TANDEM DIABETES CARE INC - Annual Report: 2019 (Form 10-K)

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Item 1.	Business

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•	Type 1 diabetes is characterized by the body’s nearly complete inability to produce insulin. It is frequently diagnosed during childhood or adolescence. Individuals with type 1 diabetes require daily insulin therapy to survive.

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Type 2 diabetes represents 90% to 95% of all individuals diagnosed with diabetes and is characterized by the body’s inability to either properly utilize insulin or produce enough insulin. Initially, many people with type 2 diabetes attempt to manage their diabetes with improvements in diet, exercise and oral medications. However, as their diabetes advances, some patients progress to requiring injectable therapies, such as long-acting insulin, and a subset of this population will require daily rapid-acting insulin therapy.

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•	Color touchscreen - The large color touchscreen is easy to read, simple to learn, and intuitive to use for anyone familiar with a smartphone or tablet.

•	Small and discreet - The t:slim X2 pump is up to 38 percent smaller than other pumps, yet can hold up to 300-units of insulin.

•	Flexible technology - Can be used with or without automated insulin delivery or CGM - When advanced features are turned off, the t:slim X2 pump removes the CGM chart from the screen and puts the Bolus and Option buttons front and center for easy access. We currently offer integration with Dexcom’s G5 or G6 sensor, depending on geography.

•	AID features (availability varies by geography) - We have commercially launched two different AID algorithms on our t:slim X2 platform - Basal-IQ technology and Control-IQ technology.

◦	Basal-IQ technology: This predictive low glucose suspend feature is designed to temporarily suspend insulin delivery to help reduce the frequency and duration of hypoglycemic events. With Dexcom G6 CGM integration, this feature works with no fingersticks required for mealtime dosing or calibration.

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Control-IQ technology: This advanced hybrid-closed loop feature is designed to help increase a user's time in targeted glycemic range (70-180 mg/dL). It is the first and only system cleared to deliver automatic correction boluses in addition to adjusting insulin to help prevent high and low blood sugar. Control-IQ technology is integrated with Dexcom’s G6 CGM and offers optional settings for sleep and exercise that change the treatment values to better match the different physiological needs during these activities.

•	Connectivity - Features a two-way Bluetooth wireless technology radio for communicating with more than one external device at a time. It also features a micro-USB connection that supports charging the lithium-polymer battery, software updates and rapid data uploads.

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•	drive worldwide adoption of our products by offering the best insulin delivery systems;

•	deliver a portfolio of therapy management solutions designed to improve patient outcomes;

•	expand the value provided by our portfolio through an ecosystem approach to diabetes management;

•	build deeper relationships with all stakeholders across multiple channels, including virtual and tele-health platforms;

•	leverage our manufacturing operations to achieve cost and production efficiencies;

•	use data in new ways that deliver real-world insights and that promote better outcomes; and

•	identify new offerings that support our mission to improve the lives of people with diabetes.

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•	product design and development;

•	pre-clinical and clinical testing;

•	establishment registration and product listing;

•	product manufacturing;

•	labeling and storage;

•	pre-market clearance or approval;

•	advertising and promotion;

•	product sales and distribution;

•	recalls and field safety corrective actions; and

•	servicing and post-market surveillance.

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•	systems may not be safe or effective to the FDA’s satisfaction;

•	the data from pre-clinical studies and clinical trials may be insufficient to support approval;

•	the manufacturing process or facilities may not meet applicable requirements; and

•	changes in FDA approval policies or adoption of new regulations may require additional data.

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•	the FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold;

•	patients do not enroll in clinical trials at the rate expected;

•	patients do not comply with trial protocols;

•	patient follow-up is not at the rate expected;

•	patients experience adverse side effects;

•	patients die during a clinical trial, even though their death may not be related to the products that are part of our trial;

•	institutional review boards and third-party clinical investigators may delay or reject the trial protocol;

•	third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated schedule or consistent with the clinical trial protocol, good clinical practices or other FDA requirements;

•	we or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans;

•	third-party clinical investigators have significant financial interests related to us or our study that the FDA deems to make the study results unreliable, or the company or investigators fail to disclose such interests;

•	regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials;

•	changes in governmental regulations or administrative actions;

•	the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or efficacy; and

•	the FDA concludes that our trial design is inadequate to demonstrate safety and efficacy.

•	establishment registration and device listing;

•	QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process;

•	labeling regulations that prohibit the promotion of products for uncleared, unapproved or “off-label” uses, and impose other restrictions on labeling, advertising and promotion;

•	the FDA’s Medical Device Reporting, or MDR regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

•	voluntary and mandatory device recalls to address problems when a device is defective and could be a risk to health; and

•	corrections and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health.

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•	warning letters or untitled letters that require corrective action;

•	fines and civil penalties;

•	unanticipated expenditures;

•	delays in approving or refusal to approve future products;

•	FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries;

•	suspension or withdrawal of FDA clearance or approval;

•	product recall or seizure;

•	interruption of production;

•	operating restrictions;

•	injunctions; and

•	criminal prosecution.

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Item 1A.	Risk Factors

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

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

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

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

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

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

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

•	concerns regarding the perceived safety or reliability of any of our products, or any component thereof; and

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

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

•	greater ability to respond to competitive pressures and regulatory uncertainty;

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

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

•	greater market share and established base of customers;

•	larger and more established distribution networks;

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

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

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

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

•	perceived risks or uncertainties associated with the use of our products, or components thereof, or of similar products or technologies of our competitors;

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

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

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•	implement and execute our business strategy;

•	manage and improve the productivity of our sales, clinical, marketing and customer service infrastructure to grow sales of our existing and proposed products, and enhance our ability to provide service and support to our customers;

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

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

•	enhance our manufacturing capabilities, increase production of products efficiently while maintaining quality standards, and adapt our manufacturing facilities to the production of new products;

•	respond effectively to competitive pressures and developments;

•	enhance our existing products and develop proposed products;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

•	demonstrate the safety and efficacy of proposed products; and

•	obtain the necessary regulatory approvals for proposed products.

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•	different regulatory requirements for product approvals in foreign countries;

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

•	more restrictive privacy laws relating to personal information of end users and employees, including GDPR;

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

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

•	different reimbursement systems;

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

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

•	foreign taxes, including withholding of payroll taxes;

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

•	business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters, or incidence of disease.

•	problems assimilating the acquired products or technologies;

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

•	unanticipated costs associated with acquisitions;

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

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

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

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

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

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

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

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

•	the costs associated with maintaining and expanding our customer service infrastructure;

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

•	the cost of ongoing compliance with legal and regulatory requirements;

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

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

•	anticipated or unanticipated capital expenditures; and

•	unanticipated general and administrative expenses.

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•	our ability to increase sales and gross profit from our insulin pump products, including the related insulin cartridges and infusion sets, and to commercialize and sell our future products;

•	the number and mix of our products sold in each quarter;

•	acceptance of our products by people with insulin-dependent diabetes, their caregivers, healthcare providers and third-party payors;

•	the pricing of our products and competitive products, including the use of discounts, rebates or other financial incentives by us or our competitors;

•	the effect of third-party coverage and reimbursement policies;

•	our ability to maintain our existing infrastructure;

•	the amount of, and the timing of the payment for, insurance deductibles required to be paid by our customers and potential customers under their existing insurance plans;

•	interruption in the manufacturing or distribution of our products;

•	our ability to simultaneously manufacture multiple products that meet quality, reliability and regulatory requirements;

•	seasonality and other factors affecting the timing of purchases of our products;

•	timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;

•	results of clinical research and trials on our existing and future products;

•	the ability of our suppliers to timely provide us with an adequate supply of components that meet our requirements for product quality and reliability;

•	regulatory clearance or approvals affecting our products or those of our competitors; and

•	the timing of revenue and expense recognition associated with our product sales pursuant to applicable accounting standards.

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•	stop selling our products or using technology that contains the allegedly infringing intellectual property;

•	prevent or limit our ability to sell a product that we are currently developing;

•	incur significant legal expenses;

•	pay substantial damages to the party whose intellectual property rights we are allegedly infringing;

•	redesign those products that contain the allegedly infringing intellectual property; or

•	attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.

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•	product design and development;

•	pre-clinical and clinical testing and trials;

•	product safety;

•	establishment registration and product listing;

•	labeling and storage;

•	marketing, manufacturing, sales and distribution;

•	pre-market clearance or approval;

•	servicing and post-market surveillance;

•	advertising and promotion; and

•	recalls and field safety corrective actions.

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•	our inability to demonstrate that our products are safe and effective for their intended users;

•	the data from our clinical trials may be insufficient to support clearance or approval; and

•	failure of the manufacturing process or facilities we use to meet applicable requirements.

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the federal healthcare programs’ Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, paying or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and state Medicaid programs;

•	federal and state false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, state Medicaid programs, or other third-party payors that are false or fraudulent;

•	federal and state physician referral laws, such as the Stark Law, that prohibit a physician from referring Medicare or Medicaid patients to an entity providing “designated health services,” including a company that furnishes durable medical equipment, with which the physician has a financial relationship unless that financial relationship meets an exception;

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federal and state laws, such as the Civil Monetary Penalties Law, that prohibit an individual or entity from offering or transferring remuneration to any person eligible for benefits under a federal or state health care program which such individual or entity knows or should know are likely to influence such eligible individual’s choice of provider, practitioner or supplier of any item or service for which payment may be made under federal health care programs such as Medicare and state Medicaid programs;

•	federal criminal laws enacted as part of HIPAA that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

•	federal disclosure laws, such as the Physician Payments Sunshine Act, which require certain manufacturers, including medical device manufacturers, to submit annual data pertaining to payments or other transfers of value to covered recipients, including physicians;

•	the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections;

•	foreign and U.S. state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; and

•	federal and state laws governing the use, disclosure and security of personal information, including protected health information, such as HIPAA and the Health Information Technology for Economic and Clinical Health.

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•	actual or anticipated fluctuations in our financial and operating results from period to period;

•	our actual or perceived need for additional capital to fund our operations;

•	market acceptance of our current products and products under development, and the recognition of our brand;

•	introduction of proposed products, technologies or treatment techniques by us or our competitors;

•	announcements of significant contracts, acquisitions or divestitures by us or our competitors;

•	regulatory approval of our products or the products of our competitors, or the failure to obtain such approvals on the projected timeline or at all;

•	speculative trading practices of market participants;

•	issuance of securities analysts’ reports or recommendations;

•	threatened or actual litigation and government investigations;

•	sales of shares of our common stock by our employees, directors or principal stockholders; and

•	general political or economic conditions.

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•	authorize the issuance of preferred stock with powers, preferences and rights that may be senior to our common stock, which can be created and issued by the board of directors without prior stockholder approval;

•	provide for the adoption of a staggered board of directors whereby the board is divided into three classes each of which has a different three-year term;

•	provide that the number of directors shall be fixed by the board;

•	prohibit our stockholders from filling board vacancies;

•	provide for the removal of a director only with cause and then by the affirmative vote of the holders of a majority of the outstanding shares;

•	prohibit stockholders from calling special stockholder meetings;

•	prohibit stockholders from acting by written consent without holding a meeting of stockholders;

•	require the vote of at least two-thirds of the outstanding shares to approve amendments to the certificate of incorporation or bylaws; and

•	require advance written notice of stockholder proposals and director nominations.

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Item 1B.	Unresolved Staff Comments.

Item 2.	Properties.

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Roselle Street Leases: approximately 88,000 square feet of general office and laboratory space located on Roselle Street in San Diego, California. All of our existing leases for facilities on Roselle Street are scheduled to expire in May 2022. We have a one-time option to terminate our Roselle Street Leases effective as of May 2021 upon delivery of advance notice to the landlord and the payment of an early termination fee.

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Barnes Canyon Lease: approximately 48,880 square feet of general office, manufacturing and warehouse space located on Barnes Canyon Road in San Diego, California, which is scheduled to expire in November 2023. We have a one-time option to extend the term of the Barnes Canyon Lease for a period of not less than three years and not greater than five years, by delivering notice to the landlord at least nine months and not more than 12 months prior to the expiration of the lease.

•	Vista Sorrento Parkway Lease: approximately 59,013 square feet of general office space located on Vista Sorrento Parkway in San Diego, California, which is scheduled to expire in January 2023. We have a one-time option to extend the term of the Vista Sorrento Parkway Lease for a period of four years, by delivering written notice to the landlord in accordance with the terms of the lease.

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Marindustry Place Lease: approximately 40,490 square feet of general office and warehouse space located on Marindustry Place, San Diego, California, which is scheduled to expire in April 2026. We have a one-time option to extend the term of the Marindustry Place Lease for a period of no less than three years and no more than five years by delivering written notice to the landlord in accordance with the terms of the lease.

•	Shoreline Lease: approximately 94,562 square feet of general office space located on Shoreline Drive, Boise, Idaho. The Shoreline Lease term is scheduled to commence in July 2020, and expire in June 2027. We have a one-time option to extend the term of the Shoreline Lease for a period of three years by delivering written notice to the landlord in accordance with the terms of the lease.

•	Boise Short-Term Lease: approximately 9,109 square feet of general office space located on Shoreline Drive, Boise, Idaho. This is a short-term lease that is scheduled to expire in September 2020.

•	Markham Lease: approximately 667 square feet of general office space located in Markham, Ontario, Canada. This is a month-to-month lease that can be canceled by delivering written notice to the landlord in accordance with the terms of the lease.

Item 3.	Legal Proceedings.

Item 4.	Mine Safety Disclosures.

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

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Item 6.	Selected Financial Data.

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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t:sport Insulin Delivery System – Approximately half the size of our t:slim X2 pump, the t:sport pump is being designed for people who seek even greater discretion and flexibility with the use of their insulin pump. We anticipate that t:sport will feature a 200-unit cartridge, an on-pump bolus button, a rechargeable battery, an AID algorithm, and a Bluetooth radio. t:sport is being designed for use with leading U-100 insulins, and we are evaluating the use of insulin concentrates to provide to people with greater insulin needs. We anticipate that t:sport will be our first insulin pump to support full pump-control from our mobile application, subject to FDA review and approval. A separate controller may be offered in addition to or in advance of full mobile control availability.

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Connected (Mobile) Health Offerings – We are currently preparing for the launch of a mobile application that has been designed to utilize the capability of the Bluetooth radio integrated with the t:slim X2 to wirelessly upload pump data to t:connect, receive notification of pump alerts and alarms, and provide a discrete, secondary display of glucose and insulin data.  Future updates of this app will integrate other health-related information from third party sources, and support future pump-control capabilities for our products under development.

◦	The launch of the first generation of this mobile application in the United States follows the roll-out of our Control-IQ technology and, by allowing for the wireless upload of data to t:connect, is intended to reduce patient burden and increase healthcare provider office efficiency by reducing the manual steps historically required for data extraction.

◦	Over time, we also intend to offer additional features and enhancements to the mobile application, including partial or full control of pump features.

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•	market acceptance of our products and competitive products by people with insulin-dependent diabetes, their caregivers and healthcare providers;

•	the introduction of new products, treatment techniques or technologies for the treatment of diabetes, including the timing of the commercialization of new products by us and our competitors;

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

•	timing of holidays and summer vacations, which may vary by geography;

•	the buying patterns of our distributors and other customers, both domestically and internationally;

•	changes in the competitive landscape, including as a result of companies entering or exiting the diabetes therapy market;

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

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

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

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

•	continued increase in demand following the commercial launch of t:slim X2 and the demonstrated success of our Tandem Device Updater;

•	anticipated new product launches;

•	increased opportunity to achieve customer renewals as customers become eligible for insurance reimbursement to purchase a new insulin pump at the end of the typical four-year reimbursement cycle;

•	benefit in 2018 and 2019 following the announcement by Johnson & Johnson that it discontinued the operations of Animas Corporation (Animas) and discontinued availability of Animas pump supplies in September 2019;

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•	designation by UnitedHealthcare of one of our competitors as its preferred, in-network durable medical equipment provider of insulin pumps for most customers age seven and above;

•	ability to enter into and maintain agreements with CGM partners for CGM integration;

•	expansion and new product launches in select international geographies;

•	accounting variability and complexity associated with certain commercial programs, such as the Technology Upgrade Program offered in 2016 and 2017 that provided a pathway for in-warranty customers to our next-generation hardware platform; and

•	ability to effectively scale our operations to support rapid growth, including expanding our facilities, advancing our research and development efforts, increasing manufacturing capacity through third-party manufacturers, and hiring and retaining employees in customer service and support functions.

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•	In February 2018, we completed a registered public offering of 34,500,000 shares of common stock at a public offering price of $2.00 per share. The gross proceeds from the offering were approximately $69.0 million, before deducting underwriting discounts and commissions and other offering expenses.

•	In August 2018, we completed a registered public offering of 4,035,085 shares of common stock at a public offering price of $28.50 per share. The gross proceeds from the offering were $115.0 million, before deducting underwriting discounts and commissions and other offering expenses.

•	From January 2018 through December 2019, we received proceeds of $29.9 million from the exercise of 8,829,235 outstanding warrants which were originally issued in a registered public offering of common stock in October 2017. As of December 31, 2019, there were warrants to purchase 417,315 shares outstanding relating to the October 2017 offering.

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•	From January 2018 through December 2019, we issued 1,554,995 shares of common stock upon the exercise of stock options, and 409,653 shares of common stock were purchased under our 2013 Employee Stock Purchase Plan, which generated aggregate proceeds of $26.3 million.

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

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

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

•	fluctuations in gross margins and operating margins; and

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

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

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

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

•	acquisitions of equipment, technology, intellectual property and other assets;

•	additional facilities leases and related tenant improvements, and manufacturing equipment to support business growth and increase manufacturing capacity; and

•	payments under licensing, development and commercialization agreements.

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(1)

Operating lease obligations of $23.1 million were included in operating lease liabilities current and long-term in the consolidated balance sheet at December 31, 2019 (see Note 5, "Leases"). The additional $8.3 million included in the above table consists of $8.2 million due under the lease of additional general office space located on Shoreline Drive, Boise, Idaho (Shoreline Lease), which we entered into in November of 2019, and $0.1 million related to short-term leases. Minimum annual lease payments under the Shoreline Lease will be approximately $0.5 million in 2020, $1.1 million in 2021 and 2022, $1.2 million in 2023 and 2024, and $3.1 million thereafter. The Company currently estimates that it will recognize the Shoreline Lease operating lease liabilities on the consolidated balance sheet upon the lease commencement in the first quarter of 2020.

(2)	Does not include $2.5 million due under the lease of additional general office space located on High Bluff Drive, San Diego, California, which we entered into in January of 2020. Minimum annual lease payments under the lease will be approximately $1.0 million in 2020, $1.2 million in 2021, and $0.3 million in 2022.

(3)	Includes purchase orders that are cancellable under the standard terms of our purchase order agreements. In certain cases, cancellation of outstanding purchase commitments may require payment of costs incurred through the date of cancellation.

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Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.

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Item 8.	Consolidated Financial Statements and Supplementary Data

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

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(1)	For the years ended December 31, 2019 and 2018, as a result of the 2017 Tax Act, the federal statutory rate was 21%. For the year ended and 2017, the federal statutory rate was 34%.

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(1)	Net income (loss) per share is computed independently for each quarter and the full year based upon the respective average shares outstanding in each period. Therefore, the sum of the quarterly per-share calculations may not equal the reported annual per share amounts.

(2)	With the exception of the third and fourth quarter of 2019, and the fourth quarter of 2018, there is no difference in the weighted average shares used to compute basic and diluted net income (loss) per share. (see Note 2, ''Summary of Significant Accounting Policies'' for further details).

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A.	Controls and Procedures.

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Item 9B.	Other Information.

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Item 10.	Directors, Executive Officers and Corporate Governance.

Item 11.	Executive Compensation.

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13.	Certain Relationships and Related Transactions, and Director Independence.

Item 14.	Principal Accounting Fees and Services.

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Item 15.	Exhibits and Financial Statement Schedules

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*	Indicates management contract or compensatory plan.

**	Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and have been filed separately with the Securities and Exchange Commission.

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This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.

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