, as well as their caregivers and healthcare providers, about the distinct features, ease-of-use, ~~positive lifestyle impact,~~beneficial treatment outcomes, and other perceived benefits of our products as compared to competitive products. If we are not successful in convincing existing and potential customers of the benefits of our products, or if we are not able to achieve the support of caregivers and healthcare providers for our ~~insulin pump~~ products, our sales may decline or we may ~~fail to increase~~achieve sales below our ~~sales in line with our forecasts.~~

~~Achieving and maintaining market~~expectations.

Market acceptance of our products could be negatively impacted by many factors, including:

●

•the failure of our products to achieve and maintain wide acceptance among ~~people with insulin-dependent diabetes, their caregivers, healthcare providers, third-party payors and key opinion leaders in the diabetes treatment community;~~

●

the failure of our products to provide the features and functionality that people with insulin-dependent diabetes, their caregivers and healthcare providers are seeking in an insulin pump, and to incorporate those features into our products in a timely, cost-effective and user-friendly manner;

●

~~lack of evidence supporting the safety, ease-of-use or other perceived benefits of our products over competitive products or other currently-available insulin treatment methodologies;~~

●

~~perceived risks or uncertainties associated with the use of our insulin pump products or similar products or technologies generally;~~

●

~~the introduction of competitive products, technologies or treatment techniques and the rate of their acceptance as compared to our insulin pump products;~~

●

~~discounts, rebates and other financial incentives that our competitors may offer for competitive products that make them more attractive than our products; and~~

●

~~results of clinical studies relating to our existing products or products under development or similar competitive products.~~

~~In addition, even if we are able to convince~~ people with insulin-dependent diabetes, their caregivers, or healthcare providers, ~~that~~third-party payors and key opinion leaders in the diabetes treatment community;

•lack of evidence supporting the safety, ease-of-use or other perceived benefits of our products ~~compare favorably to~~over competitive products or other currently available insulin treatment methodologies;

•perceived risks or uncertainties associated with the products and treatment alternatives offered by our competitors, negative perceptions regarding our financial stability relative to that of our competitors, and our ability to sustain our business operations on a long-term basis, especially in light of our recent and projected financial results, recent changes in and volatility of our stock price, concerns regarding our ability to maintain the continued listing of our common stock on NASDAQ, perceptions about the recent completion of a public offering of our common stock and warrants, our current level of indebtedness and debt service costs, our conclusion that there is substantial doubt about our ability to continue as a going concern, and uncertainties regarding the regulatory environment, could cause consumers to delay the purchaseuse of our products, or components thereof, or of similar products or technologies of our competitors;

•adverse regulatory or legal actions relating to ~~purchase~~our insulin pump products or similar products or technologies; and

•results of clinical studies relating to our existing products or products under development or similar competitive products.

~~Furthermore,~~

In addition, the rapid evolution of technology and treatment options within our industry may cause consumers to delay the purchase of our products in anticipation of advancements or breakthroughs, or the perception that advancements or breakthroughs could occur, in our products or the products offered by our competitors. For example, we believe that during the second half of 2016, consumers interested in purchasing our insulin pump products may have delayed or changed their purchasing decisions in anticipation of the release of a new product by one of our competitors. It is also possible that consumers interested in purchasing any of our future products currently under development may delay the purchase of one of our current products.

We anticipate that customers may continue to delay their purchasing decisions, or physicians may continue to pause prescriptions of our products, as a result of the COVID-19 global pandemic or unfavorable changes in general economic conditions.

If our insulin pump products do not achieve and maintain widespread market acceptance, we may fail to achieve sales ~~at or above~~consistent with our ~~projected amounts. If our sales do not meet our sales~~ projections, in which case our business, financial condition and operating results could be materially and adversely ~~affected, and we may fail to meet our strategic objectives.~~

affected.

Failure to secure or retain adequate coverage or reimbursement for our current products and our potential future products by third-party payors could adversely affect our business, financial condition and operating results.*

~~We have derived nearly~~ ~~all of our revenue from sales of insulin pumps and associated supplies and expect to continue to do so.~~

A substantial portion of the purchase price of an insulin pump is typically paid for by third-party payors, including private insurance companies, preferred provider organizations and other managed care providers. Future sales of our current and future products will be limited unless our customers can rely on third-party payors to pay for all or part of the associated purchase cost. Access to adequate coverage and reimbursement for our current and future products by third-party payors is essential to the acceptance of our products by customers.

As guidelines in setting their coverage and reimbursement policies, many third-party payors in the United States use coverage decisions and payment amounts determined by the Centers for Medicare and Medicaid Services ~~or CMS,~~(CMS), which administers the U.S. Medicare program. Medicare periodically reviews its reimbursement practices for diabetes-related products. Medicare previously implemented a competitive bidding process for blood glucose strip reimbursement, which resulted in a significant reduction in the reimbursement rate for those products. More recently, in 2017, Medicare announced,products, and ~~then shortly thereafter suspended, a competitive bidding process for insulin pumps. As a result,~~ there is uncertainty as to the future Medicare reimbursement rate for our products. It is also possible that CMS may continue to review and modify the current coverage and reimbursement of diabetes-related products in connection with anticipated changes to the regulatory approval process for insulin pumps and related products, software applications and services. In addition, ~~those~~ third-party payors that do not follow the CMS guidelines may adopt different coverage and reimbursement policies for our current and future products. ItFurther, it is possible that some third-party payors will not offer any coverage for our current or future products. For instance, ~~effective July 1, 2016, UnitedHealthcare designated~~it is possible that third-party payors may adopt policies in the future that designate one or more of our competitors as their preferred, in-network durable medical equipment provider of insulin pumps ~~for most customers over~~and that such policies would discourage or prohibit the ~~age of 18. We expect this decision will prevent a majority of UnitedHealthcare~~payors’ members from purchasing ~~an insulin pump from us for the foreseeable future. It is possible that other third-party payors may adopt similar policies in the future,~~our products, which would adversely impact our ability to sell our products.

We currently have contracts establishing reimbursement for our insulin pump products with ~~approximately 150~~a number of national and regional third-party payors in the United States. While we ~~anticipate entering~~may enter into additional contracts both in the United States and the more than 20 countries in which we operate outside the United States with third-party payors and ~~adding~~add coverage for future products under our current agreements,, we cannot guarantee that we will succeed in doing so or that the reimbursement contracts that we are able to negotiate will enable us to sell our products on a profitable basis. In particular, ~~any negative perceptions among third-party payors regarding our financial stability and our ability~~we have limited experience securing reimbursement in international markets other than Canada, as that process is managed by local distributors. Government involvement in funding healthcare may limit access to ~~continue to sell and service our products, may make it more difficult to enter into contracts for~~or reimbursement ~~with additional third-party payors. This may be especially true in light of the fact that our management believes that we do not have sufficient cash to fund our operations~~ for the ~~next twelve months without additional financing, and the conclusion that there is substantial doubt about our ability to continue as a going concern.~~Company’s products. In addition, existing contracts with third-party payors generally include numerous quality and compliance related requirements, including audit rights, and can be modified or terminated by the third-party payor without cause and with little or no notice to us. ~~Moreover,~~Our compliance with the administrative procedures or requirements ~~of third-party payors~~ may result in increased costs for us and delays in processing approvals by those third-party payors for customers to obtain coverage for our ~~products.~~products, and any payor audits of our compliance obligations may result in requests for refunds or other costs. Failure to secure or retain adequate coverage or reimbursement for our current and future products by third-party payors, or delays in processing approvals by those payors, could result in the loss of sales, which could have a material adverse effect on our business, financial condition and operating results.

Further, the healthcare industry in the United States is increasingly focused on cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with third-party payors. If third-party payors deny coverage or reduce their current levels of payment, or if our production costs increase faster than increases in reimbursement levels, we may be unable to sell our products on a profitable basis.

We may face unexpected challenges in marketing and selling our products, and training new customers on the use of our products, which could harm our ability to achieve our sales and service objectives.*

forecasts.

We have ~~only~~ limited experience marketing and selling our newer products as well as training new customers on their ~~use.~~use, particularly in international markets. In addition, the vast majority of our existing customers are individuals with type 1 diabetes, and we have ~~only~~ limited experience marketing and selling our products to customers with type 2 diabetes. ~~As a result,~~

In addition, due to the current COVID-19 global pandemic, starting in the first quarter of 2020 we ~~may face unexpected challenges marketing~~temporarily discontinued in-person activities for our field-based sales and ~~selling t:flex,~~clinical employees and are utilizing technology to remotely engage healthcare providers and customers. While we have authorized limited in-person activities to resume, many restrictions persist that have been imposed by state and local governmental authorities or expert agencies, as well as by the health systems and professional organizations with which we interact. The scope and duration of these restrictions on our field-based employees remains highly uncertain, and it is ~~designed~~difficult to ~~meet~~predict the ~~needs~~extent of ~~customers with type 2 diabetes and/or higher insulin requirements.~~

~~We expect to derive nearly all of~~any adverse impacts on the demand for our ~~revenue~~products resulting from ~~the sale of t:slim X2 with G5, t:flex Pumps and pump-related supplies unless and until we receive regulatory clearance or approval for other products currently under development. As a result, our~~these restrictions.

Our financial condition and operating results are and will continue to be highly dependent on ~~the~~our ability ~~of our sales and marketing organization~~ to adequately promote, market and sell our insulin ~~pumps~~pump and related products, and the ability of our diabetes educators to train new customers on the use of our products. If our sales and marketing representatives or diabetes educators ~~fail~~continue to ~~achieve~~be restricted in their ~~objectives,~~ability to interact with healthcare providers and customers, our sales could decrease or may not increase at levels that are in line with our forecasts.

If we are unable to maintain our existing sales, marketing, clinical and customer service infrastructure, we may fail to increase our sales to meet our forecasts.

A key element of our business strategy ~~is the ability of~~involves our sales, marketing, clinical ~~marketing~~ and customer service ~~infrastructure to drive~~personnel driving adoption ~~of our products, which includes independent diabetes educators that train new customers on the use~~ of our products. We have ~~rapidly~~significantly increased the number of sales, marketing, clinical and customer service personnel employed by us since ~~the initial~~we commenced commercial ~~launch of t:slim in 2012.~~sales. However, we have faced considerable challenges in growing and managing these resources, including with respect to recruiting, training and assimilation of ~~new~~sales territories and ~~accounts.~~new clinical training staff. We expect to continue to face significant challenges as we ~~manage~~seek to further increase the number of our sales, clinical and ~~grow our infrastructure~~customer service personnel in order to optimize the ~~future and work to motivate and retain the individuals who make up~~coverage of our existing ~~infrastructure.~~sales territories, as well as expand the number and scope of our existing sales territories. These challenges may be even greater in ~~light~~connection with our commercial expansion outside of ~~negative perceptions regarding our financial stability, and~~ the ~~recent decline in our stock price, which may make it more difficult to motivate and retain key personnel.~~United States, where we have limited experience. Unexpected turnover among our sales, marketing, clinical and customer service personnel, or unanticipated challenges in recruiting additional personnel, would have a negative impact on our ability to achieve our sales projections. Further, if a sales, marketing or clinical representative was to depart and be retained by one of our competitors, we may fail to prevent him or her from helping competitors solicit business from our existing customers, which couldadversely affect our sales. Similarly, if we are not able to recruit and retain a network of diabetes educators and customer service personnel, we may not be able to successfully train and service new customers, which could delay new sales and harm our reputation.

These risks may be greater now than in the past due to current general labor shortages in the United States, and in particular in our office locations in San Diego, California and Boise, Idaho.

We expect ~~that~~ the ~~management~~oversight of our sales, marketing, clinical and customer service personnel will continue to place significant burdens on our management ~~team.~~team, which may be compounded as we manage remote employees during the COVID-19 global pandemic and as we work towards returning personnel to our facilities. If we are unable to retain our personnel in line with our strategic plans, we may not be able to effectively commercialize our existing products or products under development, or enhance the strength of our brand, either of which could result in the failure of our sales to increase in line with our projections or ~~could even~~ cause sales to decline.

Our sales and marketing efforts are dependent on independent distributors who are free to market products that compete with our products. If we are unable to maintain or expand our network of independent distributors, our sales may be negatively affected.

For the year ended December 31, 2016, sales to approximately 40 independent distributors represented approximately 74% of our sales. While our goal is to ultimately reduce the percentage of our sales to independent distributors over time as we enter into contracts with additional third-party payors, we*

We believe ~~that~~ a ~~meaningful percentage~~majority of our sales will continue to be to independent distributors for the foreseeable future, and it is possible that the percentage of our sales to independent distributors could ~~even~~ increase, particularly in light of our reliance on independent distributors outside of the ~~near term.~~United States. For example, our dependence upon independent distributors in the United States could increase if third-party payors decide to contract with independent distributors directly in lieu of contracting with us to supply our products to their members directly. Our dependence upon independent distributors is also expected to increase following our launch of the t:lock Connector for our insulin cartridge, which we expect will result in greater sales of our infusion sets to distributors. Our dependence upon independent distributors could also increase if customers prefer to purchase all of their diabetes supplies through a single source, instead of purchasing pump-related products through us and other diabetes supplies through other suppliers. ~~However,~~ our conclusion that, unless we successfully raise additional capital, there is substantial doubt about our ability to continue as a going concern, together with the inclusion of an explanatory paragraph that describes conditions that raise substantial doubt about our ability to continue as a going concern in our independent registered public accounting firm’s report contained in our financial statements for the year ended December 31, 2016, may negatively impact one or more of our distributors’ interest in continuing to do business with us. None of our independent distributors ~~has~~in the United States have been required to sell our products exclusively and each of them may freely sell the products of our competitors. ~~Our distributor agreements generally have one-year initial terms with automatic one-year renewal terms, and are terminable in connection with a party’s material breach.~~ If we are unable to maintain or expand our network of independent distributors, our sales may be negatively affected.

For the year ended December 31, ~~2016,~~2021, our two largest independent distributors in the United States collectively comprised approximately ~~33%~~21% of our worldwide sales, and our three largest independent international distributors collectively comprised approximately 55% of our international sales. If any of our key independent distributors were to cease to distribute our products or reduce their promotion of our products as compared to the products of our competitors, our sales could be adversely affected. In ~~such a situation,~~that case, we may need to seek alternative independent distributors or increase our reliance on our other independent distributors or our direct sales representatives, which may not prevent our sales from being adversely affected. Additionally, to the extent ~~that~~ we enter into additional arrangements with independent distributors to perform sales, marketing or distribution services, ~~or other arrangements pursuant to which independent distributors may purchase product from us,~~ the terms of the arrangements could ~~cause~~result in our product margins ~~to be~~being lower than if we directly marketed and sold our products.

If the third parties on which we increasingly rely to assist us with our current and anticipated pre-clinical development or clinical trials do not perform as expected, we may not be able to obtain regulatory clearance or approval or commercialize our products.

As our clinical infrastructure expands, we expect to increasingly rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct some of our current and anticipated pre-clinical investigations and clinical trials. If we are not able to ~~contract with or~~ reach ~~other~~ mutually acceptable agreements with these third parties on a timely basis, ~~or on mutually acceptable terms, or~~ these third parties do not successfully carry out their commitments or regulatory obligations or meet expected deadlines, or the quality or accuracy of the data they obtain is compromised due to the failure to adhere to ~~agreed upon~~agreed-upon clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance or approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. In particular, we currently expect to rely on data from the IDCL Trial to support our development of t:slim X2 with TypeZero inControl AID algorithms. The IDCL Trial is being conducted entirely by third parties over which we have little or no control or influence. In the event that the IDCL Trial is not performed on a timely basis, or if the quality or accuracy of the data obtained from the IDCL Trial is compromised due to the failure to adhere to clinical protocols or regulatory requirements or for other reasons, our development activities for t:slim X2 with TypeZero may be negatively impacted.

We are increasingly dependent on clinical investigators and clinical sites to enroll ~~patients~~participants in our current and anticipated clinical trials and human factors studies, and the failure to successfully complete ~~the clinical~~those trials and studies could prevent us from obtaining regulatory approvals for or commercializing our products.

As part of our product development efforts, we expect to increasingly rely on clinical investigators and clinical sites to enroll ~~patients~~participants in our clinical trials or users in our human factors testing and other third parties to manage such trials and testing and to perform related data collection and analysis. However, we may not be able to control the amount and timing of resources that clinical sites may devote to our clinical trials ~~especially with respect to the IDCL Trial that we intend to rely upon for the development of t:slim X2 with TypeZero.~~or other studies. If these clinical investigators and clinical sites fail to enroll a sufficient number of patients, fail to ensure compliance by patients with clinical protocols, or fail to comply with regulatory requirements, we may be unable to successfully complete our clinical trials or other studies, which could prevent us from obtaining regulatory approvals for our products and commercializing our products, which would have an adverse impact on our business.

~~Our ability to maintain and grow our revenue depends in part on retaining a high percentage of our customer base.~~

A key to maintaining and growing our revenue is the retention of a high percentage of our customers due to the potentially significant revenue generated from ongoing purchases of disposable insulin cartridges and other supplies. In addition, our pumps are designed and tested to remain effective for at least four years and a satisfied customer may consider purchasing another product from us when the time comes to replace the pump. We have developed retention programs aimed at customers, their caregivers and healthcare providers, which include training specific to our products, ongoing support by sales and clinical employees, and 24/7 technical support and customer service. If demand for our products fluctuates, including as a result of the introduction of competitive products, changes in reimbursement policies, manufacturing problems, perceived safety or reliability issues with our or our competitors’ products, the failure to secure regulatory clearance or approvals, or for other reasons, our ability to attract and retain customers could be harmed. In addition, the retention of current customers may be impacted by negative perceptions regarding our financial stability relative to that of our competitors, and our ability to sustain our business operations on a long-term basis. The failure to retain a high percentage of our customers would negatively impact our revenue growth and may have a material adverse effect on our business, financial condition and operating results.

If important assumptions about the potential market for our products are inaccurate, or if we have failed to understand what people with insulin-dependent diabetes are seeking in an insulin pump, our business and operating results may be adversely affected.

Our business strategy was developed based on a number of important assumptions about the diabetes industry in general, and the insulin-dependent diabetes market in particular, any one or more of which may prove to be inaccurate or may change over time. For example, we believe that the benefits of insulin pump therapy as compared to other common insulin treatment alternatives will continue to drive growth in the market for insulin pump therapy. In addition, we believe the incidence of diabetes in the United States and worldwide is increasing. Further, our view is that diabetes management can vary greatly from person to person, creating multiple market segments based on clinical needs and personal preferences. However, each of these assumptions may prove to be inaccurate and limited sources exist to compare treatment alternatives and obtain reliable market data. The actual incidence of diabetes, and the actual demand for our products or competitive products, could differ materially from our projections if our assumptions are incorrect. In addition, our strategy of focusing exclusively on the insulin-dependent diabetes market may limit our ability to increase sales or achieve profitability.

Another key element of our business strategy is utilizing market research to understand what people with diabetes are seeking to improve in their diabetes therapy management. This strategy underlies our entire product design, marketing and customer support approach and is the basis on which we developed our current products and are pursuing the development of new products. However, our market research is based on interviews, focus groups and online surveys involving people with insulin-dependent diabetes, their caregivers and healthcare providers, ~~that~~which represent only a small percentage of the overall insulin-dependent diabetes market. As a result, the responses we ~~received~~receive may not be reflective of the broader market and may not provide us accurate insight into the desires of people with insulin-dependent diabetes. In addition, understanding the meaning and significance of ~~the responses received during our~~such market research responses necessarily requires that analysis be conducted and conclusions be drawn. We may not be able perform an analysis that yields meaningful results, or the conclusions we draw from the analysis could be misleading or incorrect. Moreover, even if our market research has allowed us to better understand the features and functionality consumers are seeking in an insulin pump to improve management of their diabetes therapy, there can be no assurance that consumers will actually purchase our products or that our competitors will not develop products with similar features.

We ~~have a limited operating history upon~~expect to face complexities frequently encountered by companies in competitive and rapidly evolving markets, which may make it difficult to evaluate our business and forecast our future sales and operating ~~results and may face difficulties frequently encountered by companies early~~results.

We operate in ~~their commercialization in~~a competitive and rapidly-evolving markets.*

We commenced operations in 2006, and began commercial sales of t:slim in the third quarter of 2012, of t:flex in the second quarter of 2015 and of t:slim G4 in the third quarter of 2015. Accordingly, we have a limited operating history upon which to evaluate our business and forecast our future sales and operating results. More recently, our commercial launches of t:slim X2 with G5 and t:lock,rapidly evolving market. Important industry changes, such as the FDA approval and launch of new products by ~~one~~our competitors, as well as changes specific to our business, such as the timing of our ~~competitors,~~launch of new products currently in development, increasing reliance on digital health products and ~~the announcement by Johnson & Johnson that it is discontinuing the operations~~connected devices, and our potential expansion of ~~Animas Corporation and exiting the insulin pump business~~commercial sales in international markets, combine to make it more difficult for us to predict our future sales and operating ~~results.~~results, as well as our expected timeframe to achieve profitability. The significant uncertainty resulting from the COVID-19 global pandemic has made, and may continue to make, it more difficult for us to accurately forecast our financial results and achieve sustained profitability. In assessing our business prospects, you should consider these factors as well as the various risks and difficulties frequently encountered by companies ~~early in their commercialization history~~ in competitive and rapidly evolving markets, particularly those ~~facing emerging growth~~ companies that manufacture and sell medical devices.

These risks include our ability to:

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~~implement~~ ~~and execute our business strategy;~~

•implement and execute our business strategy;

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~~manage and improve the productivity of our sales, clinical and marketing infrastructure to grow sales of our existing and proposed products;~~

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~~increase awareness of our brand and build loyalty among people with insulin-dependent diabetes, their caregivers and healthcare providers;~~

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~~expand our commercial operations, including complying with a broad range of legal requirements within a highly regulated industry;~~

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expand our manufacturing capabilities, including obtaining and maintaining regulatory approvals to operate our facilities, increasing production of products efficiently while maintaining quality standards, and adapting our manufacturing facilities to the production of new products;

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~~respond effectively to competitive pressures and developments;~~

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~~enhance our existing products and develop proposed products;~~

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~~obtain and maintain regulatory clearance or approval to enhance our existing products and commercialize proposed products;~~

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~~perform clinical trials with respect to our existing products and proposed products; and~~

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

~~Due~~•manage and improve the productivity of our sales, marketing, clinical and customer service infrastructure to grow sales of our existing and proposed products, and enhance our ability to provide service and support to our ~~limited operating history, we may not have~~customers;

•achieve and maintain market acceptance of our products and increase awareness of our brand among people with insulin-dependent diabetes, their caregivers and healthcare providers;

•comply with a broad range of regulatory requirements within a highly regulated industry;

•enhance our manufacturing capabilities, increase production of products efficiently while maintaining quality standards, and adapt our manufacturing facilities to the institutional knowledge or experience to be able to effectively address these and other risks that may face our business. In addition, we may not be able to develop insights into trends that could emerge and negatively affect our business and may fail to production of new products;

•respond effectively to ~~those trends.~~ competitive pressures and developments;

•enhance our existing products and develop proposed products;

•manage cybersecurity and other technological risks associated with our expanding portfolio of digital health products, and align these products to a dynamic threat landscape.

•obtain and maintain regulatory clearance or approval to enhance our existing products and commercialize proposed products;

•perform clinical trials and other studies with respect to our existing products and proposed products; and

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

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

Our ability to achieve profitability will depend, in part, on our ability to reduce the per-unit cost of our products while also increasing production volume.

We believe our ability to reduce the per-unit cost of our insulin pumps and related products will have a significant impact on our ability to achieve profitability. Our cost of sales includes raw materials and component parts, labor costs, product training expenses, freight, reserves for expected warranty costs, royalties, scrap and charges for excess and obsolete inventories. It also includes manufacturing overhead costs, including expenses relating to quality assurance, manufacturing engineering, material procurement and inventory control, facilities, equipment, information technology and operations supervision and management. Our warranty reserve requires a significant amount of judgment and is primarily estimated based on historical experience. Recently released versions of our pump may not incur warranty costs in a manner similar to previously released pumps and the launch of our mobile app also may result in unanticipated changes in historical trends.

In response to the COVID-19 global pandemic, we have taken steps to prioritize the health and safety of our employees and customers, while working to maintain a continuous supply of products, training and customer support. For example, we have implemented preventative safety measures for our employees involved in production and fulfillment operations as well as for any field-based employees. For employees in other functions, we have adopted measures designed to help employees remain effective in a work-from-home environment and we are implementing safety measures and protocols as employees transition back into our facilities. We also temporarily increased our staffing in certain operations in order to mitigate potential risks associated with increases in unplanned employee absences or illness. In addition, due to shortages of specific components, we have had to qualify alternative components or source components from alternative distributors. Each of these measures has resulted in unanticipated expenses that will negatively impact our gross margin and may adversely impact our ability to achieve profitability. We may also incur additional incremental expenses to help us support our ongoing operations during a period of unpredictable variability in the demand for our products, including throughout the duration of the COVID-19 pandemic.

If we are unable to increase our production volumes while sustaining or reducing our overall cost of sales, including through arrangements such as volume purchase discounts, negotiation of pricing and cost reductions with our suppliers, more efficient training programs for customers, improved warranty performance or fluctuations in warranty estimates, it will be difficult to reduce our per-unit costs and our ability to achieve profitability will be constrained.

In addition, the per-unit cost of our products is significantly impacted by our overall production volumes, and any factors that prevent our products from achieving market acceptance, cause our production volumes to decline, alter our product mix, result in our sales growing at a slower rate than we expect, or result in the closure of our manufacturing facilities, would significantly impact our expected per-unit costs, which would adversely impact our gross margins. Further, we may not achieve anticipated improvements in manufacturing efficiency as we undertake actions to expand our manufacturing capacity. We are also subject to other general market and economic conditions that may increase our expenses, including unpredictable variability in commodity prices, wage increases and inflation. If we are unable to effectively manage our overall costs while increasing our production volumes and lowering our per-unit costs, we may not be able to achieve or sustain profitability, which would have an adverse impact on our business, financial condition and operating results.

Manufacturing risks may adversely affect our ability to manufacture products, which could negatively impact our sales and operating margins.*

Our business strategy depends on our ability to manufacture our current and proposed products in sufficient quantities and on a timely basis ~~so as~~ to meet consumer demand, while adhering to product quality standards, complying with regulatory requirements and managing manufacturing costs. We are subject to numerous risks ~~relating~~related to our manufacturing capabilities, including:

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~~quality or reliability defects in product components that we source from third-party suppliers;~~

•quality or reliability defects in product components that we source from third-party suppliers;

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~~our inability to secure product components in a timely manner, in sufficient quantities and on commercially reasonable terms;~~

•our inability to secure product components in a timely manner due to shipping delays at ports of entry or exit, the impact of the COVID-19 global pandemic, or other issues, in sufficient quantities and on commercially reasonable terms;

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~~difficulty identifying and qualifying alternative suppliers for components in a timely manner;~~

•difficulty identifying and qualifying alternative suppliers for components in a timely manner;

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~~the challenge of implementing and maintaining acceptable quality systems while experiencing rapid growth;~~

•implementing and maintaining acceptable quality systems while experiencing rapid growth;

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~~our failure to increase production of products to meet demand;~~

•our failure to increase production of products to meet demand;

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•our inability to modify production lines and expand manufacturing facilities to enable us to efficiently produce future products or implement changes in ~~current products in response to consumer demand or regulatory requirements;~~

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~~our inability to manufacture multiple products simultaneously while utilizing common manufacturing equipment; and~~

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~~potential damage to or destruction of our manufacturing equipment or manufacturing facility.~~

~~These risks are likely to be exacerbated by our limited experience with our~~ current products ~~and~~in response to consumer demand or regulatory requirements;

•our inability to manufacture multiple products simultaneously while utilizing common manufacturing ~~processes.~~

equipment;

•government-mandated or voluntary closures of, or operational limitations impacting, our manufacturing facilities; and

•potential damage to or destruction of our manufacturing equipment or manufacturing facilities.

As demand for our products increases, and as the number of our commercial products expands, we will have to invest additional resources to purchase components, hire and train employees, and enhance our manufacturing processes and quality systems. ~~Over the past year we have implemented several new pieces~~We may also increase our utilization of ~~equipment that are intended~~third parties to ~~improve our~~perform contracted manufacturing ~~capacity and efficiency~~services for us, and we ~~expect~~may need to ~~implement~~acquire additional custom designed equipment ~~and procedures over~~to support the ~~next 12-18 months. However, it is possible that we may not achieve the anticipated improvements from these investments.~~

~~In addition, during 2016 we entered into a new lease agreement for an additional facility to consolidate substantially all~~expansion of our manufacturing warehousing and other operational needs, and the transition of these operations to a new facility is subject to additional risk and uncertainty, and may expose us to duplicative or incremental costs. While we have obtained the regulatory approvals necessary to commence manufacturing and shipping certain products from the new facility, we have not obtained approval to manufacture all of our products at this facility and the timing associated with obtaining the additional approvals is uncertain. Furthermore,capacity. In addition, although we expect some of our products under development to share product features and components with our current products, manufacturing of these products may require ~~the~~ modification of our production lines, ~~the~~ hiring of specialized employees, ~~the~~ identification of new suppliers for specific components, ~~the implementation of~~qualifying and implementing additional equipment and procedures, obtaining new regulatory approvals, or ~~the development of~~developing new manufacturing technologies. Ultimately, it may not be possible for us to manufacture these products at a cost or in quantities sufficient to make these products commercially viable.

In response to the COVID-19 global pandemic, in early 2020 we initiated discussions with our key suppliers regarding their abilities to fulfill existing orders and we have continued to regularly assess their capacity. At various times, our primary infusion set manufacturer experienced certain inventory constraints which resulted in us requesting some customers to accept substitutions of similar products to prevent delays in order fulfillment. Additionally, at various times our cartridge inventory was below our targeted stocking levels and our inventory of certain pump and cartridge components are currently below our targeted stocking levels. We continue to monitor factors that could negatively impact our supply chain, such as shortages of semiconductors and copper that are needed to manufacture our insulin pumps and accessories and custom components for our insulin pumps and cartridges where we rely on a limited number of qualified suppliers. If we continue to experience these or similar manufacturing challenges, or if these challenges worsen in the future, it could have a negative impact on product sales and harm our reputation.

If we and our suppliers fail to increase our production capacity to meet consumer demand while also maintaining product quality standards, obtaining and maintaining regulatory approvals, and efficiently managing costs, our sales and operating margins could be negatively impacted, which would have an adverse impact on our financial condition and operating results.

We depend on a limited number of third-party suppliers for certain ~~product~~ components and products, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of components or products, or our ability to adequately forecast customer demand, could harm our business.

We currently rely, and expect to continue to rely, on third-party suppliers to supply components of our current products and of our potential future products, including our disposable insulin cartridges. For example, we rely on plastic injection molding companies to provide plastic molded components, electronic manufacturing suppliers to provide electronic assemblies, and machining companies to provide machined mechanical components. We also purchase all of our infusion sets and pump accessories from third-party suppliers. For our business strategy to be successful, our suppliers must be able to provide us with components and products in sufficient quantities, in compliance with regulatory requirements and quality control standards, in accordance with agreed-upon specifications, at acceptable costs and on a timely basis. ~~Recently,~~

Although we have implemented several business strategies intended to increase our future sales of infusion sets. Increases in any of our product sales, whether forecasted or unanticipated, could strain the ability of our suppliers to deliver an increasingly large supply of components in a manner that meets these various requirements.

~~We do not~~ have long-term supply agreements with many of our suppliers, ~~and, in many cases, we make our purchases on a purchase order basis.~~these agreements do not include long-term capacity commitments. Under most of our supply agreements, we make purchases on a purchase order basis and have no obligation to buy any given quantity of components or products until we place written orders, and our suppliers have no obligation to manufacture for us or sell to us any given quantity of components or products until they accept an order. ~~As a result, our ability to purchase adequate quantities of our components or products may be limited. Additionally,~~In addition, our suppliers may encounter problems that limit their ability to manufacture components or products for us, including financial difficulties, or damage to their manufacturing equipment or ~~facilities.~~facilities, inability to obtain raw materials or other components, or problems with their own suppliers. For instance, we are currently subject to allocation limits for certain semiconductor components. As a result, our ability to purchase adequate quantities of our components or products may be limited. If we fail to obtain sufficient quantities of ~~high quality~~high-quality components to meet demand on a timely basis, we could lose customer orders, our reputation may be harmed, and our business could suffer. Our conclusion that, unless we successfully raise additional capital, there is substantial doubt about our ability to continue as a going concern, together with the inclusion of an explanatory paragraph that describes conditions that raise substantial doubt about our ability to continue as a going concern in our independent registered public accounting firm’s report contained in our financial statements for the year ended December 31, 2016, may cause one or more of our suppliers to terminate their relationship with us, or claim that our financial condition causes them to demand different payment terms.

We generally use a small number of suppliers for our components ~~or products.~~and products, some of which are located outside the United States, including in China, Mexico and Costa Rica. Depending on a limited number of suppliers exposes us to risks, including limited control over ~~pricing,~~costs, including tariffs, availability, quality and delivery schedules. Moreover, in some cases we do not have long-standing relationships with our manufacturers and may not be able to convince suppliers to continue to make components available to us unless there is demand for such components from their other customers. As a result, there is a risk that certain components could be discontinued and no longer available to ~~us.~~us at acceptable prices, or at all. We have in the past been, and we may in the future be, required to make significant “last time” purchases of component ~~inventory~~inventories that isare being discontinued by the manufacturer to ensure supply continuity. If any one or more of our suppliers cease to provide us with sufficient quantities of components in a timely manner or on terms acceptable to us, we would have to seek alternative sources of supply. We are actively pursuing alternative suppliers of several existing components and qualifying new alternatives to existing select components, but there is no assurance that we will be able to identify alternative sources that meet our requirements and at comparable prices, or at all. Because of factors such as the proprietary nature of our products, our quality control standards and applicable regulatory requirements, we cannot quickly engage additional or replacement suppliers for some of our critical components. These risks associated with the procurement of critical components from a limited number of suppliers may be increased as a result of the COVID-19 global pandemic. Failure of any of our suppliers to deliver products at the level our business requires ~~would~~could harm our reputation and limit our ability to meet our sales ~~commitments,~~projections, which ~~could harm our reputation and~~ could have a material adverse effect on our ~~business.~~

business, financial condition and operating results.

We place orders with our suppliers using our forecasts of customer demand, which are based on a number of assumptions and estimates, in advance of purchase commitments from our customers. As a result, we incur inventory and manufacturing costs in advance of anticipated sales, which sales ultimately may not materialize or may be lower than expected. If we overestimate customer demand, we may experience higher inventory carrying costs and increased excess or obsolete inventory, which would negatively impact our results of operations. By the same token, if we underestimate future demand we may be unable to meet future production requirements or our inventory of critical materials may be below our targeted stocking levels. We expect it will be particularly difficult to accurately forecast demand during the global pandemic and even for some time while travel and social-distancing restrictions are lifted.

We may also have difficulty obtaining ~~similar~~ components from other suppliers that are acceptable to the FDA or other regulatory agencies, and the failure of our suppliers to comply with ~~strictly-enforced~~ regulatory requirements could expose us to regulatory action including warning letters, product recalls, termination of distribution, product seizures or civil penalties. Such a failure by our suppliers could also require us to cease using the components, seek alternative components or technologies, and modify our products to incorporate alternative components or technologies, which could necessitate additional regulatory approvals. Any disruption of this nature, or any increased expenses associated with any such ~~disruptions,~~disruption, could negatively impact our ability to manufacture our products on a timely basis, in sufficient quantities, or at all, which could harm our commercialization efforts and ~~adversely affect~~have a material adverse impact on our operating results.

If we cannot manufacture and sell our new infusion set connector when anticipated, or if it does not achieve market acceptance, we may not achieve our financial projections.*

In September 2017, we began commercial sales of products with our t:lock Connector, which replaces the standard Luer-lok connector that historically joined an infusion set to our proprietary disposable insulin cartridges. Concurrently, we began selling infusion sets that are compatible with t:lock. Our anticipated 2017 sales assume that our current and future customers will begin using our new cartridges and infusion sets with t:lock in significant quantities by the end of 2017. Furthermore, our supplier of infusion sets must manufacture a variety of lengths and styles of infusion sets with t:lock that matches our cartridges. Failure to do so, or to do so at the necessary production volumes, may result in our inability to convert customers to t:lock when anticipated or at all, which would negatively impact our sales and operating margins.

In addition, our independent distributors will need to agree to purchase the compatible infusion sets from us to provide to their customers. We anticipate the transition period for our direct customers and distributors to utilize their inventory on hand before transitioning to t:lock will be 90 to 120 days following its initial launch. During this period we anticipate offering both styles of cartridges and infusion sets to facilitate the transition of customer supplies. However, due to the variability in purchasing patterns, standard Luer-lok inventory may not be consumed at the predicted rates and we may be required to offer both styles of insulin cartridges and infusion sets for a longer period than anticipated or we may be left with excess quantities of Luer-lok style insulin cartridges that we cannot sell at standard prices or at all.

While t:lock was designed based on customer feedback, and all standard Luer-lok infusion sets that we currently offer will initially be made available with t:lock, it is possible that t:lock may not gain market acceptance by current or potential customers, their caregivers, or healthcare providers.

Any negative market response to t:lock may impact a current customer’s decision to purchase a new pump from us at the time of renewal. In addition, potential customers may decide not to purchase our insulin pumps if they do not prefer t:lock or t:lock compatible infusion sets, which may impede our ability to achieve our financial projections.

~~We currently operate primarily at two locations in San Diego, California, and any~~ disruption at ~~these locations~~one of our facilities could adversely affect our business and operating results.*

~~Substantially all~~

Although we operate in multiple locations, most of our current operations are ~~either~~still conducted ~~or expected to be conducted, at two locations~~ in San Diego, California, including our final pump assembly, some manufacturing processes, and the majority of our research and development, ~~activities, customer and technical support, and~~ management and administrative functions. In addition, ~~substantially all~~the majority of our ~~inventory~~inventories of component supplies and finished goods ~~are held~~is stored at ~~these locations.~~two facilities in San Diego. Over the past two years we substantially expanded various quality and customer and technical support activities in Boise, Idaho. We take precautions to safeguard our facilities and data infrastructure, including by acquiring insurance, employing back-up generators, adopting health and safety protocols, implementing cybersecurity protections, and utilizing off-site storage of computer data. However, vandalism, terrorism, unplanned power outages, cyberattacks or a natural ~~or other~~ disaster, such as an earthquake, fire or flood, or other catastrophic event, could damage or destroy our manufacturing equipment or our ~~inventory~~inventories of component supplies and finished goods, cause substantial delays in our operations, result in the loss of key information, result in reduced sales, and cause us to incur additional expenses. Our insurance coverage may not ~~cover our losses~~be sufficient to provide coverage with respect to the damages incurred in any particular ~~case.~~case, and our insurance carrier may deny coverage with respect to all or a portion of our claims. Regardless of the level of insurance coverage or other precautions taken, damage to our facilities may have a material adverse effect on our business, financial condition and operating results.

~~The~~

We may not experience the anticipated operating efficiencies from the transition of our manufacturing and warehousing operations.

At the beginning of 2018 we completed the transition of our manufacturing operations to ~~our new~~a facility may result in further delays or expenses, which may increase our manufacturing and operating costs and require us to spend additional capital.*

~~We currently manufacture all of our insulin pump products and a significant portion of our cartridges at our headquarters~~located on Barnes Canyon Road in San Diego, ~~California, but are~~and during the fourth quarter of 2019 we commenced operations at a logistics warehouse in ~~the process~~San Diego. We expect that both of ~~transitioning all of our manufacturing operations to a nearby facility that~~these actions will allow for future capacity for product manufacturing and warehousing expansion. ~~The transition~~However, we may not experience the anticipated operating efficiencies at either facility as we continue to ~~the new~~scale our business operations and add manufacturing ~~facility commenced during the second quarter~~requirements for products currently under development. In addition, beginning in 2020 we outsourced a portion of ~~2017~~our cartridge manufacturing demand to an experienced third-party contract manufacturer and we expect to ~~complete~~increase our reliance on this third-party cartridge manufacturer over the ~~transition by the end of 2017. During the transition period we expect to experience some temporary duplication of operations to support ongoing product~~next 24 months while reducing our own internal t:slim cartridge manufacturing ~~which will result~~capacity in ~~duplicative and incremental costs. In addition, while we have obtained certain governmental approvals~~ ~~necessary to commence manufacturing and shipping certain products from the new facility, we have not obtained approval to manufacture all~~our existing facility. We may consider outsourcing other aspects of our ~~products at this facility and~~operations in the ~~timing associated with obtaining the additional approvals is uncertain.~~ We may continue to face significant challenges as we manage our proposed facility transition, such as additional delays or expenses, and we may be required to make additional capital expenditures relating to the new facility. We also may experience unanticipated inefficiencies as we commence manufacturing operations at the new facility, particularly during the transition period.future. If we fail to achieve the operating efficiencies that we anticipate, ~~from the new facility, or if we incur substantial incremental costs during the transition,~~ our manufacturing and operating costs may be greater than expected, which would have a material adverse impact on our operating results. In addition, we ~~anticipate.~~

~~In September 2017, following an inspection relating~~or our third-party contract manufacturers may encounter problems during manufacturing for a variety of reasons, including failure to ~~our new manufacturing facility, the FDA issued a Form 483, List of Inspectional Observations, containing two observations. Following our receipt of the Form 483, we began implementing corrective~~follow specific protocols and ~~preventive actions~~procedures, failure to ~~fully address the FDA observations,~~comply with applicable regulations, equipment malfunction, component part supply constraints and we intend to provide written responses to the FDA detailing these corrective and preventive actions. While we believe we will resolve this matter with the FDA without significant delay or expense, the outcome of this matter is presently uncertain. We cannot provide assurance that the FDA will conclude that our corrective and preventive actions are adequate to address the observations. If the FDA is not satisfied, it may issue a warning letter to us or may take other actions,environmental factors, any of which could delay or impede our ability to meet customer demand and have a material adverse ~~effect~~impact on our ~~business.~~

business, financial condition and operating results. Further, because of the custom nature of our cartridge manufacturing process and product components, and the highly regulated nature of our products overall, in the event of any problems with a contract manufacturer, we may not be able to quickly establish additional or alternative arrangements.

We expect that the management and support of our ~~transition to~~facilities, increasing reliance on third-party contract manufacturers and the ~~new facility~~increase of our manufacturing volumes will place significant burdens on our management team, particularly in areas relating to operations, quality, regulatory, facilities and information technology. ~~If we experience unanticipated employee turnover in any of these areas, we~~We may not be able to effectively manage ~~the completion of construction of the new facility or~~ our ~~transition and commencement of~~ongoing manufacturing operations ~~when planned~~ and we may not achieve the operating efficiencies that we anticipate, either from ~~the new facility.~~

our own facilities or from our use of contract manufacturing. Further, additional increases in demand for our products may require that we further expand our business operations, which may require that we obtain additional facilities, make additional investments in capital equipment or increase our utilization of third-party contract manufacturing.

If we do not enhance our product ~~offerings through~~portfolio to meet the demands of our ~~research and development efforts,~~market, we may fail to effectively compete, orwhich may impede our ability to become profitable.

In order to increase our sales and market share in the insulin-dependent diabetes market, we must enhance and broaden our product ~~offerings~~portfolio in response to the evolving demands of people with insulin-dependent diabetes, their caregivers and healthcare providers, as well as competitive pressures and technologies. We may not be successful in developing, obtaining regulatory approval for, or marketing our proposed products when anticipated, or at all. In addition, notwithstanding our market research efforts, our future products may not be accepted by people with insulin-dependent diabetes, their caregivers, healthcare providers or third-party payors. The success of any proposed product offerings will depend on numerous factors, including our ability to:

●

identify the product features and functionality that people with insulin-dependent diabetes, their caregivers and healthcare providers are seeking in an insulin pump, and successfully incorporate those features into our products;

●

~~develop and introduce products in sufficient quantities and in a timely manner;~~

●

~~offer products at a price that is competitive with other products then available;~~

•identify the product features and functionality that people with insulin-dependent diabetes, their caregivers and healthcare providers are seeking in an insulin pump, and successfully incorporate those features into our products;

●

~~work with third-party payors to obtain reimbursement for our products;~~

•develop and introduce products in sufficient quantities and in a timely manner;

●

~~adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties;~~

•offer products at a price that is competitive with other products then available;

●

~~demonstrate the safety and efficacy of proposed products; and~~

•work with third-party payors to obtain reimbursement for our products;

●

~~obtain the necessary regulatory approvals for proposed products.~~

•adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties;

•demonstrate the safety and efficacy of proposed products; and

•obtain the necessary regulatory approvals for proposed products on a timely basis.

If we fail to generate demand by continuing to develop products that incorporate features and functionality requested by people with insulin-dependent diabetes, their caregivers or healthcare providers, or if we do not obtain regulatory clearance or approval for proposed products in time to meet market demand, we may be unable to compete and may fail to generate sales sufficient to achieve or maintain profitability. We have in the past experienced, and we may in the future experience, delays in various phases of product development and commercialization, including during research and development, manufacturing, limited release testing, marketing and customer education efforts. We have also recently experienced delays in the regulatory review and approval process, including due to the impacts of the current global pandemic. Any delays in our anticipated regulatory submissions or approvals, or subsequent product launches, may significantly impede our ability to successfully compete in our markets. In particular, such delays could cause customers to delay or forego purchases of our products, or to purchase our competitors’ products. Even if we are able to successfully develop proposed products when anticipated, these products may not produce sales in excess of the costs of development, and they may be quickly rendered obsolete by changing consumer preferences or the introduction by our competitors of products embodying new technologies or features, or alternative methods for the treatment of diabetes.

~~The~~

Any concerns regarding the safety and efficacy of our products ~~is not supported by long-term clinical data, which~~ could limit sales and ~~our products could~~ cause unforeseen negative effects.*

~~t:slim X2~~effects to our business prospects and t:flex received pre-market clearance under Section 510(k) of the U.S. Federal Food, Drug, and Cosmetic Act, or FDCA. The 510(k) clearance process is shorter and typically requires the submission of less supporting documentation than other FDA approval processes and does not always require long-term clinical studies. t:slim G4 and t:slim X2 with G5 received FDA approval under a PMA. However, there are no published studiesfinancial results.

Studies to evaluate the safety or effectiveness of ~~t:slim G4 or t:slim X2 with G5~~our latest products in a controlled ~~setting.~~

setting are only available over the past few years. As a result, we currently lack the breadth of published long-term clinical data supporting the safety and efficacy of our products and the benefits they offer, that might have been generated in connection with other approval processes. For these reasons, people with insulin-dependent diabetes and healthcare providers may not be familiar with our studies and may be slower to adopt or recommend our ~~products, we may not have comparative~~products. Further, even with data ~~that our competitors have or are generating,~~from controlled studies third-party payors may not be willing to provide coverage or reimbursement for our ~~products and we may be~~products. We remain subject to ~~greater~~ regulatory and product liability ~~risks. These~~risks, and these and other factors could slow the adoption of our products and result in our sales being lower than anticipated. In addition, future studies or clinical experience may indicate that treatment with our products is not superior to treatment with competitive products. Such results could slow the adoption of our products and significantly reduce our sales, which could prevent us from achieving our forecasted sales targets or achieving or sustaining profitability.

If the results of clinical studies or other experience, such as our monitoring or investigation of customer complaints, indicate that our products may cause or create an unacceptable risk of unexpected or serious complications or other unforeseen negative effects, we could be required to inform our customers of these risks or complications or, in more serious circumstances, we could be subject to mandatory product recalls, suspension or withdrawal of FDA clearance or approval, which could result in significant legal liability, ~~and~~ harm to our ~~business reputation.~~

reputation, and a decline in our product sales.

Any alleged illness or injury associated with any of our products or product ~~recall~~recalls may negatively impact our financial results and business prospects depending on a number of factors, including the scope and seriousness of the problem, degree of publicity, reaction of our customers and healthcare professionals, ~~and collaborators,~~ competitive ~~reaction,~~response, and consumer ~~attitudes overall.~~perceptions generally. Even if such an allegation or product liability claim lacks merit, cannot be substantiated, is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products have caused or carry a risk of causing illness, injury or death could adversely affect our reputation with customers, healthcare professionals, third-party payors, and existing and potential collaborators, and could adversely affect our operating results and cause a decline in our stock price.

Furthermore, general concerns regarding the perceived safety or reliability of any of our products, or any component thereof, may have a similar adverse effect on us.

We may enter into collaborations, ~~in-licensing~~licensing arrangements, joint ventures, strategic alliances or partnerships with third parties that may not result in the development of commercially viable products or the generation of significant future revenues.*

In the ordinary course of our business, we may enter into collaborations, ~~in-licensing~~licensing arrangements, joint ventures, strategic alliances or partnerships to develop proposed products ~~and to~~or technologies, pursue new markets, or weprotect our intellectual property assets. We may also elect to amend or modify similar agreements that we already have in place. Proposing, negotiating and implementing collaborations, ~~in-licensing~~licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex ~~process. Other~~process, and may subject us to business risks. For example, other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities, or may be the counterparty in any such arrangements. We may not be able to identify ~~secure,~~ or complete any such ~~transactions or arrangements~~collaboration in a timely manner, on a cost-effective basis, on acceptable terms or at all. ~~We have limited institutional knowledge and experience with respect to these business development activities, and~~In addition, we may ~~also~~ not realize the anticipated benefits of any such ~~transaction or arrangement.~~collaborations that we do identify and complete. In particular, these collaborations may not result in the development of products or technologies that achieve commercial success or result in ~~significant revenues and could be terminated prior~~positive financial results, or may otherwise fail to ~~developing any products.~~

have the intended impact on our business.

Additionally, we may not be in a position to exercise sole decision-making authority regarding ~~the transaction~~a collaboration, licensing or other similar arrangement, which could create the potential risk of creating impasses on ~~decisions,~~decisions. Further, our collaborators and ~~our collaborators~~business partners may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators and other business partners, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations, termination rights or the ownership or control or other licenses of intellectual property ~~developed during the collaboration.~~rights. If any conflicts arise with our current or future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. In addition, we have limited control over the amount and timing of resources that our current collaborators, such as Dexcom and ~~TypeZero,~~Abbott, or any future collaborators devote to our arrangement with them or our future products. Disputes between us and our current, future or potential collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements are contractual in nature and may be terminated or dissolved under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

For example, we have entered into ~~three separate~~multiple development and commercialization agreements with Dexcom, which provide us non-exclusive licenses to integrate various currently available and future generations of ~~Dexcom~~Dexcom’s CGM technology with our insulin pump products. We currently offer t:slim G4 under an agreement that runs until January 4, 2018, with automatic one-year renewals. Our agreements with Dexcom, which provide us non-exclusive licenses to integrate Dexcom G5 and G6 technology with our insulin pump products currently run until June 2020, with automatic one-year renewals. Under certain circumstances, ~~our~~these agreements ~~with Dexcom~~ may be terminated by either party without cause or on short notice. Our current agreements with Dexcom do not grant us rights to integrate future generations of Dexcom CGM technology, other than G7 CGM devices, with any of our current or future products. Termination of any of our agreements with Dexcom ~~could~~would require us to redesign certain current products and products under development, and attempt to integrate an alternative CGM system into our insulin pump systems, which would require significant development and regulatory activities that could result in an interruption or substantial delay in the availability of the product to our customers.

~~We operate~~ The termination of our business in regions subject to natural disasters and other catastrophic events, and any disruption to our business resulting from natural disasters will adversely affect our revenue and results of operations.*

~~We operate our business in regions subject to natural disasters, including earthquakes, hurricanes, floods, fires and other catastrophic events. Any natural disaster could adversely affect~~existing commercial agreements with Dexcom would disrupt our ability to ~~conduct business and provide~~commercialize our existing products and ~~services to~~ our ~~customers, and the insurance we maintain may not be adequate to cover our losses resulting from any business interruption resulting from a natural disaster or other catastrophic events.~~

Recently, Hurricane Irma and Hurricane Harvey adversely impacted our business operations in Texas, Florida and other nearby regions. These hurricanes directly and significantly affected our sales force, healthcare providers and potential customers, as well as distribution centers operated by certaindevelopment of our independent distributors. Although our business operations have generally resumed in these areas, we are currently assessing the impact these hurricanes had and will continue to have on our customers, the demand for ourfuture products, in the affected areas, the effectiveness of our sales force, and the ability of our distributors to meet their obligations to us. We expect it will be several weeks before we are able to fully assess the extent of the impact and the implications to our business.

~~These and any future disruptions to our operations~~which could have a material adverse impact on our financial condition and results of operations, ~~in future periods.~~

~~Any~~negatively impact our ability to compete and cause our stock price to decline.

A security breach or other significant ~~disruptions~~disruption to our information technology systems, or failures of our pumps’ software to perform as we anticipate, could materially disrupt our operations or result in the loss, theft, misuse, unauthorized disclosure, or unauthorized access to sensitive information relating to our customers, suppliers, employees or other individuals, which could damage our relationships, expose us to litigation or regulatory proceedings, or harm our reputation, any of which could have an adverse and material effect on our business, financial condition and operating results.

The efficient operation of our business depends on our information technology ~~systems.~~and communication systems, as well as those of our suppliers, contract manufacturers, distributors and other third-party business partners. We rely on ~~our information technology~~such systems to effectively ~~manage~~store, process and transit proprietary sales and marketing data, accounting and financial functions, manufacturing and quality records, inventory management, product development tasks, research and development data, customer service and technical support functions. Our information technology systems, including those that support our t:connect uploader software and cloud-based web application, our current and future mobile applications, our Tandem Source data management platform, as well as those involved in the operation of our Tandem Device Updater, are vulnerable to damage or interruption from a number of causes, including earthquakes, fires, floods and other natural disasters, terrorist attacks, attacks by computer viruses or hackers, malware, ransomware or other destructive software, cyber-attacks, power losses, and computer system or data network failures. Should any of those risks occur, it could adversely impact the availability, confidentiality and integrity of information assets contained in those systems.

Our business also involves the storage and transmission of a substantial amount of confidential, personal, or other sensitive information, including health information and other personal information relating to our customers, the personal information of our employees and other individuals, and our proprietary, financial, operational or strategic information. Should any of the foregoing risks occur, it could also result in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of such sensitive information, which could lead to significant reputational or competitive harm, litigation involving us or our business partners, regulatory proceedings, or substantial liabilities, fines, penalties or expenses. As a result, we strive to maintain and regularly update reasonable security measures, and to respond quickly and effectively if and when data security incidents do occur. Like many businesses, we are subject to numerous data privacy and security risks, including threats arising from computer viruses or hackers, cyber-attacks and ransomware attacks, as well as the risk that one or more of our employees may fail to comply, whether knowingly or accidentally, with established security measures, or with internal policies relating to the use, storage or transmission of confidential or sensitive information. We are unable to predict the direct or indirect impact of any such incidents to our business. Further, many of our third-party service providers are subject to similar risks. Whether or not our security measures and those of our third-party service providers are ultimately successful, our expenditures on those measures could have an adverse impact on our financial condition and results of operations, and divert management’s attention from pursuing our strategic objectives.

In addition to the risks regarding information technology systems and processing of sensitive information, our ~~currently-marketed~~ insulin pumps and ~~our~~other products ~~currently under development~~rely on software, some of which is developed by third-party service providers, that could contain ~~software~~unanticipated vulnerabilities, which could bemake our products subject to computer ~~virus, hacker attacks~~viruses, cyber-attacks, or ~~other~~ failures. ~~As a result of the recent FDA clearance~~These risks significantly increased when we commenced use of our Tandem Device Updater, which enables customers to remotely update software on their insulin pumps ~~these~~and may be higher following the launch of our new mobile application in the second half of 2020. These risks may increase further when we enable users to control insulin boluses through the mobile app. We may also face new risks relating to our information technology systems as we continue to commercialize our products outside of the United States and are ~~significantly increased.~~

subject to additional regulations relating to the use and protection of personal information and as we launch new mobile applications or new features to our existing applications. As this is a rapidly evolving area, compliance with any future requirements, regulations, and evolving threat models may require the investment of additional resources in the form of capital, personnel or technology.

The failure of our or our service providers’ information technology systems or our pumps’ software or other mobile applications to perform as we anticipate, or our failure to effectively ~~implement new~~identify, investigate and mitigate potential threats through ongoing maintenance and enhancement of software applications, information technology systems and privacy policies and controls, could disrupt our entire operation or adversely affect our software products. For example, we market our Tandem Device Updater as having the unique capability to deploy software updates to our pumps, which ~~we anticipate~~ may allow customers remote access to new and enhanced features. The failure of our Tandem Device Updater to provide software updates as we anticipate, including as a result of our inability to secure and maintain necessary regulatory approvals, the inability of our pumps to properly receive software updates, errors or viruses embedded within the software being transmitted, or the failure of our customers to properly utilize the system to complete the update, could result in decreased sales, increased warranty costs, and harm to our reputation, ~~all~~any of which could have a material adverse effect on our business, financial condition and operating results.

We experienced a breach of our information technology systems in January 2020.

On January 17, 2020, we learned that an unauthorized person gained access to an employee’s email account through a cyber-attack commonly known as “phishing.” We investigated the incident, and learned that a limited number of our employee email accounts may have been accessed by an unauthorized user in a similar manner between January 17, 2020 and January 20, 2020. Our investigation indicated that customer information, as well as proprietary Company information, may have been contained in one or more of the employee email accounts affected by the incident. Our investigation has not determined whether an unauthorized person viewed any such information. As a result of this incident, we are presently defending a class action lawsuit entitled Joseph Deluna et al. v. Tandem Diabetes Care, Inc., which is pending in the Superior Court of the State of California in the County of San Bernardino.

The risks posed by this lawsuit and any future related matters include civil monetary damages, attorney fees and costs, other legal penalties, reputational damage, loss of goodwill, and competitive harm. It is possible that our legal expenses and defense costs, alone or together with any monetary damages, may exceed the limits of any applicable insurance coverage that we carry.

If we ~~fail~~are found to ~~properly manage our anticipated growth, our business~~have violated laws concerning the privacy and security of patient health information or other personal information, we could ~~suffer.~~

~~Our rapid growth has placed, and we expect that it will continue~~be subject to place, a significant strain on our management team and financial resources. For example, between December 31, 2015 and December 31, 2016 our employee base increased by approximately 23%. In addition, during 2015 and 2016 we experienced turnover among key employees in our sales, marketing, clinical, and research and development functions, including the hiring of a new Chief Commercial Officer and a new Vice President of Engineering. Our failure to manage growth effectively could cause us to misallocate managementcivil or ~~financial resources, negatively impact our ability to attract and retain key employees, and result in losses or weaknesses in our infrastructure,~~criminal penalties, which could ~~materially adversely affect~~increase our ~~business. Additionally,~~liabilities and harm our ~~anticipated growth~~reputation or our business.*

There are a number of laws in the United States and outside the ~~projected evolution~~United States protecting the privacy and security of personal information. These laws include the U.S. Health Insurance Portability and Accountability Act of 1996 (HIPAA) and related regulations, U.S. state laws (such as the California Consumer Privacy Act (CCPA)), Canada’s Personal Information and Electronic Documents Act (PIPEDA) or the applicable provincial alternatives, the EU’s General Data Protection Regulation (GDPR), EU member states directives, or similar applicable laws. These laws place limits on how we may collect, use, share and store medical information and other personal information, and they impose obligations to protect that information against unauthorized access, use, loss, and disclosure. The putative class action lawsuit described above alleges violations of some of these laws.

If we, or any of our ~~product portfolio will~~service providers who have access to the personal data for which we are responsible, are found to be in violation of the privacy or security requirements of HIPAA, PIPEDA, GDPR, or applicable foreign, U.S. state and Canadian provincial laws, we could be subject to civil or criminal penalties, which could increase ~~the demands placed on~~ our ~~suppliers, resulting in an increased need for us to manage~~liabilities, harm our ~~suppliers~~reputation and ~~monitor for quality assurance. Any failure by us to manage our growth effectively could~~ have ana material adverse effect on our ~~ability~~business, financial condition and operating results. In addition, entities operating in the healthcare industry have increasingly become targets for hackers. Although we utilize a variety of measures to ~~achieve~~secure the data that we control, even compliant entities can experience security breaches or have inadvertent failures despite employing reasonable practices and safeguards.

We may also face new risks relating to data privacy and security as the United States, individual U.S. states or Canadian provinces, E.U. member states, and other international jurisdictions adopt or implement new data privacy and security laws and regulations as we continue to commercialize our products worldwide. For example, amendments to privacy and security laws (such as the CCPA) may impose additional requirements on us and increase our regulatory and litigation risk. As we continue to expand, our business ~~objectives.~~

will need to adapt to meet these and other similar legal requirements.

We depend on the knowledge and skills of our senior management and other key employees, and if we are unable to retain and motivate them or recruit additional qualified personnel, our business may suffer.

We have benefited substantially from the leadership and performance of our senior management, as well as certain key employees. For example, ~~our Chief Executive Officer, as well as other~~ key members of our management have experience successfully scaling an ~~early stage~~early-stage medical device company to achieve profitability. Our success will depend on our ability to retain our current management and key employees, and to attract and retain qualified personnel in the future. Competition for senior management and key employees in our industry is intense and over the past year we have also experienced general labor shortages in various areas of our business. We cannot guarantee that we will be able to retain our personnel or attract new, qualified personnel. ~~This~~In addition, adoption of new work models and requirements about when or how often employees work on site or remotely may present new challenges. As certain jobs and employers increasingly operate remotely, competition for talent may change in ways that cannot be ~~especially true during periods~~fully predicted at this time. Moreover, we may need to increase employee wages and benefits in order to attract and retain our personnel, which ~~we face challenges such as financial difficulty or a reduced stock price.~~would increase our expenses. The loss of the services of certain members of our senior management or key employees could prevent or delay the implementation and completion of our strategic objectives, or divert management’s attention to seeking qualified ~~replacements.~~replacements, and any general labor shortages could also negatively impact our ability to expand and scale functions that are needed to support the ongoing development of our products and the future growth of our business. Each member of senior management, as well as the vast majority of our ~~key~~ employees may terminate employment without notice and without cause or good reason. The members of our senior management are not subject to non-competition agreements. Accordingly, the adverse effect resulting from the loss of certain members of senior management could be compounded by our inability to prevent them from competing with us.

We depend upon key employees in a competitive market, and if we are unable to provide meaningful equity incentives to retain key personnel, it could adversely affect our ability to execute our business strategy.*

We are highly dependent upon the members of our ~~executive~~ management team, as well as other key employees. ~~Many of these individuals have been employed by us for many years, have played integral roles in the growth of our business, and will continue to provide value to us.~~ In our industry, it is common to attract and retain executive talent and other employees with compensation packages that include a significant equity component. ~~At this time, our outstanding equity awards, which generally are~~We have issued, ~~in the form of stock options, are significantly devalued or out of the money~~ and ~~less likely to be exercisable in the future. We plan~~may continue to issue, additional equity incentives that we believe will enhance our ability to retain our current key employees and attract the necessary additional executive ~~talent, which~~talent. It may ~~include~~be more difficult to continue to incentivize employees during a period of rapid growth in our overall headcount while limiting the ~~repricing~~utilization of the share reserve under our current stock ~~options.~~incentive plans. However, even if we issue significant additional equity incentives, there can be no assurance that we will be able to attract and retain key executive talent. A loss of any of our key personnel, or our inability to hire new personnel, may have a material adverse effect on our ability to execute our business strategy.

We began commercialization of our products outside of the United States, which may result in a variety of risks associated with international operations that could materially adversely affect our business.

During 2018, we began commercialization of the t:slim X2 insulin pump in select geographies outside of the United States. We have limited experience commercializing our products outside of the United States and expect that we will be subject to additional risks related to international business markets, including:

•different regulatory requirements for product approvals in foreign countries;

•differing U.S. and foreign medical device import and export rules;

•more restrictive privacy laws relating to personal information of end-users and employees, including GDPR and other EU member state directives;

•reduced protection for our intellectual property rights in foreign countries;

•unexpected changes in tariffs, trade barriers and regulatory requirements;

•different reimbursement systems;

•economic weakness, including inflation, or political instability in particular foreign economies and markets;

•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad or with U.S. regulations that would apply to activities in such foreign jurisdictions, such as the Foreign Corrupt Practices Act;

•foreign taxes, including withholding of payroll taxes;

•foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; and

•business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters, or incidence of disease, including as a result of the COVID-19 global pandemic.

In addition, entry into international markets may require significant financial resources, impose additional demands on our manufacturing, quality, regulatory, customer support and other general and administrative personnel, and could divert management’s attention from managing our core business. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets. If we are ~~found~~unable to ~~have violated laws protecting~~expand internationally, manage the ~~confidentiality of patient health information, we could be subject to civil or criminal penalties, which could increase our liabilities and harm our reputation or our business.~~

There are a number of federal and state laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. In particular, the U.S. Department of Health and Human Services, or HHS, promulgated patient privacy rules under HIPAA. These privacy rules protect medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose. If we, or anycomplexity of our ~~service providers, are found to be in violation~~global operations successfully or if we incur unanticipated expenses, we may not achieve the expected benefits of ~~the promulgated patient privacy rules under HIPAA, we could be subject to civil or criminal penalties, which could increase~~this expansion and our ~~liabilities, harm our reputation and have a material adverse effect on our business,~~ financial condition and ~~operating results.~~

results of operations could be materially and adversely impacted.

We may seek to grow our business through acquisitions of ~~complementary~~ products or technologies, or investments in businesses, and the failure to successfully manage these acquisitions or investments, or the failure to integrate them with our existing business, could have a material adverse effect on our business, financial condition and operating results.

From time to time, we may consider opportunities to acquire or invest in other companies, products or technologies that may enhance our product platform or technology, expand the breadth of our markets or customer base, or otherwise advance our business strategies. Potential and completed acquisitions and investments involve numerous risks, including:

●

~~problems assimilating the acquired products or technologies;~~

•problems assimilating, maintaining or operating the acquired products or technologies;

●

~~issues maintaining uniform standards, procedures, controls and policies;~~

•issues maintaining uniform standards, procedures, controls and policies;

●

~~unanticipated costs associated with acquisitions;~~

•unanticipated costs, impairment charges or write-offs associated with acquisitions or investments;

●

~~diversion of management’s attention from our existing business;~~

•diversion of management’s attention from our existing business;

●

~~risks associated with entering new markets in which we have limited or no experience; and~~

•risks associated with entering new markets in which we have limited or no experience; and

●

~~increased legal and accounting costs relating to the acquisitions or to compliance with regulatory matters.~~

•increased legal and accounting costs relating to the acquisitions or to comply with regulatory requirements or other compliance matters.

We have ~~no current commitments~~experienced and may continue to experience one or more of these risks in connection with ~~respect~~our acquisition of Sugarmate, which was completed in 2020. For example, as a result of an update to ~~any~~Dexcom’s data systems in October 2021, Sugarmate users in all geographies were unable to receive Dexcom CGM data in the Sugarmate app. Connections for users in the United States were restored in December 2021 and in June 2022 for users in all geographies except Australia and New Zealand, though we continue to work towards restoring service for users in those geographies.These service disruptions, or other problems utilizing the mobile app or other assets acquired from Sugarmate, could adversely affect our ability to realize the expected benefits from the Sugarmate acquisition. Further, it is possible that we could experience a loss of Sugarmate customers or reputational harm arising from this service outage or similar events, which could adversely affect our business, results of operations, and financial condition.

We do not know if we will be able to identify future acquisitions or investments we deem suitable, whether we will be able to successfully complete any such acquisitions or investments on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies into our business. Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition.

Risks Related to ~~our~~Our Future Financings and Financial Results ~~and Need for Financing~~

We ~~will~~may need or otherwise determine to raise additional funds in the ~~future. If these~~future and if we are unable to raise additional funds ~~are~~when necessary or desirable, we may not ~~available~~be able to ~~us, we will not have sufficient cash to fund~~achieve our ~~operations for the next twelve months.~~strategic objectives.*

As of September 30, ~~2017,~~2022, we had ~~$22.5~~$608.7 million in cash, cash equivalents and short-term ~~investments, which included $10.0 million of restricted cash. At the date our financial statements in this Quarterly Report were issued, our~~investments. Our management believed that we did not have sufficient cash to fund our operations for the next twelve months without additional financing and therefore, we concluded there was substantial doubt about our ability to continue as a going concern within one year after the date the financial statements were issued. Moreover,expects the continued growth of our business, including the expansion of our customer ~~care~~service infrastructure to support our growing base of customers, our plans to expand commercial sales of our products outside of the United States, the growth of our manufacturing and warehousing operations, increasing the size of our facility footprint due to increases in headcount and additional ~~research and development~~R&D activities, ~~and the transition to our new manufacturing facility,~~ will continue to increase our ~~expenses and capital needs.~~expenses. In addition, the amount of our future product sales is difficult to predict and actual sales may not be in line with our forecasts. ~~Our~~Accordingly, our future capital requirements will depend on many factors, including:

●

•the revenue generated by sales of our insulin pump products, and the related insulin cartridges and infusion sets, ~~and insulin cartridges,~~ and any other future products that we may develop and commercialize;

•the gross profits and gross margin we realize from the sales we generate;

•the costs associated with maintaining and expanding an appropriate sales, marketing, clinical and customer service infrastructure;

•the expenses we incur or other capital expenditures we make to maintain or enhance our manufacturing operations and distribution capabilities, including leasing additional property, hiring additional personnel, and purchasing additional equipment;

•the expenses associated with developing and commercializing our proposed products or technologies;

•the cost of obtaining and maintaining regulatory clearance or approval for our products and our manufacturing facilities;

•the cost of ongoing compliance with legal and regulatory requirements

•the expenses we incur in connection with current or future litigation or governmental investigations;

•expenses we may incur or other financial commitments we may make in connection with current and potential new acquisitions, investments, business or commercial collaborations, development agreements or licensing arrangements;

•anticipated or unanticipated capital expenditures;

•unanticipated general and administrative expenses; and

•impacts and disruptions resulting from geopolitical actions, including war and terrorism, natural disasters, or incidence of disease, including as a result of the impacts from the COVID-19 global pandemic.

As a result of these and other factors we ~~may develop and commercialize;~~

●

~~the gross profits and gross margin we realize from the sales we generate;~~

●

~~the costs associated with maintaining an appropriate sales, clinical and marketing infrastructure;~~

●

~~the expenses we incur in maintaining and expanding our manufacturing infrastructure, including opening our new manufacturing location and adding additional manufacturing equipment and capacity;~~

●

~~the cost associated with developing and commercializing our proposed products or technologies;~~

●

~~the costs associated with maintaining and expanding our customer care infrastructure;~~

●

~~the cost of obtaining and maintaining regulatory clearance or approval for our products and our manufacturing facilities;~~

●

~~the cost of ongoing compliance with legal and regulatory requirements;~~

●

~~expenses we incur in connection with potential litigation or governmental investigations;~~

●

~~our compliance with the covenants in our Amended and Restated Term Loan Agreement with Capital Royalty Partners, which we refer to as the Term Loan Agreement;~~

●

~~anticipated or unanticipated capital expenditures; and~~

●

~~unanticipated general and administrative expenses.~~

We may in the future seek additional capital from public or private offerings of our ~~capital stock (including our ATM offering)~~equity or ~~we may elect to borrow additional amounts under new credit lines~~debt securities, or from other sources. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, we may incur significant financing or debt service costs, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies, or grant licenses on terms that are not favorable to us.

If we are unable to raise additional capital when necessary, we may not be able to maintain our existing sales, marketing, clinical and customer ~~care~~service infrastructure, enhance our current products or develop new products, take advantage of future opportunities, respond to competitive pressures, changes in supplier relationships, or unanticipated changes in customer ~~demand, or satisfy covenants in our existing indebtedness.~~demand. Any of these events could adversely affect our ability to achieve our strategic objectives, which could have a material adverse effect on our business, financial condition and operating results.

Our operating results may fluctuate significantly from quarter to quarter.

There has been and may continue to be meaningful variability in our operating results from quarter to quarter, as well as within each quarter, especially around the time of anticipated new product ~~introductions.~~launches or regulatory approvals by us or our competitors, and as a result of the commercial launch of our products in geographies outside of the United States. Our operating results, and the variability of these operating results, will be affected by numerous factors, including:

●

our ability to increase sales and gross profit of our insulin pump products and pump-related supplies, and to commercialize and sell our future products, and the number of our products sold in each quarter;

•our ability to commercialize and sell our current and future products and our ability to increase sales and gross profit from our products, including insulin pumps and the related insulin cartridges and infusion sets;

●

~~acceptance of our products by people with insulin-dependent diabetes, their caregivers, healthcare providers and third-party payors;~~

●

~~the financial and accounting impacts of the Technology Upgrade Program;~~

●

~~the pricing of our products and competitive products, including the use of discounts, rebates or other financial incentives by us or our competitors;~~

●

~~the effect of third-party coverage and reimbursement policies;~~

●

~~our ability to maintain our existing infrastructure;~~

●

~~the amount of, and the timing of the payment for, insurance deductibles required to be paid by our customers and potential customers under their existing insurance plans;~~

●

~~interruption in the manufacturing or distribution of our products;~~

●

~~our ability to simultaneously manufacture multiple products that meet quality and reliability requirements;~~

●

~~seasonality and other factors affecting the timing of purchases of our products;~~

●

~~timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;~~

●

~~results of clinical research and trials on our existing and future products;~~

●

~~the ability of our suppliers to timely provide us with an adequate supply of components that meet our requirements;~~

●

~~regulatory clearance or approvals affecting our products or those of our competitors; and~~

●

~~the timing of revenue and expense recognition associated with our product sales pursuant to applicable accounting standards.~~

~~As a result~~•the number and mix of our ~~recent product launches,~~products sold in each quarter;

•acceptance of our products by people with insulin-dependent diabetes, their caregivers, healthcare providers and ~~due~~third-party payors;

•the pricing of our products and competitive products, including the use of discounts, rebates or other financial incentives by us or our competitors;

•the effect of third-party coverage and reimbursement policies;

•our ability to maintain our existing infrastructure;

•the ~~complexities~~amount of, and the timing of the ~~industry in which we operate, it will continue~~payment for, insurance deductibles required to be ~~difficult~~paid by our customers and potential customers under their existing insurance plans;

•interruption in the manufacturing or distribution of our products;

•our ability to simultaneously manufacture multiple products that meet quality, reliability and regulatory requirements;

•seasonality and other factors affecting the timing of purchases of our products;

•timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;

•results of clinical research and trials on our existing and future products;

•the ability of our suppliers to timely provide us with an adequate supply of components that meet our requirements for ~~us to forecast demand for~~product quality and reliability;

•regulatory clearance or approvals, or adverse regulatory or legal actions, affecting our products or those of our competitors; and

•the timing of revenue and expense recognition associated with ~~any degree of certainty, which means it will be difficult for us~~our product sales pursuant to forecast our sales. For example, in the period leading up to the commercial launch of t:slim X2, we believe there were an increasing number of customers anticipating its availability who delayed their purchasing decisions until they could include t:slim X2 in their decision-making process.

applicable accounting standards.

In addition, we expect our operating expenses will continue to increase as we expand our ~~business. Accordingly, we~~business, which may ~~experience substantial variability~~exacerbate the quarterly fluctuations in our operating ~~results from quarter to quarter.~~results. If our quarterly or annual operating results fall below the expectation of investors or securities analysts, the price of our common stock could decline ~~substantially as has occurred over the past several months.~~substantially. Further, any quarterly or annual fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate ~~substantially.~~substantially, and these price fluctuations could result in further pressure on our stock price. We believe ~~that~~ quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

We have concluded that we do not have sufficient cash to fund our operations for the next twelve months without additional financing and, therefore, there was substantial doubt about its ability to continue as a going concern within one year after the date the financial statements were issued, which could have a material adverse impact on our business.*

At the date the financial statements in this Quarterly Report were issued, our management believed that we did not have sufficient cash to fund our operations for the next twelve months without additional financing and, therefore, we concluded there was substantial doubt about our ability to continue as a going concern within one year after the date the financial statements were issued. ~~The financial statements included in this Quarterly Report have been prepared on a basis that assumes that we will continue as a going concern,~~ ~~which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.~~

Our ability to continue as a going concern is dependent upon a number of factors, including our ability to increase our sales and gross profits, our ability to generate positive cash flow from operations, and our ability to obtain the necessary financing to meet our obligations and repay our liabilities arising from obligations that become due in the ordinary course of business. Management currently believes that it will be necessary for us to raise additional funding. However, our conclusion that there is substantial doubt about our ability to continue as a going concern may be viewed unfavorably by current and prospective investors, as well as by analysts and creditors. As a result, this conclusion may make it more difficult for us to raise the additional financing necessary to continue to operate our business. In addition, this conclusion may make it more difficult for us to sell our products and meet our sales forecasts, which may further impede our ability to raise additional financing.

If we cannot generate sufficient revenues from the sale of our products or secure additional financing on acceptable terms, we may be forced to significantly alter our business strategy, substantially curtail our current operations, or cease operations altogether.

~~We may not be able to generate sufficient cash to service our indebtedness, which currently consists of our Term Loan Agreement with Capital Royalty Partners.~~

At December 31, 2016, we had $81.1 million aggregate borrowings outstanding under the Term Loan Agreement with Capital Royalty Partners. Our ability to make scheduled payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash reserves at the time a scheduled payment becomes due and our actual and projected financial and operating performance. The amount of our cash reserves and our financial and operating performance are subject to certain financial and business factors, as well as prevailing economic and competitive conditions, some of which may be beyond our control. We cannot assure you that we will maintain a level of cash reserves or cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, or interest on our existing or future indebtedness.

If our cash balances or cash flows from operations are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell or license our assets, sell or reduce our operations, seek additional capital on unfavorable terms, or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, or that these actions would permit us to meet our scheduled debt service obligations. Our recent and projected financial results, the explanatory paragraph that describes conditions that raise substantial doubt about our ability to continue as a going concern in the report of our independent registered public accounting firm, and general concerns among potential investors and creditors about our financial well-being may make taking such actions on commercially reasonable terms especially difficult. If we are unable to generate sufficient cash flow or are otherwise unable to obtain the funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, we could be in default under the terms of the Term Loan Agreement.

The Term Loan Agreement contains restrictive and financial covenants that may limit our operating flexibility, and our potential inability to comply with such covenants puts us at risk of triggering an event of default under the Term Loan Agreement.*

The Term Loan Agreement contains certain restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions. We may not be able to engage in any of the foregoing transactions unless we obtain the consent of Capital Royalty Partners or terminate the Term Loan Agreement.

The Term Loan Agreement also contains certain financial covenants, including minimum revenue and cash balance requirements, and financial reporting requirements. There is no guarantee that we will be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal and interest under the Term Loan Agreement. Further, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance the amounts outstanding under the Term Loan Agreement.

The terms of the Term Loan Agreement also require that we deliver audited financial statements that include an unqualified audit report to Capital Royalty Partners. The audit report and opinion of our independent registered public accounting firm contained in our financial statements for the year ended December 31, 2016 includes an explanatory paragraph that describes conditions that raise substantial doubt about our ability to continue as a going concern. This explanatory paragraph in our auditor’s report constitutes a potential event of default under the Term Loan Agreement. As a result, in March 2017, we entered into Waiver and Amendment No. 4 to Term Loan Agreement, or the Fourth Amendment, which includes a limited waiver of a potential event of default that could have resulted from the inclusion of the explanatory paragraph in our auditor’s report. The Fourth Amendment also imposes additional restrictive and financial covenants on us, which may increase our risk of triggering defaults under the Term Loan Agreement.

In the event of a future default triggered by any violations of the covenants in the Term Loan Agreement, we will need to obtain additional waivers from Capital Royalty Partners to avoid being in default. For example, if the audit report and opinion of our independent registered public accounting firm contained in our financial statements for the year ending December 31, 2017 includes an explanatory paragraph that describes conditions that raise substantial doubt about our ability to continue as a going concern, it could constitute a potential event of default under the Term Loan Agreement for which we are required to seek a waiver. If we are unable to obtain a waiver of any events of default, or an amendment to the Term Loan Agreement that would allow us to be in compliance with the terms of the agreement, an event of default would result.

In the event of our default under of the Term Loan Agreement, we may be required to repay any outstanding amounts earlier than anticipated and our capital resources may not be sufficient to meet those obligations. Further, if we are unable to repay our indebtedness and Capital Royalty Partners institutes foreclosure proceedings against our assets, we could be forced into bankruptcy or liquidation, and in such a scenario, the values that we receive for our assets could be significantly lower than the values reflected in our financial statements.

Risks Related to ~~our~~Our Intellectual Property and Potential Litigation

Our ability to comprehensively protect our intellectual property and proprietary technology is uncertain.*

We rely primarily on patent, trademark and trade secret laws, as well as confidentiality and non-disclosure agreements, to protect our proprietary technologies. As of September 30, ~~2017,~~2022, our patent portfolio consisted of approximately 55127 issued U.S. patents and 5282 pending U.S. patent applications. Of these, our issued U.S. patents expire between approximately ~~2021~~2024 and ~~2035. We also have~~2041. Our foreign patent portfolio consisted of approximately 45 issued patents and ~~are seeking~~22 pending patent ~~protection for our proprietary technologies~~applications in other countries throughout the world. Of these, our issued foreign patents expire between approximately 2025 and 2039. In addition, we also have 10136 trademark registrations, including 27 U.S. trademark registrations and 13109 foreign trademark registrations.

We have applied for patent protection relating to certain existing and proposed products and processes. If we fail to file a patent application timely in any jurisdiction, ~~we may be precluded from doing so at a later date.~~it could result in us forfeiting certain patent rights in that jurisdiction. Further, we cannot assure you that any of our patent applications will be ~~approved~~granted in a timely manner or at all. The rights granted to us under our patents, and the rights we are seeking to have granted in our pending patent applications, may not ~~be meaningful or~~ provide us with any commercial advantage. In addition, those rights could be opposed, contested or circumvented by our competitors, or be declared invalid or unenforceable in judicial or administrative proceedings. The failure of our patents to adequately protect our technology might make it easier for our competitors to offer the same or similar products or technologies. Even if we are successful in receiving patent protection for certain products and processes, our competitors may be able to design around our patents or develop products that provide outcomes which are comparable to ours without infringing on our intellectual property rights. Due to differences between foreign and U.S. patent laws, our patented intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States. Even if patents are granted outside of the United States, effective enforcement in those countries may not be available.

We rely on our trademarks and trade names to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. We cannot assure you that our current or future trademark applications will be approved in a timely manner or at all. ~~Third~~From time to time, third parties ~~also may~~ oppose our trademark applications, or otherwise challenge our use of ~~the~~ trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote additional resources to marketing new brands. Further, we cannot assure you that competitors will not infringe upon our trademarks, or that we will have adequate resources to enforce our trademarks.

We have entered into confidentiality agreements and intellectual property assignment agreements with our officers, employees, temporary employees and consultants regarding our intellectual property and proprietary technology. We also enter into confidentiality agreements with potential collaborators and other counterparties, and the terms of our collaboration agreements typically contain provisions governing the ownership and control of intellectual property. In the event of unauthorized use or disclosure or other breaches of those agreements, we may not be provided with meaningful protection for our trade secrets or other proprietary information.

If a competitor infringes ~~upon~~ one of our patents, trademarks or other intellectual property rights, enforcing those patents, trademarks and other intellectual property rights may be difficult, expensive and time consuming. Patent law relating to the scope of claims in the industry in which we operate is subject to rapid change and constant evolution and, consequently, patent ~~positions~~protection in our industry can be uncertain. Even if successful, litigation to defend our patents and trademarks against challenges or to enforce our intellectual property rights ~~could be expensive and time consuming and~~ could divert management’s attention from managing our business. Moreover, we may not have sufficient resources or incentive to defend our patents or trademarks against challenges or to enforce our intellectual property rights. Litigation also puts our patents at risk of being invalidated or narrowly interpreted ~~narrowly~~ and our patent applications at risk of not issuing. Additionally, pursuing litigation may provoke third parties to assert counterclaims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially valuable. The occurrence of any of these events may have a material adverse effect on our business, financial condition and operating results.

~~The~~

Patent litigation in the medical device industry is ~~characterized by patent litigation,~~not uncommon, and from time to time, we may be subject to litigation that could be costly, result in the diversion of management’s time and efforts, or require us to pay damages.

Our success will depend in part on not infringing the patents or violating the other proprietary rights of third parties. Significant litigation regarding patent rights exists in our industry. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made ~~substantial~~considerable investments in competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make and sell our products. The large number of patents, the rapid rate of new patent issuances, and the complexities of the technology involved increase the risk of patent litigation.

From time to time, we may receive communications from third parties alleging our infringement of their intellectual property ~~rights.~~rights or offering a license to their intellectual property relating to products that we are currently developing. Any intellectual ~~property dispute~~property-related discussions, disputes or litigation could force us to do one or more of the following:

●

~~stop selling our products or using technology that contains the allegedly infringing intellectual property;~~

•stop selling our products or using technology that allegedly infringes third-party intellectual property;

●

~~incur significant legal expenses;~~

•prevent or limit our ability to sell a product that we are currently developing;

●

~~pay substantial damages to the party whose intellectual property rights we are allegedly infringing;~~

•incur significant legal expenses;

●

~~redesign those products that contain the allegedly infringing intellectual property; or~~

•pay substantial damages to the party whose intellectual property rights we are allegedly infringing;

●

~~attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.~~

•redesign those products that allegedly infringe third-party intellectual property; or

•attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.

We do not currently maintain insurance to cover the expense or any liability that may arise from an intellectual property dispute with a third party. Any litigation or claim against us, even those without merit, or even preparing for a potential dispute or litigation before it arises, may cause us to incur substantial costs, and could place a significant strain on our financial resources and divert the attention of management from our core ~~business and~~business. Any litigation or claim against us may also harm our reputation. Further, as we launch new products and increase our sales, and the number of participants in the diabetes market increases, we believe the possibility of our involvement in intellectual property ~~infringement claims against us increases.~~

disputes will increase.

We may be subject to damages resulting from claims that we, or our employees, have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.

Many of our employees were previously employed at other medical device companies, including those that are our direct competitors or could potentially become our direct competitors. In some cases, those employees joined our company recently. We may be subject to claims that we, or our employees, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of these former employers or competitors. In addition, we have been and may in the future be subject to allegations that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be necessary to defend against these claims. Even if we successfully defend against these claims, litigation could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation. If our defense to those claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. We cannot guarantee that this type of litigation will not continue, and any future litigation or the threat thereof may adversely affect our ability to hire additional direct sales representatives. A loss of key personnel or their work product could hamper or prevent our ability to commercialize proposed products, which could have an adverse effect on our business, financial condition and operating results.

We may incur product liability losses, and insurance coverage may be inadequate or unavailable to cover these losses.

Our business exposes us to potential product liability claims that are inherent in the design, manufacture, testing, inspection, and sale of medical devices. We ~~could become the~~are subject ofto product liability lawsuits alleging that component failures, manufacturing flaws, manufacturing defects, negligence in manufacturing, design defects, negligence in design, or inadequate disclosure of product-related risks, warnings, or product-related information resulted in an unsafe condition, injury or death to customers. The risk of one or more product liability claims or lawsuits may be even greater ~~following~~after we launch new products with new features or enter new markets where we have no prior experience selling our ~~January 2014 voluntary recall of cartridges used with t:slim.~~products and rely on newly-hired staff or new independent distributors or contractors to provide new customer training and customer support. In addition, the misuse of our products or the failure of customers to adhere to operating guidelines could cause significant harm to customers, including death, which could result in product liability claims. We may also identify deficiencies in our products that we determine are immaterial and do not pose safety risks, and therefore decide not to initiate a voluntary recall. However, any such deficiency may be more significant than we expect and lead to product liability claims. Product liability lawsuits and claims, safety alerts or product recalls, with or without merit, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business, harm our reputation and adversely affect our ability to attract and retain customers, any of which could have a material adverse effect on our business, financial condition and operating results.

Although we maintain third-party product liability insurance coverage, it is possible that claims against us may exceed the coverage limits of our insurance policies. Even if any product liability loss is covered by an insurance policy, these policies typically have substantial deductibles for which we are responsible. In addition, we expect the cost of our product liability insurance will increase as our product sales increase and we may also increase the amount of our deductibles over time. Product liability claims in excess of applicable insurance coverage could have a material adverse effect on our business, financial condition and operating results. In addition, any product liability claim brought against us, with or without merit, could result in ~~an increase~~further increases of our product liability insurance premiums. Insurance coverage varies in cost and can be difficult to obtain, and we cannot guarantee that we will be able to obtain insurance coverage in the future on terms acceptable to us or at all. Our inability to obtain sufficient insurance coverage to protect ~~again~~against potential product liability claims could prevent or limit our commercialization of current products or products currently under development.

Risks Related to ~~our~~Our Legal and Regulatory Environment

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

The medical device industry is regulated extensively in the United States by governmental authorities, principally the FDA and corresponding state regulatory agencies. The regulations are very complex and are subject to rapid change and varying interpretations. Regulatory restrictions or changes could limit our ability to carry on or expand our operations or result in higher than anticipated costs or lower than anticipated sales. The FDA and other U.S. governmental agencies and international regulatory authorities regulate numerous elements of our business, including:

•product design and development;

•pre-clinical and clinical testing and trials;

•product safety;

•establishment registration and product listing;

•labeling and storage;

•marketing, manufacturing, sales and distribution;

•pre-market clearance or approval;

•servicing and post-market surveillance;

•advertising and promotion; and

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~~product design and development;~~

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~~pre-clinical and clinical testing and trials;~~

•recalls and field safety corrective actions.

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~~product safety;~~

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~~establishment registration and product listing;~~

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~~labeling and storage;~~

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~~marketing, manufacturing, sales and distribution;~~

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~~pre-market clearance or approval;~~

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~~servicing and post-market surveillance;~~

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~~advertising and promotion; and~~

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~~recalls and field safety corrective actions.~~

Before we can market or sell a new regulated product or a significant modification to an existing product in the United States, we must obtain either clearance under Section 510(k) of the ~~FDCA~~Food, Drug and Cosmetic Act or approval of a ~~Premarket Approval, or PMA,~~pre-market approval (PMA) application from the FDA, unless an exemption from pre-market review applies. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based on extensive data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. ~~We received approval of our PMA for t:slim G4 in September 2015 and of our PMA supplement for t:slim X2 with G5 in August 2017.~~ Products that are approved through a PMA application generally need FDA approval before they can be modified. Similarly, some modifications made to products cleared through athe 510(k) clearance process may require a new 510(k). submission. The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time-consuming, and we may not be able to obtain these clearances or approvals on a timely basis or at all for our proposed products.

We initially received pre-market clearance for t:slim under Section 510(k) of the FDCA in November 2011. We obtained 510(k) clearances for t:connect and t:flex in February 2013 and January 2015, respectively. From time to time, we may make modifications to these products that may require a new 510(k). We have received 510(k) clearance for various modifications to t:slim and its associated cartridge. For instance, in July 2016, we received 510(k) clearance to reduce the age in our indications for use of t:slim to age six. We may pursue 510(k) clearance for additional products or product modifications in the future.

If the FDA or other regulatory authority requires ~~us to go through~~ a more rigorous examination for our future products or modifications to existing products than we had expected, our product introductions or modifications could be delayed or canceled, which could cause our sales to decline or to not increase in line with our forecasts. ~~We anticipate that our products currently under development will require the more costly, lengthy and uncertain PMA approval process.~~

The FDA or other regulatory authority can delay, limit or deny clearance or approval of one of our devices for many reasons, including:

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~~our inability to demonstrate that our products are safe and effective for their intended users;~~

•our inability to demonstrate that our products are safe and effective for their intended users;

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~~the data from our clinical trials may be insufficient to support clearance or approval; and~~

•the data from our pre-clinical studies or clinical trials may be insufficient to support clearance or approval; and

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~~failure of the manufacturing process or facilities we use to meet applicable requirements.~~

•failure of the manufacturing process or facilities we use to meet applicable requirements.

In addition, the FDA or other regulatory authority may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently cleared or approved products on a timely basis.

More recently, the FDA has stated that the review process for new submissions may take longer than normal due to the impact of the COVID-19 global pandemic.

Any delay in, or failure to receive or maintain, clearance or approval for our products under development could prevent us from generating revenue from these products or achieving profitability. Moreover, customers may defer purchasing our existing products in anticipation of a new product launch. Additionally, the FDA and other regulatory authorities have broad enforcement ~~powers. Regulatory~~powers and regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some customers from using our products and adversely affect our reputation and the perceived safety and efficacy of our products.

~~Failure~~

Since our inception we have been audited or inspected by various regulatory authorities on numerous occasions. We also regularly respond to routine inquiries from regulatory authorities. In some instances these audits, inspections and inquiries result in findings that require us to take corrective actions, which could include changes to our internal policies, procedures or operations, revisions to our product labeling, issuances of customer notifications or the initiation of product recalls, any of which could result in product liability claims and lawsuits. Since mid-2021 we have completed several audits and inspections, some of which include findings that require us to take one or more corrective actions. Our failure to appropriately respond to these findings and take corrective actions, or our failure to comply with applicable regulations for any other reason, could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, delays by the FDA or other regulators in granting clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators. Any of these sanctions could result in higher than anticipated costs, lower than anticipated sales, and diversion of management time and resources, any of which could have a material adverse effect on our reputation, business, financial condition and operating results.

Further, we ~~are evaluating~~commenced commercial sales of our products in select international ~~expansion opportunities for a potential launch in~~markets during the third quarter of 2018. IfAs we expand our operations outside of the United States and launch new products, we will become subject to various additional regulatory and legal requirements ~~under the applicable laws and regulations of~~in the international markets we enter. These additional legal and regulatory requirements may ~~involve~~result in our incurring significant costs and ~~expenditures~~expenditures. We have limited experience complying with applicable laws and regulations in international markets generally, and in particular when we enter new markets, and if we are not able to comply with any such requirements, our international expansion and business could be significantly harmed.

~~Modifications~~

New products or modifications to our existing products may require new 510(k) clearances or PMAs, or may require us to cease marketing or recall the modified products until clearances are obtained.

Any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, requires a new 510(k) clearance or, possibly, a PMA. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary for changes that we have made to our products. If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to our previously cleared or approved products, for which we concluded that new clearances or approvals were not necessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

Further, the FDA’s ongoing review of and potential changes to the 510(k) program may make it more difficult for us to modify our previously cleared products, either by imposing stricter requirements on when a new 510(k) for a modification to a previously cleared product must be submitted, or by applying more onerous review criteria to such submissions.

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

We and our third-party suppliers, contract manufacturers and service providers are required to comply with the FDA’s Quality System Regulation ~~or QSR,~~(QSR), which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products. We also are subject to similar requirements by regulatory authorities in other geographies. The FDA ~~audits~~and other regulatory bodies routinely audit our compliance with the QSR and equivalent international requirements through periodic announced and unannounced inspections of manufacturing and other ~~facilities. The FDA~~facilities which may ~~impose inspections or audits~~occur at any time. We cannot assure you that our facilities or our contract manufacturer or third-party suppliers’ facilities would pass any quality system inspection or audit. If we or our suppliers, contract manufacturers and service providers have significant non-compliance issues or if any corrective action plan that we or our suppliers, contract manufacturers or service providers propose in response to observed deficiencies is not sufficient, the FDA could take enforcement action against ~~us. Any~~us and the manufacturing or distribution of ~~the foregoing~~our devices could be interrupted and our operations disrupted.

If we, or our third-party suppliers, contract manufacturers and service providers, fail to adhere to QSR requirements, this could delay production of our products and lead to fines, difficulties in obtaining regulatory clearances, recalls, enforcement actions, including injunctive relief or consent decrees, or other consequences, which could, in turn, have a material adverse effect on our ~~reputation, business,~~ financial condition ~~and operating results.~~

or results of operations.

A recall or suspension of our products, or the discovery of serious safety issues with our products, could have a significant negative impact on us.*

The FDA ~~has~~and equivalent foreign regulatory authorities have the authority to require the recall or suspension, either temporarily or permanently, of commercialized products in the event of material deficiencies or defects in quality systems, product design or manufacture or in the event that a product poses an unacceptable risk to health. ~~The FDA has~~Regulatory authorities have broad discretion to require the recall or suspension of a product or to require that manufacturers alert customers of safety risks, and may do so even in circumstances where we do not believe our product poses an unacceptable risk to health. In addition, manufacturers may, under their own initiative, recall a product or suspend sales if any material deficiency in a product is ~~found.~~found or alert customers of unanticipated safety risks. A government-mandated or voluntary recall or suspension by us, one of our distributors or any of our other third-party suppliers could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls, ofsuspensions or other notices relating to any products that we distribute would divert managerial and financial resources, and have an adverse effect on our reputation, financial condition and operating results.

Further, under the FDA’s Medical Device Reporting ~~or MDR,~~ regulations and equivalent regulations in other geographies, we are required to maintain appropriate quality systems and report ~~to the FDA any incident~~incidents in which our product may have caused or contributed to ~~a death or~~ serious injury or death in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to ~~death~~serious injury or ~~serious injury.~~death. Repeated product malfunctions may result in a voluntary or involuntary product recall or suspension of product sales, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition and operating results.

We have initiated product recalls in the past, and our risk of future product recalls may increase as we launch new products or offer new software updates for existing products.

Any adverse event involving any products that we distribute could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. For example, the Australian Therapeutic Goods Administration (TGA) temporarily suspended our pump product sales in Australia commencing November 24, 2020, however sales of pump-related supplies were allowed to continue. Effective April 1, 2021, following discussions with the TGA, the temporary suspension was lifted for our t:slim X2 with Basal-IQ technology, subject to certain post-market surveillance obligations and other conditions. We have discontinued sales of earlier generation products in Australia and we only recently commenced offering our Control-IQ technology in Australia. There can be no assurance that the TGA will not reimpose the suspension of our pump product sales or impose other regulatory restrictions in the future. In addition, other regulatory bodies may take similar actions against us, and any regulatory challenges we encounter could have a negative impact on our product sales and harm our reputation. Any corrective actions we take in response to this action or future matters with the TGA or other regulatory bodies, whether voluntary or involuntary, will require the dedication of our time and capital, may distract management from operating our business, ~~and~~ may harm our reputation and financial ~~results.~~

results or could result in additional regulatory scrutiny in other geographies.

Our failure to comply with U.S. federal and state fraud and abuse laws, including anti-kickback laws and other U.S. federal and state anti-referral laws, could have a material, adverse impact on our business.

There are numerous U.S. federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws, ~~and~~ physician self-referral laws, and false claims laws. Our relationships with healthcare providers and other third parties are subject to scrutiny under these laws. Violations of these laws are punishable by criminal and civil sanctions, including, in some instances, imprisonment and exclusion from participation in federal and state healthcare programs, including the Medicare, Medicaid and Veterans Administration health programs.

Healthcare fraud and abuse regulations are complex and evolving, and even minor irregularities can potentially give rise to claims that a statute or prohibition has been violated. The laws that may affect our ability to operate include:

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•the federal healthcare programs’ Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

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federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

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federal and state physician referral laws, such as the federal “Stark Law,” that prohibit a physician from referring Medicare or Medicaid patients to an entity providing “designated health services,” including a company that furnishes durable medical equipment, in which the physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement;

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~~federal criminal laws enacted as part of HIPAA that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;~~

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~~the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections; and~~

●

foreign and U.S. state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

~~Further, the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Affordability Reconciliation Act, or, collectively, the PPACA,~~ among other things, ~~amends~~persons from knowingly and willfully soliciting, receiving, offering, paying or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind in exchange for or to induce either the ~~intent requirement~~referral of an individual for, or the purchase, lease, order or recommendation of, any good or service for which payment may be made under federal ~~anti-kickback~~healthcare programs such as the Medicare and ~~criminal healthcare fraud statutes. An~~state Medicaid programs;

•federal and state false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, state Medicaid programs, or other third-party payors that are false or fraudulent;

•federal and state physician self-referral laws, such as the Stark Law, that prohibit a physician from referring Medicare or Medicaid patients to an entity providing “designated health services,” including a company that furnishes durable medical equipment, with which the physician has a financial relationship unless that financial relationship meets an exception under the applicable law;

•federal and state laws, such as the Civil Monetary Penalties Law, that prohibit an individual or entity ~~can now~~from offering or transferring remuneration to any person eligible for benefits under a federal or state health care program which such individual or entity knows or should know are likely to influence such eligible individual’s choice of provider, practitioner or supplier of any item or service for which payment may be ~~found guilty~~made under federal health care programs such as Medicare and state Medicaid programs;

•federal criminal laws enacted as part of HIPAA that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

•federal disclosure laws, such as the ~~PPACA without actual knowledge~~Physician Payments Sunshine Act, which require certain manufacturers, including medical device manufacturers, to submit annual data pertaining to payments or other transfers of value to covered recipients, including physicians;

•the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections;

•federal and state laws governing the use, disclosure and security of personal information, including protected health information, such as HIPAA and the Health Information Technology for Economic and Clinical Health; and

•foreign and U.S. state law equivalents of each of the ~~statute or specific intent to violate it. In addition, the PPACA provides that claims submitted in violation of the Anti-Kickback Statute automatically constitute~~above federal laws, such as anti-kickback and false claims ~~for purposes of the False Claims Act.~~ laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

Possible sanctions for violation of these laws include monetary fines, civil and criminal penalties, exclusion from Medicare, Medicaid and other federal healthcare programs, and forfeiture of amounts collected in violation of those ~~prohibitions.~~prohibitions and in some circumstances, treble damages. Any violation of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, financial condition and operating results.

The reporting requirements under the Physician Payments Sunshine Act have been expanded, and we will need to implement additional processes and controls in order to comply with these new tracking and disclosure obligations. Any failure to submit the required data in an accurate and timely manner may result in the imposition of civil monetary penalties. Federal government agencies have issued final rules making modifications to the Anti-Kickback Statute “safe harbors” and the Stark Law regulations, and the full impact of such modifications on the health care industry and our business operations is not yet known. Further, the federal government has published proposed rules for public comment which would make material modifications to HIPAA. It is unknown if or when these proposed rules may be adopted and what final form the proposed rules may take and how they may impact our business operations.

To enforce compliance with the federal laws, the U.S. Department of Justice ~~or DOJ,~~(DOJ) in conjunction with other federal agencies, has ~~recently~~ increased its scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Dealing with investigations can be ~~time-~~time and resource-consuming and can divert management’s attention from our core business. Additionally, if a healthcare company settles an investigation with the DOJ or other law enforcement agencies, we may be forced to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

The scope and enforcement of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Federal or state regulatory authorities might challenge our current or future activities under these laws. Any of these challenges could have a material adverse effect on our reputation, business, financial condition and operating results. Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming. Additionally, we cannot predict the impact of any changes in these laws and whether ~~or not~~they might be retroactive.

We may be liable if we engage in the promotion of the off-label use of our products.

Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition against the promotion of the off-label use of our products or the pre-promotion of unapproved products. Healthcare providers may use our products off-label, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine. However, if the FDA determines that our promotional materials or training constitutes promotion of an off-label use or the pre-promotion of an unapproved product, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil ~~fine~~fines and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties. Although our policy is to refrain from statements that could be considered off-label promotion of our products or pre-promotion of an unapproved product, the FDA or another regulatory agency could disagree and conclude that we have engaged in ~~off-label promotion.~~improper promotional activities. In addition, the off-label use of our products may increase the risk of product liability claims, which are expensive to defend and could result in substantial damage awards against us and harm our reputation.

Legislative or regulatory healthcare reforms may result in downward pressure on the price of and decrease reimbursement for our products, and uncertainty regarding the healthcare regulatory environment could have a material adverse effect on our business.*

The sales of our products depend in part on the availability of coverage and reimbursement from third-party payors such as government health administration authorities, private health insurers, health maintenance organizations and other healthcare-related organizations. Both the federal and state governments in the United States continue to propose and pass new legislation and regulations designed to, among other things, expand healthcare coverage to more individuals, contain or reduce the cost of healthcare, and improve the quality of healthcare outcomes. This legislation and regulation may result in decreased reimbursement for medical devices, which may create additional pressure to reduce the prices charged for medical devices. Reduced reimbursement rates could significantly decrease our revenue, which in turn would place significant downward pressure on our gross margins and impede our ability to become profitable.

The ~~PPACA~~Affordable Care Act (ACA), substantially changed the way healthcare is financed by both governmental and private insurers, encourages improvements in the quality of healthcare items and services, and significantly impacts the medical device industry. However, a number of legislative changes have been proposed and adopted since the ~~PPACA~~ACA was enacted, and legislation has ~~recently~~also been and will likely continue to be proposed that could modify or repeal the ~~PPACA.~~ACA. In addition, the ACA continues to be the subject of various legal challenges. The uncertainties regarding the future of the ~~PPACA,~~ACA, and other healthcare reform initiatives, may have an adverse effect on our customers’ purchasing decisions regarding our products.

In the future, additional changes could be made to governmental healthcare programs that could significantly impact the success of our products. Cost control initiatives could decrease the price that we receive for our products. At this time, we cannot predict which, if any, additional healthcare reform proposals will be adopted, when they may be adopted or what impact they may have on the existing regulatory environment, or our ability to operate our business. Any of these factors could have a material adverse effect on our operating results and financial condition.

~~Our financial performance~~

Climate change or other extreme weather conditions and related regulations may ~~be adversely affected by medical device tax provisions~~have a long-term impact on our business.*

Climate-related events, including the increasing frequency of extreme weather events and their impact on the U.S., Mexico, Canada, and other major regions’ critical infrastructure along with potential related regulations, have the potential to disrupt our business, our third-party suppliers, and/or the business of our customers. For example, a portion of our office facilities located in ~~the healthcare reform laws.~~

~~Beginning~~San Diego are in ~~2013 through the end of 2015, the PPACA imposed, among other things,~~ an ~~annual excise tax of 2.3% on any entity~~area that ~~manufactures or imports medical devices offered for sale~~is prone to flooding, which has occasionally caused temporary disruptions to our business operations and our third-party contract manufacturers are located, in the United States. Congress suspended this tax on December 18, 2015 for two years, for sales of devices during the period January 1, 2016 through December 31, 2017. We do not believe that our products wereregions subject to ~~this tax (prior~~natural disasters, including earthquakes, hurricanes, floods, fires and other catastrophic events. We strive to ~~its suspension) based~~partner with organizations that mitigate their business risks associated with climate change. However, we recognize that inherent risks related to climate change, other extreme weather conditions and related regulations exist wherever global business is conducted. While these dangers currently have a low-assessed risk of disrupting our normal business operations, they pose a potential long-term impact on ~~the retail exemption under applicable Treasury Regulations. However, the availability~~our business.

Risks Related to Our Common Stock

The price of ~~this exemption is subject~~our common stock may continue to ~~interpretation by the IRS,~~fluctuate significantly.

The trading price of our common stock has been volatile in recent years. We believe our stock price has been, and the IRS may disagree with our analysis. The future of the medical device tax (and the PPACA generally) is uncertain. If the tax is not repealed and the two-year suspension of the tax is not extended beyond 2017, future products that we manufacture, produce or import maywill continue to be, subject to ~~this tax (unless~~wide fluctuations in response to a variety of factors, including the ~~retail exemption~~following:

•actual or anticipated fluctuations in our financial and operating results from period to period;

•our actual or perceived need for additional capital to fund our operations;

•market acceptance of our current products and products under development, and the recognition of our brand;

•introduction of proposed products, technologies or treatment techniques by us or our competitors;

•announcements of significant contracts, acquisitions or divestitures by us or our competitors;

•regulatory approval of our products or the products of our competitors, or the failure to obtain such approvals on the projected timeline or at all;

•the announcement of a product recall, suspension or other ~~applicable exemption applies). The financial impact this tax may have on~~safety notice associated with our ~~business is unclear and there can be no assurance that our business will not be materially adversely affected by it.~~

~~Risks Related to our Common Stock and Warrants~~

~~Because of their significant stock ownership, certain~~products or the products of our ~~executive officers, directors~~competitors, or other similar regulatory enforcement actions;

•the inclusion or removal of our stock from one or more market indexes;

•speculative trading practices of market participants;

•issuance of securities analysts’ reports or recommendations;

•threatened or actual litigation and principal stockholders will be able to exert control over our company and our significant corporate decisions.*

~~Based on an aggregate~~government investigations;

•sales of ~~5,487,029~~ shares of our common stock ~~outstanding as of September 30, 2017,~~by our ~~executive officers~~employees, directors or principal stockholders; and directors, and their affiliates owned, in the aggregate, approximately 19% of the voting power of our outstanding common stock. These persons, acting together, will have the ability to significantly influence the outcome of all matters submitted to our stockholders for approval,

•general political or economic conditions, including the ~~election~~impacts and ~~removal of directors~~disruptions caused by the COVID-19 global pandemic.

These and ~~any merger, consolidation, or sale of all or substantially all of our assets.~~

~~The interests of~~other factors might cause the ~~aforementioned stockholders might not coincide with the interests of the other holders of our capital stock. This concentration of ownership may reduce the value~~market price of our common stock to fluctuate substantially. Fluctuations in our stock price may negatively affect the liquidity of our common stock, which could further impact our stock price.

In recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by ~~among other things:~~

many companies across many industries. These changes may occur without regard to the financial condition or operating performance of the affected companies. Accordingly, the price of our common stock could fluctuate based upon factors that have little or nothing to do with our company, and these fluctuations could materially reduce the market price of our common stock.

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~~delaying, deferring or preventing a change of control of our company;~~

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~~impeding a merger, consolidation, takeover or other business combination involving our company; or~~

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~~causing us to enter into transactions or agreements that are not in the best interests of all stockholders.~~

Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could reduce our stock price and prevent our stockholders from replacing or removing our current management.

Our amended and restated certificate of incorporation and bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions:

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authorize the issuance of preferred stock with powers, preferences and rights that may be senior to our common stock, which can be created and issued by the board of directors without prior stockholder approval;

•authorize the issuance of preferred stock with powers, preferences and rights that may be senior to our common stock, which can be created and issued by the board of directors without prior stockholder approval;

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~~provide for the adoption of a staggered board of directors whereby the board is divided into three classes each of which has a different three-year term;~~

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~~provide that the number of directors shall be fixed by the board;~~

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~~prohibit our stockholders from filling board vacancies;~~

•provide for the adoption of a staggered board of directors whereby the board is divided into three classes each of which has a different three-year term;

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~~provide for the removal of a director only with cause and then by the affirmative vote of the holders of a majority of the outstanding shares;~~

•provide that the number of directors shall be fixed by the board;

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~~prohibit stockholders from calling special stockholder meetings;~~

•prohibit our stockholders from filling board vacancies;

●

~~prohibit stockholders from acting by written consent without holding a meeting of stockholders;~~

•provide for the removal of a director only with cause and then by the affirmative vote of the holders of a majority of the outstanding shares;

●

~~require the vote of at least two-thirds of the outstanding shares to approve amendments to the certificate of incorporation or bylaws; and~~

•prohibit stockholders from calling special stockholder meetings;

●

~~require advance written notice of stockholder proposals and director nominations.~~

•prohibit stockholders from acting by written consent without holding a meeting of stockholders;

•require the vote of at least two-thirds of the outstanding shares to approve amendments to the certificate of incorporation or bylaws; and

•require advance written notice of stockholder proposals and director nominations.

We are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including a merger, tender offer or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.

Our board of directors is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval.

Our amended and restated certificate of incorporation authorizes our board of directors, without the approval of our stockholders, to issue 5,000,000 shares of our preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of our amended and restated certificate of incorporation, as shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The powers, preferences and rights of these additional series of preferred stock may be senior to or on parity with our common stock, and the issuance of such shares in the future may reduce the value of our common stock.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.*

As of December 31, ~~2016,~~2021, we had accumulated federal and state net operating loss or(NOL) carryforwards of approximately $301.2 million, and $291.0 million, respectively, which included the reduction recorded in 2019 discussed below. Of the total federal NOL carryforwards, approximately $112.1 million were generated after January 1, 2018, and therefore do not expire. NOL generated after January 1, 2018, is subject to 80% limitation in accordance with the Tax Cuts and Jobs Act of 2017. The remaining federal NOL carryforwards of ~~approximately $283.5~~$189.1 million ~~not considering the limitation discussed below. The federal tax loss carryforwards~~will begin to expire in 2026, and state tax loss carryforwards continue to expire in 2022, unless previously utilized. ~~In general, if~~If there is an “ownership change” with respect to our company, as defined under Section 382 of the ~~Internal Revenue Code of 1986, as amended, or the~~ Code, the utilization of our NOL and research credit carryforwards may be subject to substantial limitations imposed by the Code, and similar state provisions. ~~In general, an ownership change occurs whenever there is a shift in ownership of our company by more than 50% by one or more 5% stockholders over a specified time period.~~

Although we have not completed an update of our Section 382 analysis subsequent to December 31, 2016, the offering that we conducted in March of 2017, either separately or together, with any future equity financing, may have caused or could cause an ownership change or could increase the likelihood that we undergo an ownership change for purposes of Section 382 of the Code in the future. Limitations imposed on our ability to utilize NOL carryforwards could cause U.S. federal income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause ~~such~~ NOL carryforwards to expire unused, in each case reducing or eliminating the benefit of ~~such~~our NOL carryforwards.

In general, an ownership change occurs whenever there is a shift in ownership of our company by more than 50% by one or more 5% stockholders over a specified time period.

We have completed analyses through December 31, 2021 to determine whether our net operating losses and credits are likely to be limited by Section 382. Based on the 2018 study completed in 2019, the Company determined that offerings of our securities caused an ownership change, as defined under Section 382, in 2018 and the resulting limitation significantly reduced the Company’s ability to utilize its net operating loss and credit carryovers before they expire. As a result, in 2019 the Company significantly reduced its deferred tax assets for the net operating loss and research credit carryforwards that were projected to expire unused. In addition, future ownership changes under Section 382 may further limit the Company’s ability to fully utilize any remaining tax benefits.

We do not intend to pay cash dividends.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. ~~In addition, pursuant to our Term Loan Agreement with Capital Royalty Partners, we are precluded from paying any cash dividends.~~ Accordingly, ~~you~~investors may have to sell some or all of ~~your~~their shares of our common stock in order to generate cash flow from ~~your~~their investment. ~~You may not receive a gain on your investment when you sell their shares of our common stock and may lose the entire amount of your investment.~~

~~The requirements of being a public company have increased our costs and will continue to strain our resources and divert management’s attention.~~

As a public company, we are subject to the reporting requirements of the Exchange Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, the listing requirements of NASDAQ and other applicable securities rules and regulations. Compliance with these rules and regulations has increased our legal and financial compliance costs, made some activities more difficult, time-consuming or costly, and increased demand on our systems and resources.

The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Recent legislation permits “emerging growth companies” to implement many of these requirements over a period of up to five years after becoming subject to the requirements. We intend to take advantage of this new legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses.

In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. Although we have hired additional employees to help us comply with these requirements, in the future we may need to hire more employees or utilize external consultants in order to further support our efforts, which will increase our expenses.

~~Regulations related to "conflict minerals" may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.~~

The SEC adopted a rule requiring disclosures by public companies of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. The rule requires companies to perform due diligence, disclose and annually report to the SEC whether or not such minerals originate from the Democratic Republic of Congo or an adjoining country. The rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products, including tantalum, tin, gold and tungsten. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. Within our supply chain, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. We continue to investigate the use of conflict materials, if any, within our supply chain.

We are an “emerging growth company” and we do not know whether the reduced disclosure requirements and relief from certain other significant obligations that are applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting and compliance requirements that apply to other public companies that are not “emerging growth companies.” These exemptions include the following:

●

~~not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act;~~

●

~~less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and~~

●

~~exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.~~

We intend to take advantage of these exemptions but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. We cannot predict if investors will find our common stock less attractive because of our reliance on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, which could result in a reduction in the price of our common stock.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. For example, Mr. Sheridan, our principal executive officer, and Ms. Vosseller, our principal financial and accounting officer, are involved in a personal relationship and share a primary residence. While our board of directors is informed of the relationship and appropriate actions have been taken to ensure compliance with Company policies and procedures, the existence of this relationship could create additional risk, or the perception of additional risk, that our controls and procedures may not be effective. In addition, any testing by us conducted in connection with Section 404(a) of the Sarbanes-Oxley Act, or ~~the subsequent~~any testing conducted by our independent registered public accounting firm ~~conducted~~ in connection with Section 404(b) of the Sarbanes-Oxley Act ~~after we no longer qualify as an “emerging growth company,”~~ may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

We are required to disclose changes made to our internal control procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. We could be an “emerging growth company” for up to five years from our November 2013 initial public offering. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

The price of our common stock might fluctuate significantly.*

~~Our common stock is listed for trading on the NASDAQ Global Market under the symbol “TNDM.” Our stock price could~~

We may be ~~subject to wide fluctuations in response to a variety of factors, including the following:~~

●

~~actual or anticipated fluctuations in our quarterly financial and operating results;~~

●

~~our actual or perceived need for additional capital to fund our operations and the potential associated dilution, including as a result of the issuance of warrants in the October Financing;~~

●

~~perceptions about our financial stability generally, and relative to our competitors, and our ability to sustain our business operations long term;~~

●

~~the reaction of investors to our conclusion that there is substantial doubt about our ability to continue as a going concern;~~

●

~~overall performance of the equity markets;~~

●

~~speculative trading practices of market participants;~~

●

~~perceptions about the market acceptance of our products and the recognition of our brand;~~

●

introduction of proposed products or technologies, or announcements of significant contracts, acquisitions or divestitures by us or our competitors, including the announcement that Johnson & Johnson intends to exit the insulin pump business;

●

~~legislative, political or regulatory developments;~~

●

~~issuance of securities analysts’ reports or recommendations;~~

●

~~additions or departures of key personnel;~~

●

~~threatened or actual litigation and government investigations;~~

●

~~sale of shares of our common stock by us or members of our management; and~~

●

~~general economic conditions.~~

These and other factors might cause the market price of our common stock to fluctuate substantially, which may negatively affect the liquidity of our common stock. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market priceat increased risk of securities ~~issued by many companies across many industries. The changes frequently appear to occur without regard to~~class action litigation.

In the operating performance of the affected companies. Accordingly, the price of our common stock could fluctuate based upon factors that have little or nothing to do with our company, and these fluctuations could materially reduce the market price of our common stock and the value of the warrants.

~~Securities~~past, securities class action litigation has ~~often~~ been instituted against companies following periods of volatility in the overall market and in the ~~market~~ price of a company’s securities. ~~This~~We believe this risk may be particularly relevant to us as we have experienced significant stock price volatility in recent years. If we face such litigation, ~~if instituted against us,~~it could result in substantial costs ~~divert our~~and a diversion of management’s attention and resources, ~~and~~which could harm our business, financial condition and results of operations. Our stock price volatility and the increase in our market capitalization during the past year may also result in higher expenses associated with our directors’ and officers’ liability insurance program.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.

The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the forecasts of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price and trading volume to decline.

Risks Related to Our Convertible Senior Notes

We have indebtedness in the form of convertible senior notes, which could adversely affect our financial ~~condition.~~

~~Future sales, or~~condition and our ability to respond to changes in our business.

In May 2020, we completed the ~~perception~~offering of ~~future sales,~~$287.5 million principal amount of 1.50% Convertible Senior Notes due 2025 (the Notes), which we refer to as the Note Offering. Holders of the Notes will have the right to require us to repurchase their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion, we will be required to make cash payments in respect of the Notes being converted. Furthermore, the indenture governing the Notes provides that, in the event of an event of default (as defined in the indenture) for the Notes, the principal, premium, if any, and interest, if any, may become due prior to the maturity date for the Notes. There can be no assurance that we will be able to pay these amounts when due, or that we will be able to refinance this indebtedness on acceptable terms or at all.

As a result of our increased level of indebtedness due to the Notes Offering:

•our level of vulnerability to adverse economic conditions and competitive pressures may be heightened;

•we are required to dedicate a portion of our liquidity position or cash flow from operations to interest payments, limiting the availability of cash for other purposes;

•our flexibility in planning for, or reacting to, changes in our business and industry may be more limited; and

•our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, investments or general corporate purposes may be impaired.

We cannot be sure that our leverage resulting from the completion of the Notes Offering will not materially and adversely affect our ability to finance our operations or capital needs or to engage in other business activities. In addition, we cannot be sure that additional financing will be available when required or, if available, will be on terms satisfactory to us.

Servicing the Notes will require a significant amount of cash, and we may not have sufficient cash flow from our business to repay the Notes.

Our ability to make scheduled payments of the principal and interest on or to refinance the Notes depends on our future business operations and liquidity, which are subject, to some extent, on economic, financial, regulatory, competitive and other factors that are beyond our control, including, without limitation, market acceptance of our products, regulatory approval for our products under development, and the impacts and disruptions caused by the COVID-19 global pandemic. Our business may not generate or sustain a level of cash flow from operations sufficient to service the Notes and any future indebtedness we may incur, while operating our business and making necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying capital expenditures, selling or licensing assets, refinancing indebtedness, or obtaining additional equity capital. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to successfully engage in these activities will depend on a number of factors, including the value of our assets, our operating results and financial condition, the value of our common stock, and the status of the capital markets at such time. We may not be able to engage in any of these activities on commercially reasonable terms or at all, which could ~~materially reduce~~result in a default on the ~~market~~Notes or our future indebtedness.

We may incur substantial additional debt or take other actions which could diminish our ability to make payments on the Notes.

We and our subsidiaries are not prevented by the terms of the indenture governing the Notes, or otherwise, from incurring substantial additional indebtedness in the future, which may include the issuance of secured debt. We are not restricted under the terms of the indenture governing the Notes from incurring additional indebtedness, securing existing or future indebtedness, or recapitalizing our indebtedness. We are similarly not restricted under the terms of the indenture from taking a number of other actions that could have the effect of diminishing our ability to make payments on the Notes when due.

We may not have the ability to raise the funds necessary to repurchase the Notes upon a fundamental change, or to settle conversions of the Notes, and our future indebtedness may contain limitations on our ability to pay cash upon repurchase or conversion of the Notes.

Holders of the Notes have the right to require us to repurchase their Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plusaccrued and unpaid interest, if any. In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion, we will be required to make cash payments in respect of the Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered therefor or Notes being converted. In addition, our ability to repurchase the Notes or to pay cash upon conversions of the Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase Notes at a time when the repurchase is required by the indenture, or to pay any cash payable on future conversions of the Notes as required by the indenture, would constitute an event of default under the indenture. An event of default under the indenture, or the fundamental change itself, could also lead to an event of default under agreements governing any future indebtedness we may have issued. If the repayment of the related indebtedness were to be accelerated, we may not have sufficient funds to repay the indebtedness, while also repurchasing the Notes or making cash payments upon conversions thereof.

The conditional conversion feature of the Notes may adversely affect our liquidity.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required, under applicable accounting rules, to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would adversely affect our liquidity.

Conversion of the Notes will, to the extent we deliver shares upon conversion of such Notes, dilute the ownership interest of existing stockholders and may otherwise have a negative impact on the trading price of our common stock.*

~~Sales~~

The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders, including holders who had previously converted their Notes, to the extent we deliver shares upon conversion of any of the Notes. Any sales in the public market of the common stock issued upon the conversion of the Notes could adversely affect prevailing market prices of our common stock. In addition, the perception that some or all of the Notes may be converted into shares of our common stock ~~or the perception~~ in the ~~market that~~future could have a negative impact on the trading price of our common stock.

The fundamental change repurchase feature of the Notes may delay or prevent an otherwise beneficial takeover attempt.

The terms of the Notes require us to repurchase the Notes in the event of a fundamental change. A takeover of the Company would trigger an option of the holders of the Notes to require us to repurchase the Notes. In addition, if a ~~large number~~make-whole fundamental change (as defined in the indenture governing the Notes) occurs prior to the maturity date of the Notes, we will, in some cases, be required to increase the conversion rate of the Notes for a holder that elects to convert its Notes in connection with such make-whole fundamental change. These and other provisions set forth in the indenture may have the effect of delaying or preventing a takeover of the Company.

The Capped Call Transactions may affect the value of the Notes and our ~~shares intend~~common stock.

In connection with the issuance of the Notes, we entered into capped call transactions (the Capped Call Transactions) with the option counterparties. The Capped Call Transactions are expected generally to ~~sell~~reduce the potential dilution to our common stock upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such ~~shares,~~reduction and/or offset subject to a cap.

The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of Notes). This activity could ~~reduce~~also cause or avoid an increase or a decrease in the market price of our common stock or the Notes, which ~~would impair our~~could affect a Note holder’s ability to ~~raise future capital through~~convert the ~~sale~~Notes and, to the extent the activity occurs during any observation period related to a conversion of ~~additional equity securities. A substantial~~Notes, it could affect the number of shares and the ~~outstanding shares~~value of the consideration that a Note holder will receive upon conversion of the Notes. In addition, if such Capped Call Transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock.

The potential effect, if any, of any of these transactions and activities on the market price of our common stock ~~are freely tradable without restriction~~ or ~~further registration under~~ the ~~Securities Act. After taking~~Notes will depend in ~~consideration~~part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the ~~impact of a 1-for-10 reverse stock split that we effected on October 9, 2017, we had outstanding~~ ~~10,118,659~~ shares of common stock as of October 23, 2017, of which approximately 1,322,789 shares are restricted securities that may be sold only in accordance with the resale restrictions under Rule 144 of the Securities Act. In addition, as of October 23, 2017, we had outstanding options to purchase 933,953 shares of common stock and warrants to purchase 9,552,753 shares of common stock that, if exercised, will result in these additional shares becoming available for sale. As of October 23, 2017, there were also 37,536 sharesvalue of our common stock ~~reserved for future grant~~and the value of the Notes and, under certain circumstances, the ability of the Note holders to convert the Notes.

We do not make any representation or ~~issuance under our 2013 Stock Incentive Plan.~~

Certain holders of shares of common stock have the right, subject to various conditions and limitations, to include their shares in registration statements relating to our securities. In addition, these holders are entitled to piggyback registration rights with respectprediction as to the ~~registration under~~direction or magnitude of any potential effect that the ~~Securities Act~~transactions described above may have on the value of ~~shares of our common stock. Shares of common stock registered under these registration statements can be freely sold in~~ the ~~public market. In the event registration rights are exercised and a large number of shares of common stock are sold in the public market, those sales could reduce~~Notes or the trading price of our common stock.

In addition, we do not make any representation that the ~~future,~~option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

We are subject to counterparty risk with respect to the Capped Call Transactions.

The option counterparties are financial institutions, and we ~~may issue additional securities if we need to raise more capital. In particular, management currently believes that it~~ will be ~~necessary for us~~subject to ~~raise additional funding. For example,~~the risk that any or all of them may default under the Capped Call Transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. If an option counterparty becomes subject to insolvency proceedings, we ~~previously announced~~will become an upunsecured creditor in those proceedings, with a claim equal to ~~$15 million “at-the-market” public offering of shares~~our exposure at that time under our transactions with that option counterparty. Our exposure will depend on many factors but, in general, an increase in our exposure will be correlated to an increase in the market price and volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the ~~three months ended September 30, 2017, we had sold approximately $4.3 million~~financial stability or viability of ~~shares~~the option counterparties.

Item 6. Exhibits.

Incorporated by Reference

Provided Herewith

Exhibit Number

Exhibit Description

Form

File No.

Date of First Filing

Exhibit Number

10.1*

Confidential Intellectual Property Agreement, dated July 10, 2012, by and between Tandem Diabetes Care, Inc. and Smiths Medical ASD, Inc.

10-Q

001-36189

03-Aug-2022

10.2

31.1

Certification of John F. Sheridan, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Leigh A. Vosseller, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

Certification of John F. Sheridan, Chief Executive Officer, pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

Certification of Leigh A. Vosseller, Chief Financial Officer, pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (embedded within the Inline XBRL Document contained in Exhibit 101).

* Certain confidential portions of ~~common stock~~this exhibit have been redacted pursuant to ~~our ATM offering~~Item 601(b)(10)(iv) of Regulation S-K because the registrant has determined that such redacted information is (i) not material, and ~~accordingly, we may sell up to~~(ii) is the type of information the registrant treats as private or confidential. If requested by the Commission or the Staff, the registrant will promptly provide, on a supplemental basis, an ~~additional~~unredacted copy of approximately $10.7 million shares of common stock in our ATM offering, subject to contractual limitations. The number of new shares of our common stock issued in connection with raising additional capital could constitute a material portion of the then-outstanding shares of our common stock.

There is no public market for the warrants to purchase shares of our common stock.*

~~There~~ ~~is no established public trading market for the outstanding warrants to purchase common stock ,~~this exhibit and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the warrants on any national securities exchange or other trading market. Without an active market, we expect the liquidity of the warrants will be limited.

Holders of our warrants will generally not have rights as a common stockholder until such holders exercise their warrants and acquire our common stock.*

~~Except as set forth in the warrants, holders of warrants acquire shares of our common stock upon exercise of the warrants, holders of warrants will generally not have rights~~its analysis with respect to the ~~shares of our common stock underlying such warrants. Upon exercise~~materiality and confidentiality of the ~~warrants,~~redacted information.

** This certification is not deemed “filed” for purposes of Section 18 of the ~~holders thereof will be entitled to exercise the rights~~Securities Exchange Act of ~~a common stockholder only as to matters for which the record date occurs after the exercise date.~~

~~Due~~1934, or otherwise subject to the ~~speculative nature~~liability of ~~warrants, there is no guarantee~~ that itsection. Such certification will ~~ever~~not be ~~profitable for investors in~~deemed to be incorporated by reference into any filing under the ~~offering~~Securities Act of 1933 or the Securities Exchange Act of 1934, except to exercise their warrants.*

~~Investors in~~ the October Financing may exercise their right to acquire the shares of common stock underlying their Series A warrants at any time after the date of issuance by paying an exercise price of $3.50 per share, prior to their expiration on the date that is five years from the date of issuance, after which date any unexercised Series A warrants will expire and have no further value. Investors in the October Financing may exercise their right to acquire the shares of common stock underlying their Series B warrants at any time after the date of issuance by paying an exercise price of $3.50 per share, prior to their expiration on the date that is six months from the date of issuance, after which date any unexercised Series B warrants will expire and have no further value. There can be no assuranceextent that the ~~market price of our common stock will ever equal or exceed the exercise price of the warrants, and, consequently, whether~~registrant specifically incorporates it ~~will ever be profitable for investors to exercise their warrants.~~

Significant holders or beneficial holders of our common stock may not be permitted to exercise warrants that they hold.*

~~The terms~~ of our Series A warrants and Series B warrants offered in the October Financing prohibit a holder from exercising its warrants if doing so would result in such holder (together with such holder's affiliates) beneficially owning more than 4.99% (which threshold may be decreased or increased, but not above 9.99%, at the election of the holder upon prior written notice to us) of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. As a result, a warrant holder may not be able to exercise the warrants for shares of our common stock at a time when it would be financially beneficial for a warrant holder to do so. In such circumstance, a warrant holder could seek to sell the warrants to realize value, but may be unable to do so.

If we are unable to comply with certain continued listing requirements of NASDAQ, our common stock would be delisted from NASDAQ.*

Our common stock is currently listed on NASDAQ. In order to maintain this listing, we must satisfy minimum continued listing requirements and standards, including a minimum closing bid price requirement for our common stock. On June 14, 2017, we received notice that we had failed to meet minimum closing bid price requirement of $1.00 per share for 30 consecutive business days, which could subject our common stock to delisting. On October 24, 2017, we received notice from NASDAQ that for the 10 consecutive business days, from October 10, 2017 to October 23, 2017, our closing bid price for our common stock had been at least $1.00 per share or greater. Accordingly, we regained compliance under the NASDAQ minimum continued listing requirements. However, due to the volatility of our stock price, we cannot assure you that we will continue to satisfy the NASDAQ continued listing requirements.

~~Our executive officers and directors may sell their shares of our common stock, and these sales could adversely affect our stock price.~~

~~Sales of our common stock~~ by our executive officers and directors, or the perception that such sales may occur, could adversely affect the market price of our common stock. Our executive officers and directors may sell our common stock in the future as part of pre-arranged trading plans or otherwise.

Our recently implemented reverse stock split may decrease the liquidity of our common stock and result in higher transaction costs.*

~~The liquidity of our common stock may be negatively impacted by our implementation of~~ ~~a 1-for-10~~ reverse stock split on October 9, 2017, given the significantly reduced number of shares that are now issued and outstanding after the reverse stock split, and because our stock price did not increase commensurate with the ratio of the reverse stock split. In addition, as a result of our reverse stock split, we now have a greater number of stockholders who own “odd lots” of fewer than 100 shares of our common stock. Brokerage commission and other costs of transactions for the sale of odd lots are generally higher than the costs of transactions of more than 100 shares of common stock. Accordingly, a reverse stock split may not achieve the desired results of increasing marketability and liquidity of our common stock.

The effective increase in the authorized number of shares of our common stock as a result of our reverse stock split could have anti-takeover implications and result in further dilution to our existing stockholders.*

In connection with the recent implementation of the reverse stock split, we maintained the total number of authorized shares of our common stock. The combination of a reverse stock split of our issued and outstanding shares, and maintaining the number of our authorized shares, has significantly increased our authorized shares relative to our issued and outstanding shares. This effective increase in the number of authorized shares will allow us to sell additional shares of our common stock (or securities convertible or exchangeable for our common stock), which would result in further dilution of our current stockholders. In addition, the effective increase in the number of authorized shares could, under certain circumstances, have anti-takeover implications. For example, the additional shares of common stock that have become available for issuance could be used by us to oppose a hostile takeover attempt or to delay or prevent changes in control or our management. Although our reverse stock split was prompted by business and financial considerations and not by the threat of any hostile takeover attempt, stockholders should be aware that our reverse stock split could facilitate future efforts by us to deter or prevent changes in control, including transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices.

reference.

~~Item 2~~.

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~None.~~

~~Item 3.~~

~~Defaults Upon Senior Securities~~

~~None.~~

~~Item 4.~~

~~Mine Safety Disclosures~~

~~Not applicable.~~

~~Item 5.~~

~~Other Information~~

~~None.~~

I~~tem 6.~~

~~Exhibits~~

Incorporated by Reference

Provided Herewith
Exhibit Number

Exhibit Description

Form

File No.

Date of First Filing

Exhibit Number

3.1

Amended and Restated Certificate of Incorporation as currently in effect.

S-1/A

333-191601

1-Nov-13

3.4

3.2

Amended and Restated Bylaws as currently in effect.

S-1/A

333-191601

1-Nov-13

3.5

10.1†

Development Agreement, dated June 4, 2015, by and between Tandem Diabetes Care, Inc. and Dexcom, Inc.

X
31.1

Certification of Kim D. Blickenstaff, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X
31.2

Certification of John Cajigas, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X
32.1*

Certification of Kim D. Blickenstaff, Chief Executive Officer, pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X
32.2*

Certification of John Cajigas, Chief Financial Officer, pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X
101.INS

XBRL Instance Document.

X
101.SCH

XBRL Taxonomy Extension Schema Document.

X
101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

X
101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

X
101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

X
101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

X

†	~~The registrant has omitted portions of the referenced exhibit pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Exchange Act.~~

This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Tandem Diabetes Care, Inc.

~~Dated: October 26, 2017~~

Dated November 2, 2022

By:

~~By:~~

/s/ ~~Kim D. Blickenstaff~~

John F. Sheridan

~~Kim D. Blickenstaff~~

John F. Sheridan
President and Chief Executive Officer ~~and Director~~

(on behalf of the registrant and as the registrant’s

Principal Executive Officer)

Dated November 2, 2022

By:

~~By:~~

/s/ ~~John Cajigas~~

Leigh A. Vosseller

~~John Cajigas~~

Leigh A. Vosseller
Executive Vice President, Chief Financial Officer and Treasurer

(on behalf of the registrant and as the registrant’s

Principal Financial and Accounting Officer)

Balance at December 31, 2016	$	5,690
Provision for warranties issued during the period		4,110
Settlements made during the period		(5,240	)
Increases in warranty estimates		190
Balance at September 30, 2017	$	4,750

Current portion	$	2,080
Non-current portion		2,670
Total	$	4,750

At September 30, 2017	Maturity (in years)	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Trading securities:
Mutual funds held for nonqualified deferred compensation plan participants		$	416	$	43	$	—	$	459
Total		$	416	$	43	$	—	$	459

At December 31, 2016	Maturity (in years)	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Available-for-sale investment securities:
Commercial paper	Less than 1	$	8,483	$	1	$	(2	)	$	8,482
Trading securities:
Mutual funds held for nonqualified deferred compensation plan participants		$	354	$	26	$	(2	)	$	378
Total		$	8,837	$	27	$	(4	)	$	8,860

			Fair Value Measurements at
			September 30, 2017
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents ⁽¹⁾	$	16,527	$	16,527	$	—	$	—
Mutual funds held for nonqualified deferred compensation plan participants ⁽²⁾		459		459	—		—
Total assets	$	16,986	$	16,986	$	—	$	—

Liabilities
Deferred compensation ⁽²⁾	$	459	$	459	$	—	$	—
Total liabilities	$	459	$	459	$	—	$	—

			Fair Value Measurements at
			December 31, 2016
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents ⁽¹⁾	$	39,941	$	39,941	$	—	$	—
Commercial paper		8,482		—		8,482		—
Mutual funds held for nonqualified deferred compensation plan participants ⁽²⁾		378		378		—		—
Total assets	$	48,801	$	40,319	$	8,482	$	—
Liabilities
Deferred compensation ⁽²⁾	$	378	$	378	$	—	$	—
Total liabilities	$	378	$	378	$	—	$	—

	ESPP
	Nine Months Ended
	September 30,
	2017⁽¹⁾	2016
Weighted average grant date fair value (per share)	N/A	$	26.90
Risk-free interest rate	N/A		0.6	%
Expected dividend yield	N/A		0.0	%
Expected volatility	N/A		56.9	%
Expected term (in years)	N/A	1.3