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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 2022

or

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: 001-37717

Senseonics Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

3841
(Primary Standard Industrial
Classification Code Number)

47-1210911
(I.R.S. Employer
Identification Number)

20451 Seneca Meadows Parkway

Germantown, MD 20876-7005

(301515-7260

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

SENS

NYSE American

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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 the 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

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

There were 465,447,258 shares of common stock, par value $0.001, outstanding as of August 5, 2022.

Table of Contents

TABLE OF CONTENTS

PART I: Financial Information

ITEM 1: Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021

3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for three and six months ended June 30, 2022 and 2021

4

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2022 and 2021

5

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

ITEM 2: Management Discussion and Analysis of Financial Condition and Results of Operations

24

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk

37

ITEM 4: Controls and Procedures

37

PART II: Other Information

37

ITEM 1: Legal Proceedings

37

ITEM 1A: Risk Factors

38

ITEM 2: Unregistered Sales of Equity and Securities and Use of Proceeds

39

ITEM 3: Defaults Upon Senior Securities

39

ITEM 4: Mine Safety Disclosures

39

ITEM 5: Other Information

39

ITEM 6: Exhibits

39

SIGNATURES

40

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Senseonics Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

June 30, 

December 31, 

 

2022

2021

(unaudited)

Assets

    

    

Current assets:

Cash and cash equivalents

$

45,425

$

33,461

Short term investments, net

93,758

96,445

Accounts receivable, net

220

205

Accounts receivable, net - related parties

3,824

1,768

Inventory, net

7,251

6,316

Prepaid expenses and other current assets

 

7,818

 

6,218

Total current assets

 

158,296

 

144,413

Option

1,085

239

Deposits and other assets

 

3,347

 

1,086

Long term investments, net

11,334

51,882

Property and equipment, net

 

1,263

 

1,308

Total assets

$

175,325

$

198,928

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:

Accounts payable

$

1,734

$

1,204

Accrued expenses and other current liabilities

 

10,731

 

10,667

Accrued expenses and other current liabilities- related parties

3,692

3,597

Note payable, current portion, net

14,874

Derivative liability, current portion

438

Term Loans, net

2,926

Total current liabilities

 

31,469

 

18,394

Long-term debt and notes payables, net

50,650

59,798

Derivative liabilities

 

54,737

 

236,291

Option

19,476

69,401

Other liabilities

3,052

579

Total liabilities

 

159,384

 

384,463

Commitments and contingencies

Stockholders’ equity (deficit):

Common stock, $0.001 par value per share; 900,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 465,326,135 shares and 447,282,263 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

465

 

447

Additional paid-in capital

 

776,640

 

765,215

Accumulated other comprehensive loss

(1,128)

(212)

Accumulated deficit

 

(760,036)

 

(950,985)

Total stockholders' equity (deficit)

 

15,941

 

(185,535)

Total liabilities and stockholders’ equity (deficit)

$

175,325

$

198,928

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

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Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share and per share data)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Revenue, net

$

137

433

$

429

$

920

Revenue, net - related parties

3,577

2,856

5,767

5,215

Total revenue

3,714

3,289

6,196

6,135

Cost of sales

2,890

2,897

4,845

5,217

Gross profit

824

392

1,351

918

Expenses:

Research and development expenses

9,299

 

7,107

17,103

12,362

Selling, general and administrative expenses

8,561

 

9,175

16,445

 

15,762

Operating loss

(17,036)

 

(15,890)

(32,197)

 

(27,206)

Other income (expense), net:

Interest income

241

247

334

256

Gain (Loss) on fair value adjustment of option

28,224

(35,730)

49,925

(88,405)

Gain on extinguishment of debt and option

330

Interest expense

(4,510)

(4,034)

(9,005)

(8,092)

Gain (Loss) on change in fair value of derivatives

96,548

(124,361)

181,117

(305,260)

Net gain (impairment)

816

(381)

846

(1,163)

Other expense

(52)

(157)

(71)

(280)

Total other income (expense), net

121,267

(164,416)

223,146

(402,614)

Net Income (Loss)

104,231

(180,306)

190,949

(429,820)

Other comprehensive loss

Unrealized loss on marketable securities

(291)

(16)

(916)

(16)

Total other comprehensive loss

(291)

(16)

(916)

(16)

Total comprehensive income (loss)

$

103,940

$

(180,322)

$

190,033

$

(429,836)

Basic net income (loss) per common share

$

0.22

(0.42)

$

0.42

$

(1.08)

Basic weighted-average shares outstanding

464,133,903

431,840,854

460,061,022

398,244,296

Diluted net income (loss) per common share

$

(0.03)

(0.42)

$

(0.06)

$

(1.08)

Diluted weighted-average shares outstanding

601,330,959

431,840,854

604,342,540

398,244,296

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

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Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (in thousands)

Additional

Accumulated

Total

 

Series A

Common Stock

Paid-In

Other

Accumulated

Stockholders'

 

Convertible

  

Shares

  

Amount

  

Capital

  

Comprehensive Loss

Deficit

Equity (Deficit)

 

Preferred Stock Temporary Equity

  

Three months ended June 30, 2021:

Balance, March 31, 2021

427,915

428

711,698

(898,025)

(185,899)

$

Issuance of common stock, net

12,831

13

48,340

48,353

 

Exercise of stock options and warrants

1,588

1

2,190

2,191

Issued common stock for vested RSUs and ESPP purchase

2,791

3

3

Stock-based compensation expense

3,034

3,034

Net loss

(180,306)

(180,306)

Other comprehensive loss, net of tax

(16)

(16)

Balance, June 30, 2021

445,125

$

445

$

765,262

$

(16)

$

(1,078,331)

$

(312,640)

$

Six months ended June 30, 2021:

Balance, December 31, 2020

 

265,582

266

504,162

(648,511)

(144,083)

$

2,811

Issuance of convertible preferred stock, net

42,756

Conversion of preferred stock

54,166

54

45,512

45,566

(45,567)

Issuance of common stock, net

112,571

113

200,327

200,440

Exercise of stock options and warrants

 

5,027

4

3,885

3,889

Exchange and conversion of convertible notes, net

4,925

5

6,496

6,501

Issued common stock for vested RSUs and ESPP purchase

2,854

3

47

50

Stock-based compensation expense

4,833

4,833

Net loss

(429,820)

(429,820)

Other comprehensive loss, net of tax

 

(16)

(16)

Balance, June 30, 2021

 

445,125

$

445

$

765,262

 

$

(16)

$

(1,078,331)

$

(312,640)

$

Three months ended June 30, 2022:

Balance, March 31, 2022

463,229

463

775,172

(837)

(864,267)

(89,469)

Exercise of stock options and warrants

127

68

68

Issued common stock for vested RSUs and ESPP purchase

3,063

3

(2)

1

Stock-based compensation expense

2,585

2,585

Shares withheld related to net share settlement of equity awards

(1,093)

(1)

(1,183)

(1,184)

Net income

104,231

104,231

Other comprehensive loss, net of tax

(291)

(291)

Balance, June 30, 2022

465,326

$

465

$

776,640

$

(1,128)

$

(760,036)

$

15,941

$

Six months ended June 30, 2022:

Balance, December 31, 2021

447,282

447

765,215

(212)

(950,985)

(185,535)

Issuance of common stock

 

3,077

3

8,001

8,004

Exercise of stock options and warrants

 

9,211

9

230

239

Issuance of common stock for vested RSUs and ESPP purchase

6,849

7

56

63

Stock-based compensation expense

4,321

4,321

Shares withheld related to net share settlement of equity awards

 

(1,093)

(1)

(1,183)

(1,184)

Net income

190,949

190,949

Other comprehensive loss, net of tax

 

(916)

(916)

Balance, June 30, 2022

 

465,326

$

465

$

776,640

 

$

(1,128)

$

(760,036)

$

15,941

$

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

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Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Six Months Ended

June 30, 

2022

2021

Cash flows from operating activities

    

Net income (loss)

$

190,949

(429,820)

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

Depreciation and amortization expense

 

520

612

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

 

5,726

3,327

Change in fair value of derivatives

(181,117)

305,260

(Gain) Loss on fair value adjustment of option

(49,925)

88,405

Gain on extinguishment of debt and option

(330)

(Gain) Impairment of option, net

(846)

1,163

Stock-based compensation expense

 

4,321

4,721

Changes in assets and liabilities:

Accounts receivable

(2,070)

196

Prepaid expenses and other current assets

 

(1,600)

(761)

Inventory

(934)

(3,535)

Deposits and other assets

163

(30)

Accounts payable

 

530

1,269

Accrued expenses and other liabilities

44

(1,325)

Accrued interest

(102)

441

Net cash used in operating activities

 

(34,341)

(30,407)

Cash flows from investing activities

Capital expenditures

 

(211)

(47)

Sale of marketable securities

42,319

(145,271)

Net cash provided by (used in) investing activities

 

42,108

 

(145,318)

Cash flows from financing activities

Issuance of common stock, net

8,004

200,440

Proceeds from exercise of stock options, stock warrants and ESPP purchases

302

4,051

Taxes paid related to net share settlement of equity awards

(1,183)

Proceeds from issuance of Masters preferred stock, net

 

22,783

Repayment of term loans

(2,926)

Net cash provided by financing activities

 

4,197

 

227,274

Net increase in cash and cash equivalents

 

11,964

 

51,549

Cash and cash equivalents, at beginning of period

 

33,461

18,205

Cash and cash equivalents, at ending of period

$

45,425

$

69,754

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$

3,381

$

4,310

Lease liabilities arising from obtaining right-of-use assets

2,944

Supplemental disclosure of non-cash investing and financing activities

Issuance of common stock converted from preferred shares

54,166

Issuance of common stock converted from notes payables

4,925

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

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Senseonics Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1.

Organization and Nature of Operations

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

Senseonics, Incorporated is a wholly owned subsidiary of Senseonics Holdings, Inc. and was originally incorporated on October 30, 1996 and commenced operations on January 15, 1997. Senseonics Holdings, Inc. and Senseonics, Incorporated are hereinafter collectively referred to as the “Company” unless otherwise indicated or the context otherwise requires.

2.

Liquidity and Capital Resources

From its founding in 1996 until 2010, the Company has devoted substantially all of its resources to researching various sensor technologies and platforms. Beginning in 2010, the Company narrowed its focus to developing and refining a commercially viable glucose monitoring system. However, to date, the Company has not generated any significant revenue from product sales. The Company has incurred substantial losses and cumulative negative cash flows from operations since its inception in October 1996. The Company has never been profitable from operations, and its net losses were $302.5 million, $175.2 million, and $115.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of June 30, 2022, the Company had an accumulated deficit of $760.0 million. To date, the Company has funded its operations principally through the issuance of preferred stock, common stock, convertible notes and debt. As of June 30, 2022, the Company had cash, cash equivalents and marketable securities of $150.5 million.

In November 2021, the Company entered into an Open Market Sale Agreement, (the “2021 Sales Agreement”) with Jefferies LLC (“Jefferies”), under which the Company could offer and sell, from time to time, at its sole discretion, shares of its common stock having an aggregate offering price of up to $150.0 million through Jefferies as its sales agent in an “at the market” offering. Jefferies will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement. During the six months ended June 30, 2022, the Company received $8.0 million in net proceeds from the sale of 3,077,493 shares of its common stock under the 2021 Sales Agreement.

In November 2019, the Company entered into an Open Market Sale Agreement (the “2019 Sales Agreement”) with Jefferies, under which the Company could offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $50.0 million through Jefferies as its sales agent in an “at the market” offering. In June 2021, the Company received $48.4 million in net proceeds from the sale of 12,830,333 shares of its common stock utilizing the full capacity under the 2019 Sales Agreement.

On January 21, 2021, the Company entered into an underwriting agreement, which was subsequently amended and restated on the same day (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC, as representative of the underwriters (the “Underwriters”), to issue and sell 51,948,052 shares of common stock, in an underwritten public offering pursuant to effective registration statements on Form S-3, including a related prospectus and prospectus supplement, in each case filed with the United States Securities and Exchange Commission (“the SEC”) (the “2021 Public Offering”). The price to the public in the 2021 Public Offering was $1.925 per share of common stock. The Underwriters agreed to purchase the shares from the Company pursuant to the Underwriting Agreement at a price of $1.799875 per share and the Company also agreed to reimburse them for customary fees and expenses. The initial closing of the 2021 Public Offering occurred on January 26, 2021. Subsequent to the initial closing, the Underwriters exercised their option to purchase an additional 7,792,207 shares of common stock. Total net proceeds from the 2021 Public Offering were $106.1 million after deducting underwriting discounts and commissions and estimated offering expenses.

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On January 17, 2021, the Company entered into a Securities Purchase Agreement with certain institutional purchasers (the “Purchasers”), pursuant to which the Company sold to the Purchasers, in a registered direct offering (the “Registered Direct Offering”), an aggregate of 40,000,000 shares (the “Shares”) of common stock, $0.001 par value per share. The Shares were sold at a purchase price of $1.25 per share for aggregate gross proceeds to the Company of $50.0 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. The Shares were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the SEC on November 27, 2019. The net proceeds to the Company from the Registered Direct Offering, after deducting fees and expenses and the estimated offering expenses payable by the Company, were approximately $46.1 million.

On November 9, 2020, the Company entered into an Equity Line Agreement (the “Equity Line Agreement”) with Energy Capital, LLC, a Florida limited liability company (“Energy Capital”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital is committed to purchase up to an aggregate of $12.0 million of shares of the Company’s newly designated series B convertible preferred stock (the “Series B Preferred Stock”) at the Company’s request from time to time during the 24-month term of the Equity Line Agreement. Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, including that the Company have less than $8.0 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), the Company has the right, at its sole discretion, to present Energy Capital with a purchase notice (each, a “Regular Purchase Notice”) directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of the Company’s Series B Preferred Stock at a per share price (the “Purchase Price”) equal to $1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six months after the date of its issuance, at a conversion price of $0.3951 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. The Equity Line Agreement provides that the Company shall not affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the Company’s common stock on the NYSE American is less than $0.25 without the approval of Energy Capital. In addition, beginning on January 1, 2022, since there have been no sales of the Series B Preferred Stock pursuant to the Equity Line Agreement, Energy Capital has the right, at its sole discretion, by its delivery to the Company of a Regular Purchase Notice, to purchase up to the $12.0 million of Series B Preferred Stock under the Equity Line Agreement at the Purchase Price. There have been no issuances of Series B Preferred Stock as of June 30, 2022.

On August 9, 2020, the Company entered into a financing agreement with the parent company of Ascensia Diabetes Care Holdings AG (“Ascensia”), PHC Holdings Corporation (“PHC”), pursuant to which the Company issued $35.0 million in aggregate principal amount of Senior Secured Convertible Notes due on October 31, 2024 (the “PHC Notes”), to PHC. The Company also issued 2,941,176 shares of common stock to PHC as a financing fee. The Company also has the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022, contingent upon obtaining approval for the 180-day Eversense product for marketing in the United States before such date.

Additionally, on August 9, 2020, the Company entered into a Stock Purchase Agreement with Masters Special Solutions, LLC and certain affiliates thereof (collectively, “Masters”), pursuant to which the Company issued and sold to Masters 3,000 shares of convertible preferred stock, designated as Series A Preferred Stock (the “Series A Preferred Stock”), at a price of $1,000 per share in an initial closing. Masters also had the option to purchase up to an additional 27,000 shares of Series A Preferred Stock at a price of $1,000 per share in subsequent closings, subject to the terms and conditions of the Stock Purchase Agreement, as amended, through January 11, 2021. In January 2021, Masters and its assignees purchased in aggregate an additional 22,783 shares of Series A Preferred Stock, resulting in additional gross proceeds to the Company of $22.8 million. Each share of Series A Preferred Stock was initially convertible into a number of shares of common stock equal to $1,000 divided by the conversion price of $0.476 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. All shares of Series A Preferred Stock have been converted to common stock.

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Note 3.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Although the Company considers the disclosures in these unaudited consolidated financial statements to be adequate to make the information presented not misleading, certain information or footnote information normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted under the rules and regulations of the SEC. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of financial position at June 30, 2022, and December 31, 2021, results of operations, comprehensive income (loss), and changes in stockholder’s deficit for the three and six month periods ended June 30, 2022, and 2021 and cash flows for the six months ended June 30, 2022, and 2021 have been included. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 1, 2022. The interim results for June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any future interim periods.

The consolidated financial statements reflect the accounts of Senseonics Holdings, Inc. and its wholly owned operating subsidiary Senseonics, Incorporated. The Company views its operations and manages its business in one segment, glucose monitoring products. Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. 

Certain prior year amounts have been reclassified to conform to the current-year presentation. An adjustment has been made to the Consolidated Statements of Operations and Comprehensive Income (Loss) to consolidate the line items Sales and marketing expenses and General and administrative expenses to Selling, general and administrative expenses in order to conform to current year presentation. These reclassifications had no effect on the reported results of operations.

Recent Accounting Pronouncements

Recently Adopted

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contract in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). This new guidance is intended to reduce the complexity of accounting for convertible instruments. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments. Entities may adopt ASU 2020-06 using either partial retrospective or fully retrospective method of transition. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2022 and its adoption did not have a material impact on the consolidated financial statements and related disclosures.

Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. For available-for-sale debt securities in unrealized loss positions, the new standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The Company currently holds investments in available-for-sale securities. The Company has not historically experienced collection issues or bad debts with trade receivables. Accordingly, the Company does not expect this to have a significant impact on its

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consolidated financial statements and related disclosures at this time. The Company will adopt this guidance on the effective date for smaller reporting companies, January 1, 2023.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. In the accompanying unaudited consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, recoverability of long-lived assets, deferred taxes and valuation allowances, derivative assets and liabilities, obsolete inventory, warranty obligations, variable consideration related to revenue, depreciable lives of property and equipment, and accruals for clinical study costs, which are accrued based on estimates of work performed under contract. The Company considered COVID-19 related impacts to its estimates, as appropriate, within its unaudited condensed consolidated financial statements and there may be changes to those estimates in future periods due to the uncertainties surrounding the severity and duration of the COVID-19 pandemic. Actual results could differ from those estimates.

Significant Accounting Policies

The accounting policies used by the Company in its presentation of interim financial results are consistent with those presented in Note 3 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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4. Revenue Recognition

The Company generates product revenue from sales of the Eversense system and related components and supplies to Ascensia, through a collaboration and commercialization agreement (the “Ascensia Commercialization Agreement”, third-party distributors in the European Union and to strategic fulfillment partners in the United States (collectively, “the Customers”), who then resell the products to health care providers and patients. Customers pay the Company for sales, regardless of whether or not the Customers resell the products to health care providers and patients. The Company’s policies for recognizing sales have not changed from those described in our Annual Report on Form 10-K for the year ended December 31, 2021.

Revenue by Geographic Region

The following table sets forth net revenue derived from the Company’s two primary geographical markets, the United States and outside of the United States, based on the geographic location to which the Company delivers the product, for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2022

%

%

(Dollars in thousands)

Amount

of Total

Amount

of Total

Revenue, net:

Outside of the United States

$

2,507

67.5

%

$

4,222

68.1

%

United States

1,207

32.5

1,974

31.9

Total

$

3,714

100.0

%

$

6,196

100.0

%

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2021

%

%

(Dollars in thousands)

Amount

of Total

Amount

of Total

Revenue, net:

Outside of the United States

$

2,310

70.2

%

$

4,843

78.9

%

United States

979

29.8

1,292

21.1

Total

$

3,289

100.0

%

$

6,135

100.0

%

Contract Assets

Contract assets consist of unbilled receivables from customers and are recorded at net realizable value and relate to the revenue share variable consideration from the Ascensia Commercialization Agreement. Accounts receivable as of June 30, 2022 and December 31, 2021 included unbilled accounts receivable of $1.1 million and $1.8 million, respectively. The Company expects to invoice and collect all unbilled accounts receivable within 12 months.

Concentration of Revenue and Customers

For the three months ended June 30, 2022 and 2021, the Company derived 96% and 87%, respectively, of its total revenue from one customer, Ascensia. For the six months ended June 30, 2022 and 2021, the Company derived 93% and 85%, respectively, of its total revenue from one customer, Ascensia. Revenues for these corresponding periods represent sales of sensors, transmitters and miscellaneous Eversense system components.

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5. Net Income (Loss) per Share

Basic net income per share attributable to common stockholders is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents. Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

Potentially dilutive common shares consist of shares issuable from restricted stock units, warrants and the Company’s convertible notes. Potentially dilutive common shares issuable upon vesting of restricted stock units and exercise of stock options and warrants are determined using the average share price for each period under the treasury stock method. Potentially dilutive common shares issuable upon conversion of the Company’s convertible notes are determined using the if converted method. In periods of net loss, all potentially dilutive common shares are excluded from the computation of the diluted net loss per share for those periods, as the effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted net income per share for the periods shown:

Three Months Ended June 30, 

Six Months Ended June 30, 

2022

    

2021

2022

    

2021

Net income (loss)

104,231

(180,306)

190,949

(429,820)

Impact of conversion of dilutive securities

(124,010)

(228,614)

Dilutive Net income (loss)

(19,779)

(180,306)

(37,665)

(429,820)

Net income (loss) per share

Basic

0.22

(0.42)

0.42

(1.08)

Diluted

(0.03)

(0.42)

(0.06)

(1.08)

Basic weighted average shares outstanding

464,133,903

431,840,854

460,061,022

398,244,296

Dilutive potential common stock outstanding

Stock-based awards

4,649,548

7,003,387

2023 Notes

4,617,646

4,617,646

2025 Notes

39,689,142

39,689,142

PHC Notes

65,718,303

65,816,535

PHC Option

Energy Capital Option

21,164,986

23,690,945

Warrants

1,357,430

3,463,862

Diluted weighted average shares outstanding

601,330,959

431,840,854

604,342,540

398,244,296

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For the three and six months ended June 30, 2021, the Company operated at a loss. Accordingly, all potentially dilutive shares were considered antidilutive, and basic and diluted EPS are the same.

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

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

2021

Stock-based awards

13,900,070

28,974,297

11,142,459

28,974,297

2023 Notes

5,092,801

5,092,801

2025 Notes

39,689,142

39,689,142

PHC Notes

65,757,177

65,757,177

PHC Option

20,003,765

23,161,214

Warrants

427,821

13,334,739

260,251

13,334,739

Total anti-dilutive shares outstanding

34,331,656

152,848,156

34,563,924

152,848,156

6.

Marketable Securities

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

June 30, 2022

Gross

Gross

Estimated

Amortized

Unrealized

Unrealized

Market

    

Cost

    

Gains

    

Losses

    

Value

Commercial Paper

$

14,532

$

14,532

Corporate debt securities

$

37,292

(395)

$

36,897

Asset backed securities

$

14,847

(113)

$

14,734

Government and agency securities

$

39,549

(620)

$

38,929

Total

$

106,220

$

$

(1,128)

$

105,092

December 31, 2021

Gross

Gross

Estimated

Amortized

Unrealized

Unrealized

Market

    

Cost

    

Gains

    

Losses

    

Value

Commercial Paper

$

57,369

$

57,369

Corporate debt securities

$

39,825

(77)

$

39,748

Asset backed securities

$

26,736

(29)

$

26,707

Government and agency securities

$

24,609

(106)

$

24,503

Total

$

148,539

$

$

(212)

$

148,327

The following are the scheduled maturities as of June 30, 2022 (in thousands):

2022 (remaining six months)

    

$

32,775

2023

 

62,013

2024

6,591

Thereafter

4,841

Total

    

$

106,220

The Company periodically reviews its portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than the amortized cost basis, the Company assesses at the individual security level, for various quantitative factors including,

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but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on available-for-sale securities at June 30, 2022 were not significant and were primarily due to changes in interest rates and not due to increased credit risk associated with specific securities. The Company does not intend to sell these impaired investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

7. Inventory, net

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

    

June 30, 

    

December 31, 

2022

    

2021

Finished goods

    

$

1,020

    

$

1,012

Work-in-process

 

4,705

 

3,770

Raw materials

 

1,526

 

1,534

Total

$

7,251

$

6,316

The Company charged $0.6 million to cost of sales for the three and six months ended June 30, 2022, to reduce the value of inventory for items that are potentially obsolete due to expiry, in excess of product demand, or to adjust costs to their net realizable value. There was no corresponding charge for the three and six months ended June 30, 2021.

8. Prepaid Expenses, Other Current Assets, and Deposits and other assets

Prepaid expenses and other current assets consisted of the following (in thousands):

June 30, 

December 31, 

2022

    

2021

Contract manufacturing⁽¹⁾

$

5,314

$

5,036

Insurance

913

74

Clinical and Preclinical

669

142

Interest receivable

 

319

 

443

Research and development

236

39

Accounting and Audit

138

Rent and utilities

107

105

IT and software

    

77

 

225

Sales and Marketing

45

98

Other

56

Total prepaid expenses and other current assets

$

7,818

$

6,218

(1)Includes deposits to contract manufacturers for manufacturing process.

Deposits and other assets as of June 30, 2022 and December 31, 2021, were $3.3 million and $1.1 million, respectively. As of June 30, 2022, deposits and other assets is mainly comprised of $3.2 million for our right-of-use asset related to our operating lease of 33,000 square feet of research and office space for our corporate headquarters. In June 2022, the Company extended our lease for an additional five-year term. We recorded a modification to our right-of-use asset for the right-to-use the underlying asset for the additional lease term.

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9.

Accrued Expenses, Other Current Liabilities, and Other Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

June 30, 

December 31, 

2022

    

2021

Compensation and benefits

$

3,251

$

3,484

Research and development

2,254

2,145

Interest on notes payable

2,042

2,144

Sales and marketing services

2,276

1,962

Product warranty and replacement obligations

 

1,463

 

1,697

Professional and administration services

 

1,456

 

1,011

Contract manufacturing

    

960

    

914

Operating lease

705

904

Other

16

3

Total accrued expenses and other current liabilities

$

14,423

$

14,264

Other liabilities as of June 30, 2022 and December 31, 2021, were $3.1 million and $0.6 million, respectively. Other liabilities is comprised of the non-current portion of our operating lease liability for our corporate headquarters. In June 2022, the Company extended our lease for an additional five-year term. We recorded a modification to the lease liability upon renewal to reflect our obligation to make the additional lease payments.

10.

Product Warranty Obligations

The Company provides a warranty of one year on its smart transmitters. Additionally, the Company may also replace Eversense system components that do not function in accordance with the product specifications. Estimated replacement costs are recorded at the time of shipment as a charge to cost of sales in the consolidated statement of operations and are developed by analyzing product performance data and historical replacement experience, including comparing actual replacements to revenue.

At June 30, 2022, and December 31, 2021, the warranty reserve was $0.8 million and $0.7 million, respectively. The following table provides a reconciliation of the change in estimated warranty liabilities for the six months ended June 30, 2022 and for the twelve months ended December 31, 2021 (in thousands):

June 30, 

December 31,

    

2022

    

2021

Balance at beginning of the period

$

723

$

646

Provision for warranties during the period

47

781

Settlements made during the period

(6)

(704)

Balance at end of the period

$

764

$

723

11.

Notes Payable, Preferred Stock and Stock Purchase Warrants

Term Loans

PPP Loan

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

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

Under the terms of the PPP Note and the PPP Loan, interest accrued on the outstanding principal at a rate of 1.0% per annum. The term of the PPP Note was two years. In April 2022, the Company repaid the outstanding principal and accrued interest in full.

Convertible Preferred Stock and Warrants

On November 9, 2020, the Company entered into the Equity Line Agreement with Energy Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital is committed to purchase up to an aggregate of $12.0 million of shares of the Company’s Series B Preferred Stock at the Company’s request from time to time during the 24-month term of the Equity Line Agreement. Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, including the Company having less than $8 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), the Company has the right, at sole discretion, to present Energy Capital with a Regular Purchase Notice directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of the Company’s Series B Preferred Stock at the Purchase Price equal to $1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six months after the date of its issuance, at a conversion price of $0.3951 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. The Equity Line Agreement provides that the Company shall not affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the Company’s common stock on the NYSE American is less than $0.25 without the approval of Energy Capital. In addition, beginning on January 1, 2022, since there have been no sales of the Series B Preferred Stock pursuant to the Equity Line Agreement, Energy Capital has the right, at its sole discretion, by its delivery to the Company of a Regular Purchase Notice, to purchase up to the $12.0 million of Series B Preferred Stock under the Equity Line Agreement at the Purchase Price. There have been no issuances of Series B Preferred Stock as of June 30, 2022.

The Company accounted for the Equity Line Agreement as a put/call option (the “Energy Capital Option”). This put/call option is classified as a liability in accordance with ASC 480, Distinguishing liabilities from equity, on the Company’s balance sheet and was recorded at the estimated fair value of $4.2 million upon issuance. The put/call option is required to be remeasured to fair value at each reporting period with the change recorded in change in fair value of derivatives that is a component of other income (expense). In connection with the execution of the Equity Line Agreement, the Company incurred $7.6 million in debt issuance costs in fiscal year 2020. The fair value of the Energy Capital Option as of June 30, 2022 and December 31, 2021 was $19.5 million and $69.4 million, respectively.

Concurrently with entry into the Equity Line Agreement, the Company issued a warrant to Energy Capital, exercisable beginning on May 9, 2021, to purchase up to 10,000,000 shares of common stock at an exercise price of $0.3951 per share (the “Warrant”). The Warrant was exercised in full in February 2022.

On August 9, 2020, the Company entered into a Stock Purchase Agreement with Masters, pursuant to which the Company issued and sold Masters 3,000 shares of Series A Preferred Stock, at a price of $1,000 per share in an initial closing. Masters also had the option to purchase up to an additional 27,000 shares of Series A Preferred Stock at a price of $1,000 per share in subsequent closings, subject to the terms and conditions of the Stock Purchase Agreement, as amended, through January 11, 2021. In January 2021, Masters and its assignees purchased in aggregate an additional 22,783 shares of Series A Preferred Stock, resulting in additional gross proceeds of $22.8 million. Each share of Series A Preferred Stock was initially convertible into a number of shares of common stock equal to $1,000 divided by the conversion price of $0.476 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. All 25,783 shares of Series A Preferred Stock have been converted to shares of common stock. Masters’ option to purchase the remaining unissued shares of Series A Preferred Stock expired on January 11, 2021, resulting in a gain on extinguishment of $3.5 million.

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Convertible Notes

PHC Notes

On August 9, 2020, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with PHC, as the purchaser (together with the other purchasers from time to time party thereto, the “Note Purchasers”) and Alter Domus (US) LLC, as collateral agent. Pursuant to the Note Purchase Agreement, the Company borrowed $35.0 million in aggregate principal through the issuance and sale of the PHC Notes on August 14, 2020 (the “Closing Date”). The Company also issued 2,941,176 shares of its common stock, $0.001 par value per share to PHC as a financing fee (the “Financing Fee Shares”) on the Closing Date. The Financing Fee Shares are accounted for as debt discount in the amount of $1.5 million.

The PHC Notes are senior secured obligations of the Company and will be guaranteed on a senior secured basis by the Company’s wholly owned subsidiary, Senseonics, Incorporated. Interest at the initial annual rate of 9.5% is payable semi-annually in cash or, at the Company’s option, payment in kind. The interest rate decreased to 8.0% in April 2022 as a result of the Company having obtained FDA approval for the 180-day Eversense E3 system for marketing in the United States. The maturity date for the PHC Notes is October 31, 2024 (the “Maturity Date”). The obligations under the PHC Notes are secured by substantially all of the Company’s and its subsidiary’s assets.

The Note Purchasers are entitled to convert the PHC Notes to common stock at a conversion rate of 1,867.4136 shares per $1,000 principal amount of the PHC Notes (including any interest added thereto as payment in kind), equivalent to a conversion price of approximately $0.54 per share, subject to specified anti-dilution adjustments, including adjustments for the Company’s issuance of equity securities on or prior to April 30, 2022 below the conversion price. In addition, following a notice of redemption or certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its PHC Notes in connection with such notice of redemption or corporate event. In certain circumstances, the Company will be required to pay cash in lieu of delivering make whole shares unless the Company obtains stockholder approval to issue such shares.

Subject to specified conditions, on or after October 31, 2022, the PHC Notes are redeemable by the Company if the closing sale price of the common stock exceeds 275% of the conversion price for a specified period of time and subject to certain conditions upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount (including any payment in kind interest which has been added to such amount), plus any accrued but unpaid interest. On or after October 31, 2023, the PHC Notes are redeemable by the Company upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount (including any payment in kind interest which has been added to such amount), plus any accrued but unpaid interest, plus a call premium of 130% if redeemed at least six months prior to the Maturity Date or a call premium of 125% if redeemed within six months of the Maturity Date.

The Note Purchase Agreement contains customary terms and covenants, including financial covenants, such as operating within an approved budget and achieving minimum revenue and liquidity targets, and negative covenants, such as limitations on indebtedness, liens, mergers, asset transfers, certain investing activities and other matters customarily restricted in such agreements. Most of these restrictions are subject to certain minimum thresholds and exceptions. The Note Purchase Agreement also contains customary events of default, after which the PHC Notes become due and payable immediately, including defaults related to payment compliance, material inaccuracy of representations and warranties, covenant compliance, material adverse changes, bankruptcy and insolvency proceedings, cross defaults to certain other agreements, judgments against the Company, change of control or delisting events, termination of any guaranty, governmental approvals, and lien priority.

The Company also has the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022 (the “PHC Option”), which was initially contingent upon obtaining FDA approval for the 180-day Eversense product for marketing in the United States before such date, and which approval the Company successfully obtained in February 2022. The PHC Option represents a freestanding financial instrument and is recognized as an asset in the Company’s consolidated balance sheets at fair value on the date of issuance and subject to

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impairment testing in each reporting period prior to the options exercise or expiration. The Company acknowledges that while the PHC Option is subject to impairment testing, there is no explicit guidance regarding how impairment should be assessed and measured for the PHC Option. As such, the measurement alternative in ASC Topic 321, Investments—Equity Securities, for equity securities without readily determinable fair values can be applied by analogy to assess and measure impairment of the PHC Option. The Company developed an estimated fair value at June 30, 2022 and December 31, 2021 to be $1.1 million and $0.2 million, respectively, and a gain of less than $0.9 million was recognized in net income as the difference between the fair value of the investment and its carrying amount for the six months ended June 30, 2022

The Note Purchase Agreement also contained several provisions requiring bifurcation as a separate derivative liability including an embedded conversion feature, mandatory prepayment upon event of default that constitutes a breach of the minimum revenue financial covenant, optional redemption upon an event of default, change in interest rate after PMA approval and default interest upon an event of default. The Company recorded the fair value of the embedded features in the amount of $25.8 million as a derivative liability in the Company’s consolidated balance sheets in accordance with ASC Topic 815, Derivatives and Hedging. The derivative is adjusted to fair value at each reporting period, with the change in the fair value recorded in change in fair value of derivatives that is a component of other income (expense) in the Company’s consolidated statement of operations and comprehensive loss. The fair value of the derivative at June 30, 2022 and December 31, 2021 was $46.8 million and $149.1 million, respectively.

In connection with the issuance of the Note Purchase Agreement, the Company incurred $2.9 million in debt issuance costs and debt discounts. The associated debt issuance costs were recorded as a contra liability in the amount of $1.4 million and are deferred and amortized as additional interest expense over the term of the notes. There have been no conversions of PHC Notes since inception of the Note Purchase Agreement.

2025 Notes

In July 2019, the Company issued $82.0 million in aggregate principal amount of senior convertible notes that will mature on January 15, 2025 (the “2025 Notes”), unless earlier repurchased or converted. The 2025 Notes are convertible, at the option of the holders, into shares of the Company’s common stock, at an initial conversion rate of 757.5758 shares per $1,000 principal amount of the 2025 Notes (equivalent to an initial conversion price of approximately $1.32 per share).

The 2025 Notes also contained an embedded conversion option requiring bifurcation as a separate derivative liability, along with the fundamental change make-whole provision and the cash settled fundamental make-whole shares provision. The derivative is adjusted to fair value at each reporting period, with the change in the fair value recorded to other income (expense) in the Company’s consolidated statement of operations and comprehensive loss. The fair value of the derivative at June 30, 2022 and December 31, 2021 was $8 million and $81.4 million, respectively.

In connection with the Exchange on April 24, 2020, $24.0 million aggregate principal of the Company’s outstanding 2025 Notes held by Highbridge Capital Management, LLC (“Highbridge”) were exchanged for $15.7 million of Second Lien Notes (the “Second Lien Notes”), (i) 11,026,086 shares of common stock, (ii) warrants to purchase up to 4,500,000 shares of common stock at an exercise price of $0.66 per share, and (iii) $0.3 million in accrued and unpaid interest on the 2025 Notes being exchanged (the “Exchange”). This transaction modified the original 2025 Notes outstanding with Highbridge and resulted in $13.2 million of deferred issuance fees and debt discounts associated with the exchanged 2025 Notes being transferred as a discount to the Second Lien Notes.

As of December 31, 2021, there were conversions of $6.5 million of outstanding principal amount of the 2025 notes for 4,924,998 shares of common stock. Accordingly, $3.2 million of allocated deferred issuance costs and debt discounts were recognized as a loss on extinguishment of debt as of December 31, 2021. There were no conversions of 2025 Notes for the six months ended June 30, 2022.

2023 Notes

In the first quarter of 2018, the Company issued $53.0 million in aggregate principal amount of senior convertible notes due February 1, 2023 (the “2023 Notes”). In July 2019, the Company used the net proceeds from the

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issuance of the 2025 Notes to repurchase $37.0 million aggregate principal amount of the outstanding 2023 Notes. Each $1,000 of principal of the 2023 Notes is initially convertible into 294.1176 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $3.40 per share, subject to adjustment upon the occurrence of specified events. Holders may convert at any time prior to February 1, 2023. Holders who convert on or after the date that is six months after the last date of original issuance of the 2023 Notes but prior to February 1, 2021, may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in shares of common stock. If specific corporate events occur prior to the maturity date, the Company will increase the conversion rate pursuant to the make-whole fundamental change provision for a holder who elects to convert their 2023 Notes in connection with such an event in certain circumstances. Additionally, if a fundamental change occurs prior to the maturity date, holders of the 2023 Notes may require the Company to repurchase all or a portion of their 2023 Notes for cash at a repurchase price equal to 100% of the principal amount plus any accrued and unpaid interest.

The Company bifurcated the embedded conversion option, along with the interest make-whole provision and make-whole fundamental change provision, and in January 2018 recorded the embedded features as a debt discount and derivative liability in the Company’s consolidated balance sheets at its initial fair value of $17.3 million. Additionally, the Company incurred transaction costs of $2.2 million. The debt discount and transaction costs are being amortized to interest expense over the term of the 2023 Notes at an effective interest rate of 9.30%. The derivative is adjusted to fair value at each reporting period, with the change in the fair value recorded to other income (expense) in the Company’s consolidated statement of operations and comprehensive loss. The fair value of the derivative at June 30, 2022 and December 31, 2021 was $0.4 million and $5.8 million, respectively.

There were no conversions of 2023 Notes for the six months ended June 30, 2022. As the 2023 Notes have a maturity date of February 1, 2023, they are classified as other current liability on the Company’s consolidated balance sheet at June 30, 2022.

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The following carrying amounts were outstanding under the Company’s notes payable as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

Principal ($)

Debt Discount ($)

Issuance Costs ($)

Carrying Amount ($)

2023 Notes

15,700

(826)

-

14,874

2025 Notes

51,199

(17,910)

(300)

32,989

PHC Notes

35,000

(16,341)

(998)

17,661

PPP Loan

-

-

-

-

December 31, 2021

Principal ($)

Debt Discount ($)

Issuance Costs ($)

Carrying Amount ($)

2023 Notes

15,700

(1,499)

-

14,201

2025 Notes

51,199

(20,535)

(344)

30,320

PHC Notes

35,000

(18,587)

(1,136)

15,277

PPP Loan

2,926

-

-

2,926

Interest expense related to the notes payable for the six months ended June 30, 2022 and 2021 was as follows (dollars in thousands):

Six Months Ended June 30, 2022

Interest Rate

Interest ($)

Debt Discount and Fees ($)

Issuance Costs ($)

Loss on Extinguishment ($)

Total Interest Expense ($)

2023 Notes

5.25%

412

673

-

-

1,085

2025 Notes

5.25%

1,330

2,625

44

-

3,999

PHC Notes

8.00%

1,531

2,246

137

-

3,914

PPP Loan

1.00%

6

-

-

-

6

Total

3,279

5,545

181

-

9,005

Six Months Ended June 30, 2021

Interest Rate

Interest ($)

Debt Discount and Fees ($)

Issuance Costs ($)

Loss on Extinguishment ($)

Total Interest Expense ($)

2023 Notes

5.25%

412

614

-

-

1,026

2025 Notes

5.25%

1,372

2,210

36

3,183

6,801

PHC Notes

9.50%

1,625

1,677

102

-

3,404

PPP Loan

1.00%

29

-

-

-

29

Total

3,438

4,501

138

3,183

11,260

The following are the scheduled maturities of the Company’s notes payable as of June 30, 2022 (in thousands):

2022 (remaining six months)

    

$

2023

 

15,700

2024

35,000

2025

51,199

Total

    

$

101,899

12.

Stockholders’ Equity (Deficit)

In November 2021, the Company entered into the 2021 Sales Agreement with Jefferies, under which the Company could offer and sell, from time to time, at its sole discretion, shares of its common stock having an aggregate offering price of up to $150.0 million through Jefferies as the sales agent in an “at the market” offering. Jefferies will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement. During the six months ended June 30, 2022, the Company received $8.0 million in net proceeds from the sale of 3,077,493 shares of its common stock under the 2021 Sales Agreement.

In November 2019, the Company entered into the 2019 Sales Agreement with Jefferies LLC which allowed the Company to issue and sell up to $50.0 million in gross proceeds of its common stock. During the six months ended June 30, 2021, the Company sold 12,830,333 shares of common stock under the 2019 Sales Agreement, resulting in gross proceeds of $48.4 million.

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During the six months ended June 30, 2021, the Company sold 99,740,259 shares of common stock, of which 59,740,259 shares of common stock were sold in the 2021 Public Offering and 40,000,000 shares of common stock were sold in the Registered Direct Offering. For additional information on the 2021 Public Offering and the Registered Direct Offering, see Note 2—Liquidity and Capital Resources.

13. Stock-Based Compensation

2015 Plan

In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”), under which incentive stock options, non-qualified stock options and restricted stock units may be granted to the Company’s employees and certain other persons, such as officers and directors, in accordance with the 2015 Plan provisions. In February 2016, the Company’s Board of Directors adopted, and the Company’s stockholders approved, an Amended and Restated 2015 Equity Incentive Plan (the “Amended and Restated 2015 Plan”), which became effective on February 20, 2016. The Company’s Board of Directors may terminate the Amended and Restated 2015 Plan at any time. Options granted under the Amended and Restated 2015 Plan expire ten years after the date of grant.

Pursuant to the Amended and Restated 2015 Plan, the number of shares of the Company’s common stock reserved for issuance automatically increases on January 1 of each year, ending on January 1, 2026, by 3.5% of the total number of shares of its common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by its Board of Directors. As of June 30, 2022, 19,739,553 shares remained available for grant under the Amended and Restated 2015 Plan.

Inducement Plan

On May 30, 2019, the Company adopted the Senseonics Holdings, Inc. Inducement Plan (the “Inducement Plan”), pursuant to which the Company reserved 1,800,000 shares of the Company’s common stock for issuance. The only persons eligible to receive grants of awards under the Inducement Plan are individuals who satisfy the standards for inducement grants in accordance with NYSE American Company Guide Section 711(a), including individuals who were not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company. An “Award” is any right to receive the Company’s common stock pursuant to the Inducement Plan, consisting of non-statutory options, restricted stock unit awards and other equity incentive awards. As of June 30, 2022, 846,571 shares remained available for grant under the Inducement Plan.

2016 Employee Stock Purchase Plan

In February 2016, the Company adopted the 2016 Employee Stock Purchase Plan, (the “2016 ESPP”). The 2016 ESPP became effective on March 17, 2016. The maximum number of shares of common stock that may be issued under the 2016 ESPP was initially 800,000 shares and automatically increases on January 1 of each year, ending on and including January 1, 2026, by 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year; provided, however, the Board of Directors may act prior to the first day of any calendar year to provide that there will be no January 1 increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of common stock. At June 30, 2022 there were 13,114,632 shares of common stock available for issuance under the 2016 ESPP. For the six months ended June 30, 2022, there were purchases of 28,944 shares of common stock pursuant to this plan.

The 2016 ESPP permits participants to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their earnings. Unless otherwise determined by the administrator, the purchase price of the shares will be 85% of the lower of the fair market value of common stock on the first day of an offering or on the date of purchase. Participants may end their participation at any time and deductions not yet used in a purchase are refundable upon employment termination. The Company initiated its first 2016 ESPP offering period on August 1, 2019 and new offering periods occur every six months thereafter, each consisting of two purchase periods of six months in duration ending on or about January 31st and July 31st of each year. A participant may only be in one offering at a time. On

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February 1, 2020, there were 566,573 shares purchased in connection with the initial offering period. The 2016 ESPP contains an offering reset provision whereby if the fair market value of a share on offering date of an ongoing offering is less than or equal to the fair market value of a share on a new offering date, the ongoing offering will terminate immediately after the purchase date and rolls over to the new offering.

The 2016 ESPP is considered compensatory for financial reporting purposes.

1997 Plan

On May 8, 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”), under which incentive stock options, non-qualified stock options, and restricted stock awards may be granted to the Company’s employees and certain other persons in accordance with the 1997 Plan provisions. Approximately 1,899,190 shares of the Company’s common stock underlying options have vested under the 1997 Plan. Upon the effectiveness of the 2015 Plan, the Company no longer grants any awards under the 1997 Plan.

14.

Fair Value Measurements

The following table represents the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

 

   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets

Money market funds⁽¹⁾

$

42,168

$

42,168

Commercial paper

14,532

14,532

Corporate debt securities

36,896

36,896

Asset backed securities

14,734

14,734

Government and agency securities

38,930

34,489

4,441

PHC Option

1,085

1,085

Liabilities

Energy Capital Option

$

19,476

$

19,476

Embedded features of the 2023 Notes

438

438

Embedded features of the PHC Notes

46,760

46,760

Embedded features of the 2025 Notes

7,977

7,977

December 31, 2021

 

   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets

Money market funds⁽¹⁾

$

29,197

$

29,197

Corporate debt securities

39,748

39,748

Commercial paper

57,369

57,369

Asset backed securities

26,707

26,707

Government and agency securities

24,503

19,957

4,546

PHC Option

239

239

Liabilities

Energy Capital Option

$

69,401

$

69,401

Embedded features of the 2023 Notes

5,817

5,817

Embedded features of the PHC Notes

149,058

149,058

Embedded features of the 2025 Notes

81,417

81,417

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

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The following table provides a reconciliation of the beginning and ending net balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):

Level 3

   

Instruments

December 31, 2021

$

224,037

Gain on fair value adjustment of option

(49,925)

Gain on change in fair value of derivatives

(107,677)

Gain on extinguishment of option

Financial asset (gain) impairment cost, net

(846)

Change in fair value hierarchy classification

(438)

June 30, 2022

$

65,151

The recurring Level 3 fair value measurements of the embedded features of the notes payable and preferred stock, include the following significant unobservable inputs at June 30, 2022:

PHC Notes

PHC Option

Energy Capital Option

Unobservable Inputs

Assumptions

Assumptions

Assumptions

Stock price volatility

 

113.0

%

107.0

%

97.0

%

Probabilities of conversion provisions

5.0 - 10.0

%

5.0 - 10.0

%

5.0 - 10.0

%

Time period until maturity (yrs)

 

2.34

0.50

0.00 - 0.36

Dividend yield

 

%

%

%

15.

Income Taxes

The Company has not recorded any tax provision or benefit for the six months ended June 30, 2022 or June 30, 2021. The Company has provided a valuation allowance for the full amount of its net deferred tax assets since realization of any future benefit from deductible temporary differences, NOL carryforwards and research and development credits is not more-likely-than-not to be realized at June 30, 2022 and December 31, 2021.

On March 27, 2020, Congress enacted the CARES Act, as amended by the Flexibility Act, to provide certain relief as a result of the COVID-19 pandemic. The enactment of the CARES Act did not result in any material adjustments to the Company’s income tax provision or net deferred tax assets for the six months ended June 30, 2022.

16. Related Party Transactions

Ascensia, through the ownership interests of its parent company, PHC, has a noncontrolling ownership interest in the Company. Ascensia also has representation on the Company’s board of directors. Revenue from Ascensia during the six months ended June 30, 2022 and June 30, 2021 was $5.7 million and $5.2 million, respectively.

The amount due from Ascensia as of June 30, 2022 and December 31, 2021 was $4.3 million and $1.8 million, respectively. The amount due to Ascensia as of June 30, 2022 and December 31, 2021 was $3.6 million and $2.5 million, respectively.

17. Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.

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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks, uncertainties, and assumptions, including the duration and severity of the COVID-19 pandemic and its impact on our business and financial performance, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those described below and elsewhere in this Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K, particularly in Part I – Item 1A, “Risk Factors,” and our other filings with the Securities and Exchange Commission. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2021, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2022. Unless otherwise indicated or the context otherwise requires, all references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section to the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to Senseonics Holdings, Inc. and its subsidiary.

Overview

We are a medical technology company focused on the development and manufacturing of glucose monitoring products designed to transform lives in the global diabetes community with differentiated, long-term implantable glucose management technology. Our Eversense, Eversense XL and Eversense E3 continuous glucose monitoring (“CGM”) systems are designed to continually and accurately measure glucose levels in people with diabetes via an under-the-skin sensor, a removable and rechargeable smart transmitter, and a convenient app for real-time diabetes monitoring and management for a period of up to six months in the case of Eversense E3 and Eversense XL, as compared to seven to 14 days for non-implantable CGM systems. We affixed the CE mark to the original Eversense CGM system in June 2016, which marked the first certification for the product to be sold within the European Economic Area (“EEA”). Subsequently, we affixed the CE mark to the extended life Eversense XL CGM system in September 2017 which is currently available in select markets in Europe and the Middle East. In June 2022, we affixed the CE mark to the extended life Eversense E3 CGM system and Ascensia will begin commercialization in select markets in Europe during the third quarter of 2022. In June 2018, the U.S. Food and Drug Administration (“FDA”), approved the Eversense CGM system and it is currently available throughout the United States. In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the Eversense system. With this approval and the availability of a new app in December 2019, the Eversense system can now be used as a therapeutic CGM in the United States to replace fingerstick blood glucose measurement to make treatment decisions, including insulin dosing. In February 2022, the 180-day extended life Eversense E3 CGM system was approved by the FDA and Ascensia Diabetes Care Holdings AG (“Ascensia”) began commercializing Eversense E3 in the United States in the second quarter of 2022.

Our net revenues are derived from sales of the Eversense system which is sold in two separate kits: the disposable Eversense Sensor Pack which includes the sensor, insertion tool, and adhesive patches, and the durable Eversense Smart Transmitter Pack which includes the transmitter and charger.

We sell directly to our network of distributors and strategic fulfillment partners, who provide the Eversense system to healthcare providers and patients through a prescribed request and invoice insurance payors for

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reimbursement. Sales of the Eversense system are widely dependent on the ability of patients to obtain coverage and adequate reimbursement from third-party payors or government agencies. We leverage and target regions where we have coverage decisions for patient device use and provider insertion and removal procedure payment. We have reached approximately 250 million covered lives in the U.S. through positive insurance payor coverage decisions. We recently received positive payor coverage decision from Elevance Health, formerly Anthem, who has more than 45 million covered lives. On August 3, 2020, the Center for Medicare and Medicaid Services (“CMS”) released its Calendar Year 2021 Medicare Physician Fee Schedule Proposed Rule that announces proposed policy changes for Medicare payments, including the proposed establishment of national payment amounts for the three CPT© Category III codes describing the insertion (CPT 0446T), removal (0447T), and removal and insertion (0048T) of an implantable interstitial glucose sensor, which describes our Eversense CGM systems, as a medical benefit, rather than as part of the Durable Medical Equipment channel that includes other CGMs. In December 2021, CMS released its Calendar Year 2022 Medicare Physician Fee Schedule that updated global payments for the device cost and procedure fees. In July 2022, CMS provided temporary G-codes to enable immediate access to Eversense E3 for all eligible Medicare beneficiaries. In 2022, we have been working with payors to transition their policies to Eversense E3 and have confirmed immediate coverage policy transition from select payors.

We are in the early commercialization stages of the Eversense brand and are focused on driving awareness of our CGM system amongst intensively managed patients and their healthcare providers. In both the United States and our overseas markets, we have entered into strategic partnerships and distribution agreements that allow third party collaborators with direct sales forces and established distribution systems to market and promote Senseonics CGM systems, including Eversense, Eversense XL, Eversense E3 and future generation products.

COVID-19

The current COVID-19 pandemic (“COVID-19”) has presented a substantial public health and economic challenge around the world and is affecting our employees, customers, communities and business operations, as well as the U.S. economy and financial markets. We will continue to monitor the overall impact of the COVID-19 pandemic on our business, financial condition, liquidity, assets and operations, including our personnel, programs, expected timelines, expenses and third-party contract manufacturing and distribution.

As a result of the COVID-19 pandemic’s disruption to our operations, suppliers, employees, and the healthcare community in which we sell to and support, and our limited cash resources, in March 2020, we made significant reductions in our cost structure and operations to improve cash flow and generate future expenditure savings to ensure the long-term success of Eversense. Specifically, commercial sales and marketing of the Eversense CGM System were temporarily suspended and a strategic review of the business was performed.​ As a result of the strategic review, in the third quarter of 2020, we entered into the Ascensia Commercialization Agreement, granting commercial and distribution responsibilities of Eversense. As we continue to recover from the pandemic we have expanded operations focusing on the design, development and manufacturing of Eversense.

In addition, in response to the ongoing spread of COVID-19, we have established safety protocols for personnel access to our headquarter offices. The effects of the COVID-19 pandemic could adversely impact our business, assets, operations and sales, particularly if the COVID-19 pandemic continues to persist for an extended period of time. See “Our business, product sales and results of operations could be adversely affected by the effects of health epidemics, including the recent COVID-19 outbreak, in regions where we or third parties distribute our products or where we or third parties on which we rely have significant manufacturing facilities, concentrations, clinical trial sites or other business operations. The COVID-19 pandemic has and may continue to, materially affect our operations, including at our headquarters in Maryland and at our clinical trial sites, as well as the business or operations of our manufacturers, distributors or other third parties with whom we conduct business” in the Risk Factors section of our most recent Annual Report on Form 10-K for more information regarding the potential impact of the COVID-19 pandemic on our business and operations. We continue to actively monitor this situation and the possible effects on our business and operations.

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United States Development and Commercialization of Eversense

In 2016, we completed our PRECISE II pivotal clinical trial in the United States. This trial, which was fully enrolled with 90 subjects, was conducted at eight sites in the United States. In the trial, we measured the accuracy of Eversense measurements through 90 days after insertion. We also assessed safety through 90 days after insertion or through sensor removal. In the trial, we observed a mean absolute relative difference (“MARD”), of 8.5% utilizing two calibration points for Eversense across the 40-400 mg/dL range when compared to YSI blood reference values during the 90-day continuous wear period. Based on the data from this trial, in October 2016 we submitted a pre-market approval (“PMA”), application to the FDA to market Eversense in the United States for 90-day use. On June 21, 2018, we received PMA approval from the FDA for the Eversense system. In July 2018, we began distributing the Eversense system directly in the United States through our own direct sales and marketing organization. We have received Category III CPT codes for the insertion and removal of the Eversense sensor.

In December 2018, we initiated the PROMISE pivotal clinical trial to evaluate the safety and accuracy of Eversense for a period of up to six months in the United States and in September 30, 2019, we completed enrollment of the PROMISE trial. In the trial, we observed performance matching that of the then current Eversense 90-day product available in the United States, with a MARD of 8.5%. This result was achieved with reduced calibration, down to one per day, while also doubling the sensor life to six months. Following the results of the PROMISE trial, on September 30, 2020, a Premarket Approval, or PMA, supplement application to extend the wearable life of the Eversense CGM System to six months was submitted to the FDA. In February 2022, the extended life Eversense E3 CGM system was approved by the FDA.

In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the Eversense system and launched with an updated app in December 2019. With this approval, the Eversense system can be used as a therapeutic CGM to replace fingerstick blood glucose measurement for treatment decisions, including insulin dosing.

On February 26, 2020, we announced that the FDA approved a subgroup of PROMISE trial participants to continue for a total of 365 days to gather feasibility data on the safety and accuracy of a 365-day sensor. This sub-set of 30 participants were left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365 days. Following information gathered from this sub-set and continued development efforts, we target to begin enrollment of a clinical trial to explore the 365-day sensor, in which we intend to include a pediatric population, in the second half of 2022.

In April 2020, we announced that we received regulatory approval in Europe such that the Eversense XL is no longer contraindicated for MRI, which means the sensor does not need to be removed from under the skin during MRI scanning. We had previously obtained this indication for Eversense in the United States in 2019. This MRI approval is a first for the CGM category, as all other sensors are required to be removed during an MRI scan.

On August 9, 2020, we entered into a collaboration and commercialization agreement with Ascensia (the “Commercialization Agreement”) pursuant to which we granted Ascensia the exclusive right to distribute our 90-day Eversense CGM system and our 180-day Eversense CGM system worldwide, with the following initial exceptions: (i) until January 31, 2021, the territory did not include countries covered by our then existing distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH (together “Roche”), which are the Europe, Middle East and Asia, excluding Scandinavia and Israel, and 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions; (ii) until September 13, 2021, the territory did not include countries covered by our current distribution agreement with Rubin Medical, which are Sweden, Norway and Denmark; and (iii) until May 31, 2022, the territory does not include Israel. Pursuant to the Commercialization Agreement, in the United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and Ascensia ramped up sales activities and assumed commercial responsibilities for the 90-day Eversense product during the second quarter of 2021.

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In February 2022, we received approval from the FDA for the Eversense E3 CGM System. The approval for our third-generation sensor, with proprietary sacrificial boronic acid (“SBA”) technology doubles the sensor life to six months with MARD of 8.5%. Ascensia began commercializing Eversense E3 in the second quarter of 2022.

European Commercialization of Eversense

In September 2017, we received the CE mark for Eversense XL which indicates that the product may be sold freely in any part of the European Economic Area (“EEA”). The Eversense XL is indicated for a sensor life of up to 180 days. Eversense XL began commercialization in Europe in the fourth quarter of 2017. All such commercialization and marketing activities remain subject to applicable government approvals.

In May 2016, we entered into a distribution agreement with Roche. Pursuant to the agreement, as amended, we had granted Roche the exclusive right to market, sell and distribute Eversense in Europe, Middle East and Asia (“EMEA”), excluding Scandinavia and Israel. In addition, Roche had exclusive distribution rights in 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions. Roche was obligated to purchase from us specified minimum volumes of Eversense XL CGM components at pre-determined prices. On December 12, 2019, we further amended the distribution agreement to lower minimum volumes for 2020 and increase pricing for the remaining period of the contract. On November 30, 2020 we entered into a final amendment and settlement agreement with Roche to facilitate the transition of distribution to Ascensia as sales concluded on January 31, 2021, including final purchases, and transition support activities. The distribution rights under the agreement expired January 31, 2021.

In June 2022, we affixed the CE mark to the extended life Eversense E3 CGM system, and Ascensia will begin commercialization in select European markets during the third quarter of 2022.

Financial Overview

Revenue

We generate product revenue from sales of the Eversense system and related components and supplies to Ascensia, through the Commercialization Agreement, third-party distributors in the European Union and to strategic fulfillment partners in the United States (collectively “Customers”), who then resell the products to health care providers and patients. We are paid for our sales directly to the Customers, regardless of whether or not the Customers resell the products to health care providers and patients.

Revenue from product sales is recognized at a point in time when the Customers obtain control of our product based upon the delivery terms as defined in the contract at an amount that reflects the consideration which we expect to receive in exchange for the product. Contracts with our distributors contain performance obligations, mostly for the supply of goods, and is typically satisfied upon transfer of control of the product. Customer contracts do not include the right to return unless there is a product issue, in which case we may provide replacement product. Product conformity guarantees do not create additional performance obligations and are accounted for as warranty obligations in accordance with guarantee and loss contingency accounting guidance.

Our contracts may contain some form of variable consideration such as prompt-pay discounts, tier-volume price discounts and for the Ascensia commercial agreement, revenue share. Variable consideration, such as discounts and prompt-pay incentives, are treated as a reduction in revenue and variable considerations, such as revenue share, is treated as an addition in revenue when the product sale is recognized. The amount of variable consideration that is included in the transaction price may be constrained and is included in revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period, when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint requires the use of management judgment. Depending on the variable consideration, we develop estimates for

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the expected value based on the terms of the agreements, historical data, geographic mix, reimbursement rates, and market conditions.

Contract assets consist of unbilled receivables from customers and are recorded at net realizable value and relate to the revenue share variable consideration from the Ascensia Commercialization Agreement.

Concentration of Revenue and Customers

For the three month and six months ended June 30, 2022 and 2021, we derived the majority of our total net revenue from one customer, Ascensia. During the three months ended June 30, 2022 and 2021, we derived 96% and 87%, respectively, of our total revenue from Ascensia. During the six months ended June 30, 2022 and 2021, we derived 93% and 85%, respectively, of our total revenue from Ascensia. Revenues for these corresponding periods represent sales of sensors, transmitters and miscellaneous Eversense system components.

Revenue by Geographic Region

The following table sets forth net revenue derived from our two primary geographical markets, the United States and outside of the United States, based on the geographic location to which we deliver the product, for three and six months ended June 30, 2022 and 2021:

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2022

%

%

(Dollars in thousands)

Amount

of Total

Amount

of Total

Revenue, net:

Outside of the United States

$

2,507

67.5

%

$

4,222

68.1

%

United States

1,207

32.5

1,974

31.9

Total

$

3,714

100.0

%

$

6,196

100.0

%

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2021

%

%

(Dollars in thousands)

Amount

of Total

Amount

of Total

Revenue, net:

Outside of the United States

$

2,310

70.2

%

$

4,843

78.9

%

United States

979

29.8

1,292

21.1

Total

$

3,289

100.0

%

$

6,135

100.0

%

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Results of Operations for the Three Months Ended June 30, 2022 and 2021

Three Months Ended

 

June 30, 

Period-to-

 

2022

2021

Period Change

 

(in thousands)

(in thousands)

 

Revenue, net

    

$

137

    

$

433

    

$

(296)

Revenue, net - related parties

3,577

2,856

721

Total revenue

3,714

3,289

425

Cost of sales

2,891

2,897

(6)

Gross profit

824

392

432

Expenses:

Research and development expenses

 

9,299

 

7,107

 

2,192

Selling, general and administrative expenses

 

8,561

 

9,175

 

(614)

Operating loss

 

(17,036)

 

(15,890)

 

(1,146)

Other (expense) income, net:

Interest income

241

247

(6)

Gain (Loss) on fair value adjustment of option

28,224

(35,730)

63,954

Interest expense

 

(4,510)

 

(4,034)

 

(476)

Gain (Loss) on change in fair value of derivatives

96,548

(124,361)

220,909

Net gain (impairment)

816

(381)

1,197

Other expense

 

(52)

 

(157)

 

105

Total other (expense) income, net

 

121,267

 

(164,416)

 

285,683

Net Income (loss)

$

104,231

$

(180,306)

$

284,537

Total revenue

Our total revenue increased to $3.7 million for the three months ended June 30, 2022, compared to $3.3 million for the three months ended June 30, 2021. This increase was primarily due to the launch of Eversense E3 in the United States partially offset by slightly lower sales outside of the United States.

Cost of sales and gross profit

Our cost of sales were consistent at $2.9 million for the three months ended June 30, 2022 and for the three months ended June 30, 2021. Our gross profit increased to $0.8 million for the three months ended June 30, 2022, compared to $0.4 million for the three months ended June 30, 2021. Gross profit as a percentage of revenue, or gross margin, was 22.2% and 11.9% for the three months ended June 30, 2022 and June 20, 2021, respectively. The increase in gross margin was primarily driven by the fulfillment of orders utilizing previously written off inventory and the benefit of sales mix in countries with favorable reimbursement rates.

Research and development expenses

Research and development expenses were $9.3 million for the three months ended June 30, 2022, compared to $7.1 million for the three months ended June 30, 2021, an increase of $2.2 million. The increase was due to investments for next generation technologies including a $1.2 million increase in clinical studies activities, an increase of $0.4 million in personnel related costs due to the expansion of our research and development workforce and an increase of $0.6 million for consulting, contract fabrication and other research and development support services.

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Selling, general and administrative expenses

Selling, general and administrative expenses were $8.6 million for the three months ended June 30, 2022, compared to $9.2 million for three months ended June 30, 2021, a decrease of $0.6 million. The decrease was primarily the result of reduced payroll expenses related to stock-based compensation.

Total other (expense) income, net

Total other income, net, was $121.3 million for the three months ended June 30, 2022, compared to other expense, net, of $164.4 million for the three months ended June 30, 2021, a change of $285.7 million. The change was primarily due to a $220.9 million change in fair value of derivatives and a $64.0 million change in fair value of option, a $1.2 million change in impairment cost related to the option and a decrease of $0.1 million in other expense, partially offset by a $0.5 million increase in interest expense.

Results of Operations for the Six Months Ended June 30, 2022 and 2021

Six Months Ended

 

June 30, 

Period-to-

 

2022

2021

Period Change

 

(in thousands)

 

Revenue, net

    

$

429

    

$

920

    

$

(491)

Revenue, net - related parties

5,767

5,215

552

Total revenue

6,196

6,135

61

Cost of sales

4,845

5,217

(372)

Gross profit

1,351

918

433

Expenses:

Research and development expenses

 

17,103

 

12,362

 

4,741

Selling, general and administrative expenses

 

16,445

 

15,762

 

683

Operating loss

 

(32,197)

 

(27,206)

 

(4,991)

Other (expense) income, net:

Interest income

 

334

256

78

Gain (Loss) on fair value adjustment of option

49,925

(88,405)

 

138,330

Gain on extinguishment of debt and option

330

(330)

Interest expense

(9,005)

(8,092)

(913)

Gain (Loss) on change in fair value of derivatives

181,117

(305,260)

486,377

Net gain (impairment)

846

(1,163)

 

2,009

Other expense

 

(71)

 

(280)

 

209

Total other (expense) income, net

 

223,146

$

(402,614)

$

625,760

Net Income (loss)

$

190,949

$

(429,820)

$

620,769

Total revenue

Our total revenue of $6.2 million for the six months ended June 30,2022 is consistent when compared to the prior year period.

Cost of sales and gross profit

Our cost of sales were $4.8 million for the six months ended June 30, 2022 compared to $5.2 million for the six months ended June 30, 2021, a decrease of $0.4 million, primarily driven by reduced warranty expense. Our gross profit increased to $1.4 million for the six months ended June 30, 2022, compared to $0.9 million for the six months ended June 30, 2021. Gross profit as a percentage of revenue, or gross margin, was 21.8% and 15.0% for the six months ended June 30, 2022 and June 20, 2021, respectively. The increase in gross margin was primarily driven by the fulfillment of

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orders utilizing existing written off inventory and the benefit of sales mix in countries with favorable reimbursement rates.

Research and development expenses

Research and development expenses were $17.1 million for the six months ended June 30, 2022, compared to $12.4 million for the six months ended June 30, 2021, an increase of $4.7 million. The increase was due to investments for next generation technologies including a $2.2 million increase in clinical studies activities, an increase of $1.2 million in personnel related costs due to the expansion of our research and development workforce and an increase of $1.3 million for consulting, contract fabrication and other research and development support services.

Selling, general and administrative expenses

Selling, general and administrative expenses were $16.4 million for the six months ended June 30, 2022, compared to $15.8 million for six months ended June 30, 2021, an increase of $0.6 million. The increase was due primarily to an increase of $1.0 million in other general and administrative costs to include recruiting and associated employee overhead and local tax expenses, partially offset by $0.4 million of lower sales and marketing costs as Ascensia assumed commercialization responsibilities

Total other (expense) income, net

Total other income, net, was $223.1 million for the six months ended June 30, 2022, compared to other expense, net, of ($402.6) million for the six months ended June 30, 2021, a change of $625.7 million. The change was primarily due to a $486.4 million change in fair value of derivatives and a $138.3 million change in fair value of option.

Liquidity and Capital Resources

Sources of Liquidity

From our founding in 1996 until 2010, we devoted substantially all of our resources to researching various sensor technologies and platforms. Beginning in 2010, we narrowed our focus to developing and refining a commercially viable glucose monitoring system. However, to date, we have not generated any significant revenue from product sales. We have incurred substantial losses and cumulative negative cash flows from operations since our inception in October 1996. We have never been profitable and our net losses were $302.5 million, $175.2 million, and $115.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of June 30, 2022, we had an accumulated deficit of $760.0 million. To date, we have funded our operations principally through the issuance of preferred stock, common stock, convertible notes and debt. As of June 30, 2022, we had cash, cash equivalents and marketable debt securities of $150.5 million.

In November 2021, we entered into an Open Market Sale Agreement (the “2021 Sales Agreement”) with Jefferies LLC (“Jefferies”), under which we could offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $150.0 million through Jefferies as our sales agent in an “at the market” offering. Jefferies will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement. As of June 30, 2022, we received $8.0 million in net proceeds from the sale of 3,077,493 shares of our common stock under the 2021 Sales Agreement.

In November 2019, we entered into an Open Market Sale Agreement (the “2019 Sales Agreement”) with Jefferies, under which we could offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million through Jefferies as our sales agent in an “at the market” offering. In June 2021, we received $48.4 million in net proceeds from the sale of 12,830,333 shares of our common stock utilizing the full capacity under the 2019 Sales Agreement.

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On January 21, 2021, we entered into an underwriting agreement, which was subsequently amended and restated on the same day (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC, as representative of the underwriters (the “Underwriters”), to issue and sell 51,948,052 shares of common stock, in an underwritten public offering pursuant to effective registration statements on Form S-3, including a related prospectus and prospectus supplement, in each case filed with the Securities and Exchange Commission (the “2021 Public Offering”). The price to the public in the 2021 Public Offering was $1.925 per share of common stock. The Underwriters agreed to purchase the shares from us pursuant to the Underwriting Agreement at a price of $1.799875 per share and the Company also agreed to reimburse them for customary fees and expenses. The initial closing of the 2021 Public Offering occurred on January 26, 2021. Subsequent to the initial closing, the Underwriters exercised their option to purchase an additional 7,792,207 shares of Common Stock. Total net proceeds from the 2021 Public Offering were $106.1 million after deducting underwriting discounts and commissions and estimated offering expenses.

On January 17, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional purchasers (the “Purchasers”), pursuant to which we sold to the Purchasers, in a registered direct offering (the “Registered Direct Offering”), an aggregate of 40,000,000 shares (the “Shares”) of common stock, $0.001 par value per share. The Shares were sold at a purchase price of $1.25 per share for aggregate gross proceeds to the Company of $50.0 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. The Shares were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on November 27, 2019. The net proceeds to the Company from the Registered Direct Offering, after deducting fees and expenses and the estimated offering expenses payable by us are approximately $46.1 million.

On November 9, 2020, we entered into an equity line agreement, (“Equity Line Agreement”), with Energy Capital, LLC (“Energy Capital”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital is committed to purchase up to an aggregate of $12.0 million of shares of our newly designated series B convertible preferred stock (“the Series B Preferred Stock”), at our request from time to time during the 24-month term of the Equity Line Agreement. There have been no issuances of Series B Preferred Stock as of June 30, 2022.

Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, including that we have less than $8.0 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), we have the right, in our sole discretion, to present Energy Capital with a purchase notice (“Regular Purchase Notice”) directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of our Series B Preferred Stock at a per share price (the “Purchase Price”), equal to $1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six months after the date of its issuance, at a conversion price of $0.3951 per share. The Equity Line Agreement provides that we shall not affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the common stock on the NYSE American is less than $0.25 without the approval of Energy Capital.

Concurrently with entry into the Equity Line Agreement, we issued a warrant to Energy Capital, exercisable beginning May 9, 2021, to purchase up to 10,000,000 shares of common stock at an exercise price of $0.3951 per share, (the “Warrant”). The Warrant was exercised in full in February 2022.

On August 9, 2020, we entered into a financing agreement with Ascensia pursuant to which we issued $35.0 million in aggregate principal amount of Senior Secured Convertible Notes due on October 31, 2024 (the “PHC Notes”), to Ascensia’s parent company, PHC Holdings Corporation (“PHC”), on the Closing Date. We also issued PHC 2,941,176 shares of common stock to PHC as a financing fee. We also have the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022, contingent upon obtaining approval for the 180-day Eversense product for marketing in the United States before such date. Upon the closing of the PHC Notes, we prepaid in full the First Lien Notes, issued and sold pursuant a loan agreement with Highbridge Capital Management, LLC (“Highbridge”) (the “Highbirdge Loan Agreement”), in the amount of approximately $17.6 million.

Additionally, on August 9, 2020, we entered into a Stock Purchase Agreement with Masters Special Solutions,

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LLC and certain affiliates thereof (collectively, “Masters”), pursuant to which we issued and sold to Masters 3,000 shares of convertible preferred stock, designated as Series A Preferred Stock (the “Series A Preferred Stock”), at a price of $1,000.00 per share in an initial closing (“the Stock Purchase Agreement”). Masters also had the option to purchase up to an additional 27,000 shares of Series A Preferred Stock at a price of $1,000.00 per share in subsequent closings, subject to the terms and conditions of the Stock Purchase Agreement, as amended, through January 11, 2021. In January 2021, Masters and its assignees purchased in aggregate an additional 22,783 shares of Series A Preferred Stock, resulting in additional gross proceeds of $22.8 million. Each share of Series A Preferred Stock is initially convertible into a number of shares of common stock equal to $1,000 divided by the conversion price of $0.476 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. All shares of Series A Preferred Stock have been converted to common stock.

We believe that these agreements provide the financial resources and mutual commitment to support the growth of Eversense and specifically for the Company, the manufacturing of Eversense and continued product development, including the U.S. launch of Eversense E3. The timing and success of these collaborations and financings are dependent on certain events occurring in accordance with our plans, and may be influenced by uncontrollable external factors, including restrictions or impacts of COVID-19. Management has concluded that based on our current operating plans, existing cash and cash equivalents and cash flows from our future operations will be sufficient to meet our anticipated operating needs through 2023.

Common Stock

In November 2021, we entered into the 2021 Sales Agreement with Jefferies, under which we could offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $150.0 million through Jefferies as the sales agent in an “at the market” offering. Jefferies will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement. During the six months ended June 30, 2022, we received $8.0 million in net proceeds from the sale of 3,077,493 shares of our common stock under the 2021 Sales Agreement.

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Indebtedness

Term Loans

PPP Loan

On April 22, 2020, we received $5.8 million in loan funding from the PPP pursuant to the CARES Act, as amended by the Flexibility Act, and administered by the Small Business Administration (“SBA”). The unsecured loan (the “PPP Loan”) is evidenced by the PPP Note dated April 21, 2020 (the “PPP Note”), in the principal amount of $5.8 million with Silicon Valley Bank (“SVB”).

Under the terms of the PPP Note and the PPP Loan, interest accrues on the outstanding principal at a rate of 1.0% per annum. The term of the PPP Note was two years. In April 2022, the Company repaid the outstanding principal and accrued interest in full.

Convertible Notes

The following table summarizes our outstanding convertible notes at June 30, 2022:

Aggregate

Initial Conversion

Conversion Price

Convertible

Issuance

Principal

Maturity

Rate per $1,000

per Share of

Note

Date

Coupon

    

(in millions)

    

Date

    

Principal Amount

    

Common Stock

 

2023 Notes

January 1, 2018

5.25%

$

15.7

February 1, 2023

294.1176

$

3.40

2025 Notes

July 1, 2019

5.25%

$

51.2

January 15, 2025

757.5758

$

1.32

PHC Notes

August 14, 2020

8.00%

$

35.0

October 31, 2024

1867.4136

$

0.53

2023 Notes

In the first quarter of 2018, we issued $53.0 million in aggregate principal amount of senior convertible notes that will mature on February 1, 2023, (the “2023 Notes”), of which $15.7 million in aggregate principal remains outstanding as of June 30, 2022, after some of the holders exchanged their 2023 Notes for 2025 Notes, as defined below, in July 2019.

2025 Notes

In July 2019, we issued $82.0 million in aggregate principal amount of senior convertible notes that will mature on January 15, 2025 (the “2025 Notes”), unless earlier repurchased or converted. In connection with an exchange on April 24, 2020, $24.0 million in aggregate principal of Highbridge’s outstanding 2025 Notes were exchanged for (i) $15.7 million aggregate principal amount of Second Lien Notes (“Second Lien Notes”), (ii) 11,026,086 shares of our common stock, (iii) warrants to purchase up to 4,500,000 shares of our common stock at an exercise price of $0.66 per share, and (iv) $0.3 million in accrued and unpaid interest on the 2025 Notes being exchanged (the “Exchange”).

For additional information on the 2025 Notes and the 2023 Notes, see Note 8—Notes Payable, Preferred Stock and Stock Purchase Warrants in the accompanying unaudited consolidated financial statements.

PHC Notes

On August 9, 2020, we entered into a note purchase agreement with PHC (the “Note Purchase Agreement”), pursuant to which we agreed to borrow $35.0 million in aggregate principal through the issuance and sale of PHC Notes on or prior to August 14, 2020. The PHC Notes will be senior secured obligations and will be guaranteed on a senior secured basis by our wholly owned subsidiary, Senseonics, Incorporated. Interest at the initial annual rate of 9.5% is payable semi-annually in cash or, at our option, payment in kind. The interest rate will decrease to 8.0% beginning in April 2022 because we obtained FDA approval for the 180-day Eversense E3 product for marketing in the United States.

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The maturity date for the PHC Notes will be October 31, 2024, provided that the maturity date will accelerate if we have not repaid our Second Lien Notes (other than an aggregate principal amount of up to $1.0 million) by 91 days prior to the maturity of the Second Lien Notes.

PHC will be entitled to convert the PHC Notes to common stock at a conversion rate of 1,867.4136 shares per $1,000 principal amount of the PHC Notes, equivalent to a conversion price of approximately $0.54 per share, subject to specified anti-dilution adjustments, including adjustments for our issuance of equity securities on or prior to April 30, 2022 below the conversion price. In addition, following a notice of redemption or certain corporate events that occur prior to the maturity date, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such notice of redemption or corporate event. In certain circumstances, we will be required to pay cash in lieu of delivering make whole shares unless we obtain stockholder approval to issue such shares.

Subject to specified conditions, on or after October 31, 2022, the PHC Notes are redeemable by us if the closing sale price of the common stock exceeds 275% of the conversion price for a specified period of time and subject to certain conditions upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount, plus any accrued but unpaid interest. On or after October 31, 2023, the PHC Notes are redeemable by us upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount, plus any accrued but unpaid interest, plus a call premium of 130% if redeemed at least six months prior to the maturity date or a call premium of 125% if redeemed within six months of the maturity date.

The Note Purchase Agreement contains customary terms and covenants, including financial covenants, such as operating within an approved budget and achieving minimum revenue and liquidity targets, and negative covenants, such as limitations on indebtedness, liens, mergers, asset transfers, certain investing activities and other matters customarily restricted in such agreements. Most of these restrictions are subject to certain minimum thresholds and exceptions. The Note Purchase Agreement also contains customary events of default, after which the PHC Notes be due and payable immediately, including defaults related to payment compliance, material inaccuracy of representations and warranties, covenant compliance, material adverse changes, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, judgments against us, change of control or delisting events, termination of any guaranty, governmental approvals, and lien priority.

Funding Requirements and Outlook

Our ability to generate revenue and achieve profitability depends on the successful commercialization and adoption of our Eversense CGM systems by diabetes patients and healthcare providers, along with future product development, regulatory approvals, and post-approval requirements. These activities, including our ongoing focus to grow covered lives through positive insurance payor policy decisions and continued development of Eversense 365-day product, will require significant uses of working capital through 2022 and beyond.

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We expect that existing cash, cash equivalents and cash flows from our future operations will be sufficient to meet the Company’s current operating plans through 2023. As part of our liquidity strategy, we will continue to monitor our capital structure and operating plans and we may access the capital markets or debt markets for additional funding if the opportunity arises to enhance our capital structure for changes to our operating plans, for financing strategic initiatives and to provide financial flexibility.

Cash Flows

The following is a summary of cash flows for each of the periods set forth below (in thousands).

 

Six Months Ended

 

June 30, 

 

2022

2021

Net cash used in operating activities

    

$

(34,341)

    

$

(30,407)

 

Net cash provided by (used in) investing activities

 

42,108

 

(145,318)

Net cash provided by financing activities

 

4,197

 

227,274

Net increase in cash and cash equivalents

$

11,964

$

51,549

Net cash used in operating activities

Net cash used in operating activities was $34.3 million for the six months ended June 30, 2022 and consisted of an $181.1 million change in fair value of derivatives on convertible notes, a $49.9 million gain on fair value adjustment of the option, and a net change in operating assets and liabilities of $4.0 million (most notably increases in accounts receivable of $2.1 million and prepaid expenses and other assets of $1.6 million), partially offset by net income of $191.0 million, $5.4 million related to depreciation/amortization and non-cash items and $4.3 million of stock based compensation.

Net cash used in operating activities was $30.4 million for the six months ended June 30, 2021 and consisted of a net loss of $429.8 million, a net decrease in operating assets and liabilities of $3.7 million (mostly due to a reduction in inventory of $3.5 million, lower prepaid and other current assets of $0.8 million, and a $1.3 million decrease in accrued expenses, reflecting reduced operational activities, offset by an increase in accounts payable of $1.3 million, an increase in accrued interest of $0.4 million and an increase in accounts receivable of $0.2 million) and $0.3 million for gain on extinguishment for the convertible notes and options, offset by $305.3 million due to the change in fair value of derivatives on convertible notes, a $88.4 million loss on fair value adjustment of the option, $4.7 million for stock-based compensation and net for increased impairment reserves, depreciation/amortization and non-cash items of $5.0 million.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $42.1 million for the six months ended June 30, 2022 and primarily consisted of proceeds from the sale and maturity of marketable securities.

Net cash used in investing activities was $145.3 million for the six months ended June 30, 2021 and primarily consisted of the purchase of marketable securities.

Net cash provided by financing activities

Net cash provided by financing activities was $4.2 million for the six months ended June 30, 2022, and primarily consisted of $8.0 million from the issuance of common stock and $0.3 million for proceeds related to the exercise of stock options and warrants, partially offset by $2.9 million in repayment of the PPP loan and $1.2 million related to the settlement of equity awards.

Net cash provided by financing activities was $227.3 million for the six months ended June 30, 2021, primarily consisted of $200.4 million from issuance of common stock, proceeds of $22.8 million for the issuance of Series A preferred stock and $4.1 million for proceeds related to the exercise of stock options and warrants.

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Contractual Obligations

As of June 30, 2022, there were no material changes in our contractual obligations and commitments from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on March 1, 2022.

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk

Under SEC rules and regulations, because we are considered to be a “smaller reporting company”, we are not required to provide the information required by this item in this Quarterly Report on Form 10-Q.

ITEM 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the assistance of our chief executive officer, who is our principal executive officer, and our chief financial officer, who is our principal financial officer, has reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2022. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the periodic reports filed with the SEC is accumulated and communicated to our management, including our principal executive, financial and accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving such control objectives. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1: Legal Proceedings

From time to time, we are subject to litigation and claims arising in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Legal proceedings, including litigation, government investigations and enforcement actions could result in material costs, occupy significant management resources and entail civil and criminal penalties.

In February 2021, we received notice and accepted service of a civil complaint that had been filed in the Western District of Texas and styled Carew ex rel. United States v. Senseonics, Inc., No. SA20CA0657DAE. The complaint was filed by a relator under seal in May 2020 pursuant to the qui tam provisions in the federal False Claims Act. Prior to the unsealing of the complaint, the government declined to intervene in the case. The case, therefore, is being pursued only by the relator. The complaint alleges the Company’s marketing practices with physicians for its product, Eversense Continuous Glucose Monitoring System, violated the False Claims Act, 31 U.S.C. § 3729 and the Texas Medicaid Fraud Prevention Law, Tex. Hum Res. Code § 36.002. Outside counsel, on behalf of the Company, filed a motion to dismiss the action for failure to state a claim. On March 31, 2022, the court granted the motion to dismiss the action without prejudice which allows the plaintiff 60 days to refile the complaint. On May 27, 2022, the plaintiff filed an amended

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complaint and on July 11, 2022, the Company filed a motion to dismiss the action for failure to state a claim. Briefing on the motion is expected to be completed on or before August 29,2022, after which the motion will be ready for court consideration and decision.

As previously reported, since February 2021 the Company has been in communication with the Italian Data Protection Authority, or Garante, with respect to the Garante’s review of the Company’s unintended disclosure of certain Italian user e-mail addresses to other users in Italy and other GDPR-related obligations of the Company. On July 29, 2022 the Garante delivered its decision to the Company finding that the Company had breached certain provisions of the GDPR, assessing a fine of EUR 45,000 and directing the Company to make certain changes within three months to its European privacy notice, including simplifications to the privacy notice and the inclusion of certain references. In accordance with the Garante’s decision, the Company may settle the matter for EUR 22,500 if it makes the payment within 30 days, undertakes to update the privacy notice and does not appeal the decision. It is the Company’s current intention to resolve of the matter in this manner.

ITEM 1A: Risk Factors

 

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. Other than the risk factors set forth below, our risk factors as of the date of this Quarterly Report on Form 10-Q have not changed materially from those described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K.

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

On February 24, 2022, Russian forces launched significant military action against Ukraine, and sustained conflict and disruption in the region is possible. The impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by Canada, the United Kingdom, the European Union, the U.S. and other countries and companies and organizations against officials, individuals, regions, and industries in Russia and Ukraine, and actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions, tensions, and military actions could adversely affect the global economy and financial markets and thus could affect our business, operations, operating results and financial condition as well as the price of our common stock and our ability to raise additional capital when needed on acceptable terms. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described in our Annual Report on Form 10-K.

While our suppliers may source certain raw materials from Russia and Ukraine, to date we have not been notified that the supply of these materials has been significantly impacted by the conflict. We continue to monitor the situation closely and are proactively assessing and evaluating alternative sources to bolster supply of these materials moving forward, in addition to working closely with our suppliers in any product re-qualification that may be required. Revenue relating to products manufactured from raw materials sourced from this region does not constitute a material portion of our business. Further, there is uncertainty regarding the ultimate impact the conflict, including any escalation or further expansion of the conflict’s current scope, will have on our customers, the global economy, supply chains, logistics, fuel prices, raw material pricing and our business.

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

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

including, among other things, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, supply chain shortages, increases in inflation rates, higher interest rates and uncertainty about economic stability. For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets. The Federal Reserve recently raised interest rates multiple times in response to concerns about inflation and it may raise them again. Higher interest rates, coupled with reduced government spending and volatility in financial markets may increase economic uncertainty and affect consumer spending. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any

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necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.

ITEM 2: Unregistered Sales of Equity and Securities and Use of Proceeds

Not applicable.

ITEM 3: Defaults Upon Senior Securities

Not applicable.

ITEM 4: Mine Safety Disclosures

Not applicable.

ITEM 5: Other Information

None.

ITEM 6: Exhibits

The exhibits listed on the Exhibit Index hereto are filed or incorporated by reference (as stated therein) as part of this Quarterly Report on Form 10-Q.

Exhibit No.

Document

3.1

Amended and Restated Certificate of Incorporation of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on March 23, 2016).

3.2

Amended and Restated Bylaws of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on March 23, 2016).

3.3

Certificate of Amendment to Amended and Restated Certificate of Incorporation of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2018 (File No. 001-37717), filed with the Commission on August 8, 2018).

3.4

Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on August 18, 2020).

3.5

Certificate of Designation of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on August 18, 2020).

3.6

Form of Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717) filed with the Commission on November 9, 2020).

3.7

Amendment to Bylaws of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K (File No. 001-37717) filed with the Commission on March 5, 2021).

10.1#

Second Amendment to Collaboration and Commercialization Agreement, by and between the Subsidiary and Ascensia Diabetes Care Holdings AG, dated as of June 21, 2022.

31.1*

Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.

31.2*

Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act.

32.1**

Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act.

101.INS*

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL 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

39

Table of Contents

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*         Filed herewith.

**      These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

#

Certain portions of this exhibit, indicated by asterisks, have been omitted because they are not material and are the type that the registrant treats s

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.

SENSEONICS HOLDINGS, INC.

Date: August 9, 2022

By:

/s/Nick B. Tressler

Nick B. Tressler

Chief Financial Officer

(Principal Financial Officer)

40

CERTAIN PORTIONS OF THIS EXHIBIT (INDICATED BY ***) HAVE BEEN EXCLUDED PURSUANT TO ITEM 601(B)(10) OF REGULATION S-K BECAUSE THEY ARE BOTH NOT MATERIAL AND ARE THE TYPE THAT THE COMPANY TREATS AS PRIVATE AND CONFIDENTIAL.

EXHIBIT 10.1

SECOND AMENDMENT
TO
COLLABORATION AND COMMERCIALIZATION AGREEMENT

This Second Amendment (the “Second Amendment”) to the Collaboration and Commercialization Agreement is entered into by and between Senseonics Incorporated (“Senseonics”) and Ascensia Diabetes Care Holdings AG (“Ascensia”) (each of Senseonics and Ascensia, a “Party”, and together, the “Parties”) and is effective (except as otherwise provided herein) as of June 21, 2022 (the “Second Amendment Effective Date”).

WHEREAS, the Parties have entered into that certain Collaboration and Commercialization Agreement dated as of August 9, 2020, as subsequently amended and supplemented (the “Agreement”);

WHEREAS, the Parties desire to further amend the Agreement in accordance with Section 9.3 thereof in order to clarify certain accounting and other matters;

NOW THEREFORE, in consideration of the premises and mutual covenants contained in the Second Amendment, the parties agree as follows:

1.Product Warranty. Exhibit E to the Agreement will be deleted and replaced in its entirety by the Exhibit E attached to this Second Amendment. The reference to “warranty claims (as allowed by Exhibit E)” in Section 4.2 of the Agreement shall be deleted. For the avoidance of doubt, there shall be no adjustment to the amounts owed to Senseonics under Section 4.2 for any warranty claims as all warranty units will be included in Section 4.2 True Up Amount. The changes in this Section 1 shall be considered effective for true-up calculations for periods starting [***].
2.Pricing. Notwithstanding anything to the contrary in the Agreement (including Section 2.4(c) thereof), the minimum price (net of application of revenue sharing) in both the United States and outside the United States on a quarterly basis for sales from Senseonics to Ascensia of the 180-day Product will be set at [***], unless otherwise formally agreed by the Joint Alliance Committee for special situations. For the avoidance of doubt, this provision means that the true-up cannot result in adjustments which, after application of the revenue share and warranty, cause the realized transfer price of the sensor to be below such [***]. The Parties will continue to set a Minimum Annual Price in each market in accordance with Section 2.4(c). Ascensia will provide quarterly reports to Senseonics with updates on the average quarterly in market selling prices, net of replacement sensors of the 180-day Product in the [***], and a subtotal for all other relevant markets. If an additional market becomes substantial to results, the Parties will in good faith add quarterly reporting on such market. The changes in this Section 2 shall be considered effective for true up calculations for periods starting at [***].
3.Binding Commitment. Effective as of the next applicable Forecast period after the Second Amendment Effective Date, Section 2.3(c) of the Agreement will be replaced in its entirety as follows:

2.3(c). Binding Commitment. In each Forecast, the following shall constitute a binding commitment for Ascensia to purchase, and for Senseonics to supply, the quantities of Products specified therein, and Ascensia shall order such quantities pursuant to Section 2.2(a) (the “Binding Commitment”):

(i)the first [***] of each 12-month Forecast – a binding commitment for [***] of the quantities of Products specified therein;


(ii)for [***] of the 12-month Forecast immediately following the Second Amendment Effective Date and effective as of [***] (i.e., [***]) – a binding commitment for [***] of the quantities of Products specified therein;
(iii)for [***] of each subsequent Forecast (i.e., starting in [***]) – a binding commitment for [***] of the quantities of Products specified therein;
(iv)for month #6 of each subsequent Forecast (i.e., starting in [***]) – a binding commitment for [***] of the quantities of Products specified therein; and
(v)for [***] of each subsequent Forecast (i.e., starting in [***]) – a binding commitment for [***] of the quantities of Products specified therein.

Such Binding Commitment will be subject to a limit established by the Joint Alliance Committee based on capacity and consistency with prior Forecasts, and reviewed every [***]. With respect to quantities of Products in the Binding Commitment, Senseonics shall not be required to ship more than [***] shipment per month to a single designated distribution facility and/or logistics and kitting provider within the European Union or more than [***] shipment per month to a single central distribution location in each country in the Territory located outside the United States and European Union, as agreed to by the Parties.”

For clarity, binding percentages shall not operate additively. As an example, if during the first year from the Second Amendment Effective Date, Ascensia’s forecast for month #8 was for [***] sensors, and Ascensia subsequently reduced its forecast to [***] sensors for the same month when it became month #7, it could not further reduce its binding forecast for that same month below [***] sensors. Additional illustrative examples for calculation of the Binding Commitment are attached hereto in Schedule A.

4.Certain Payments. The Parties acknowledge and agree that the following payments are due in connection with the operation of the Agreement:
(a)Ascensia and Senseonics agree to [***], as a result of which Ascensia will provide to Senseonics three quarterly payments of [***] to offset manufacturing costs;
(b)Senseonics owes Ascensia [***] as a one-time payment in respect of the reimbursement of the [***]; and
(c)Pursuant to the funding obligations described in Sections 5(v) and 5(vi) of the First Amendment, Senseonics owes Ascensia a one-time payment of [***].

The Parties agree to offset the amounts referred to in [***]. As a result, Senseonics will make a one-time payment of [***] to Ascensia no later than [***] after the Second Amendment Effective Date. The remaining [***] manufacturing offset amounts referenced in Section 4(a) above will be made from Ascensia to Senseonics within [***] of the start of [***].

5.True-up Mechanics. The Parties agree that for the calculation of the True-Up Amounts pursuant to Section 4.2 of the Agreement, (i) they shall use an agreed upon blended revenue share percentage based upon the estimated blended revenue share percentage resulting from the forecasted revenue for the year and (ii) in the final True-Up Statement for the year shall adjust to account for the difference between the estimated revenue share used for these estimated periods and the final revenue share calculated based on actual revenues for the year.
6.Confidentiality. The Parties acknowledge that the terms and conditions of this Second Amendment shall be treated as Confidential Information of both Parties, subject to Article 8 of the Agreement, provided that Senseonics may, if required by law, disclose this Second Amendment as part of its ongoing public reporting company filings.

Background image


7.Term. The pricing provisions in Section 2 hereof shall remain in effect until April 1, 2024, after which the parties will renegotiate in good faith the going forward minimum price set forth in Section 2 of this Second Amendment and the further term for the continuation of such minimum price and the amendments in Sections 1 and 3, provided that on or after April 1, 2023, the parties shall renegotiate such minimum price and such term extensions on a going forward basis in the event either [***] to in-market reimbursement rates in local currency averaged at a constant Euro-USD rate based on the relative dollar sales volumes of the relevant markets at the time.
8.Interpretation. Except as expressly provided in this Second Amendment, the Agreement shall continue in full force and effect. The Agreement, as supplemented, clarified or amended by the Letter Agreement of November 17, 2020, the First Amendment dated as of March 31, 2021, the Side Letter Agreement dated November 12, 2021, and the Second Side Letter Agreement dated April 5, 2022, constitute the entire agreement of the Parties with respect to the subject matter hereof. In the event of any conflict between the terms of this Second Amendment and the Agreement, the terms of this Second Amendment shall control. Except where expressly noted otherwise, the amendments made herein shall be effective as of the Second Amendment Effective Date. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement. This Amendment may be executed in counterparts, each of which shall constitute an original and all of which shall together constitute a single agreement. This Amendment may be executed and delivered electronically, including via PDF format or DocuSign, and upon such delivery such electronic signature will be deemed to have the same effect as if the original signature had been delivered to the other Parties.

[Signature Page Follows]

Background image


IN WITNESS WHEREOF, each of the Parties has caused this Second Amendment to be executed by its duly authorized representatives as of the Second Amendment Effective Date.

Ascensia Diabetes Care Holdings AG

By: /s/ Elaine Anderson​ ​

Name: Elaine Anderson

Title: Head of Eversense CGM Business Unit

By: /s/ Robert Schumm​ ​

Name: Robert Schumm

Title: President

Senseonics, Incorporated

By: /s/ Tim Goodnow​ ​

Name: Tim Goodnow

Title: CEO


EXHIBIT E

Senseonics warrants to Ascensia that the Products will function in material conformance with its Specifications set forth in documentation provided by Senseonics. Ascensia’s sole and exclusive remedy for a breach of the foregoing warranty shall be Senseonics’ participation through the true-up in the process outlined below.

Country level end market warranty policies will be approved by the Joint Alliance Committee. The Parties intend that such warranty policies will not exceed [***] in any market for any 180-day sensor.

Any warranty claim by a user will be satisfied out of a sensor taken from Ascensia inventory. For bona fide warranty claims meeting the requirements and terms of the warranty agreed by the Joint Alliance Committee, subject to the minimum price set out in Section 2 hereof, these sensors will be included in the calculation for the true up as follows: replacement sensors will be included in the true up for cost purposes and such sensors that were subject to a bona fide warranty claim will only be included in revenue to the extent they generate revenue in accordance with the end-market warranty, unless otherwise formally agreed by the Joint Alliance Committee for special situations.

The Parties will determine a warranty for the 365-day Product in good faith prior to its launch.

Neither Party is liable for the cost of reinsertion. The Joint Alliance Committee may consider and discuss special situations.

This Amendment shall not affect the currently in-effect transmitter warranty.


SCHEDULE A

BINDING COMMITMENT EXAMPLE

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Binding Commitment

Notes:

Illustrative Year 1 Example

Jan

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

binding

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Feb

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

binding

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Mar

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

binding

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Illustrative Year 2 Example

Jan

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

binding

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Feb

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

binding

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Mar

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

B

[***]

[***]

A

[***]

binding

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

#1

#2

#3

#4

#5

#6

#7

#8

binding (yr 1)

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

binding (yr 2+)

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

A: [***].

B: [***].

[***]


EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy T. Goodnow, Ph.D., certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Senseonics Holdings, Inc. (the “registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2022

/s/ Timothy T. Goodnow, Ph.D. 

Timothy T. Goodnow, Ph.D.

President & Chief Executive Officer

(principal executive officer)


EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nick Tressler, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Senseonics Holdings, Inc. (the “registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2022

/s/ Nick B. Tressler

Nick B. Tressler

Chief Financial Officer

(principal financial officer)


EXHIBIT 32.1

CERTIFICATIONS OF

PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Timothy T. Goodnow, Ph.D., President and Chief Executive Officer of Senseonics Holdings, Inc. (the “Company”), and Nick B. Tressler, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

1.

The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and

2.

The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition of the Company as of the end of the period covered by the Quarterly Report and results of operations of the Company for the periods covered by the Quarterly Report.

In Witness Whereof, the undersigned have set their hands hereto as of the 9th day of August 2022.

 

/s/ Timothy T. Goodnow, Ph.D. 

 

/s/ Nick B. Tressler 

Timothy T. Goodnow, Ph.D.

 

Nick B. Tressler

President & Chief Executive Officer

 

Chief Financial Officer

(principal executive officer)

(principal financial officer)

*This Certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.