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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 September 30, 2023

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 528,281,405 shares of common stock, par value $0.001, outstanding as of November 3, 2023.

TABLE OF CONTENTS

PART I: Financial Information

ITEM 1: Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022

3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022

4

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2023 and 2022

5

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

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

27

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

39

ITEM 4: Controls and Procedures

39

PART II: Other Information

40

ITEM 1: Legal Proceedings

40

ITEM 1A: Risk Factors

40

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

40

ITEM 3: Defaults Upon Senior Securities

41

ITEM 4: Mine Safety Disclosures

41

ITEM 5: Other Information

41

ITEM 6: Exhibits

41

SIGNATURES

43

2

Senseonics Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

September 30, 

December 31, 

 

2023

2022

(unaudited)

Assets

    

    

Current assets:

Cash and cash equivalents

$

55,759

$

35,793

Short term investments, net

69,648

108,222

Accounts receivable, net

701

127

Accounts receivable, net - related parties

2,749

2,324

Inventory, net

9,726

7,306

Prepaid expenses and other current assets

 

7,557

 

7,428

Total current assets

 

146,140

 

161,200

Deposits and other assets

 

6,991

 

3,108

Long term investments, net

12,253

Property and equipment, net

 

934

 

1,112

Total assets

$

154,065

$

177,673

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:

Accounts payable

$

2,669

$

419

Accrued expenses and other current liabilities

 

14,356

 

14,616

Accrued expenses and other current liabilities, related parties

277

837

Note payable, current portion, net

15,579

Derivative liability, current portion

20

Total current liabilities

 

17,302

 

31,471

Long-term debt and notes payables, net

40,485

56,383

Derivative liabilities

 

245

 

52,050

Other liabilities

6,312

2,689

Total liabilities

 

64,344

 

142,593

Preferred stock and additional paid-in-capital, subject to possible redemption: $0.001 par value per share; 12,000 shares and 12,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022

37,656

37,656

Total temporary equity

37,656

37,656

Commitments and contingencies

Stockholders’ equity (deficit):

Common stock, $0.001 par value per share; 900,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 528,176,273 shares and 479,637,138 shares issued and outstanding as of September 30, 2023 and December 31, 2022

 

528

 

480

Additional paid-in capital

 

903,665

 

806,488

Accumulated other comprehensive loss

(59)

(678)

Accumulated deficit

 

(852,069)

 

(808,866)

Total stockholders’ equity (deficit)

 

52,065

 

(2,576)

Total liabilities and stockholders’ equity

$

154,065

$

177,673

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

3

Senseonics Holdings, Inc.

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

(in thousands, except share and per share data)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Revenue, net

$

426

    

$

126

$

1,176

$

555

Revenue, net - related parties

5,671

4,496

13,184

10,263

Total revenue

6,097

4,622

14,360

10,818

Cost of sales

4,925

3,866

12,358

8,711

Gross profit

1,172

756

2,002

2,107

Expenses:

Research and development expenses

12,769

 

10,985

38,003

28,088

Selling, general and administrative expenses

7,425

 

7,340

22,598

 

23,785

Operating loss

(19,022)

 

(17,569)

(58,599)

 

(49,766)

Other income (expense), net:

Interest income

1,460

544

3,879

878

Gain (Loss) on fair value adjustment of option

(8,592)

41,333

Exchange related gain (loss), net

(4,569)

14,207

Interest expense

(2,425)

(4,801)

(9,388)

(13,806)

Gain (Loss) on change in fair value of derivatives

438

(28,948)

6,505

152,169

Impairment cost, net

(984)

(138)

Other income (expense)

15

(41)

194

(112)

Total other (expense) income, net

(5,081)

(42,822)

15,397

180,324

Net (Loss) Income

(24,103)

(60,391)

(43,202)

130,558

Other comprehensive income (loss)

Unrealized gain (loss) on marketable securities

61

(57)

619

(973)

Total other comprehensive gain (loss)

61

(57)

619

(973)

Total comprehensive (loss) income

$

(24,042)

$

(60,448)

$

(42,583)

$

129,585

Basic net (loss) income per common share

$

(0.04)

$

(0.13)

$

(0.08)

$

0.28

Basic weighted-average shares outstanding

592,452,262

472,475,747

552,703,546

464,244,736

Diluted net loss per common share

$

(0.04)

$

(0.13)

$

(0.08)

$

(0.10)

Diluted weighted-average shares outstanding

592,452,262

472,475,747

552,703,546

608,345,713

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

4

Senseonics Holdings, Inc.

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

(in thousands)

Additional

Accumulated

Total

Series B

Common Stock

Paid-In

Other

Accumulated

Stockholders'

Convertible

  

Shares

  

Amount

  

Capital

  

Comprehensive Loss

Deficit

Equity (Deficit)

  

Preferred Stock Temporary Equity

Three months ended September 30, 2022:

Balance, June 30, 2022

465,326

$

465

$

776,640

$

(1,128)

$

(760,036)

$

15,941

$

Issuance of common stock, net of issuance costs

12,084

12

26,427

26,439

 

Exercise of stock options and warrants

681

1

711

712

Issued common stock for vested RSUs and ESPP purchase

121

69

69

Stock-based compensation expense

2,222

2,222

Net loss

(60,391)

(60,391)

Other comprehensive loss, net of tax

(57)

(57)

Balance, September 30, 2022

478,212

$

478

$

806,069

$

(1,185)

$

(820,427)

$

(15,065)

$

Nine months ended September 30, 2022:

Balance, December 31, 2021

 

447,282

$

447

$

765,215

$

(212)

$

(950,985)

$

(185,535)

$

Issuance of common stock, net of issuance costs

15,161

15

34,428

34,443

Exercise of stock options and warrants

 

9,892

10

941

951

Issued common stock for vested RSUs and ESPP purchase

6,970

7

125

132

Stock-based compensation expense

6,543

6,543

Shares withheld related to net share settlement of equity awards

(1,093)

(1)

(1,183)

(1,184)

Net income

130,558

130,558

Other comprehensive loss, net of tax

 

(973)

(973)

Balance, September 30, 2022

 

478,212

$

478

$

806,069

 

$

(1,185)

$

(820,427)

$

(15,065)

$

Three months ended September 30, 2023:

Balance, June 30, 2023

492,827

$

493

$

880,129

$

(120)

$

(827,965)

$

52,537

$

37,656

Issued common stock for vested RSUs and ESPP purchase

210

1

117

118

Exercise of stock options and warrants

5

5

Exchange of 2025 Notes

35,139

35

20,967

21,002

Issuance of warrants, net of issuance costs

363

363

Stock-based compensation expense

2,084

2,084

Net loss

(24,103)

(24,103)

Other comprehensive income, net of tax

61

61

Balance, September 30, 2023

528,176

$

528

$

903,665

$

(59)

$

(852,069)

$

52,065

$

37,656

Nine months ended September 30, 2023:

Balance, December 31, 2022

479,637

$

480

$

806,488

$

(678)

$

(808,866)

$

(2,576)

$

37,656

Issuance of common stock, net of issuance costs

 

9,945

10

7,366

7,376

Issued common stock for vested RSUs and ESPP purchase

5,581

6

199

205

Issuance of warrants, net of issuance costs

63,645

63,645

Exercise of stock options and warrants

 

6

3

3

Exchange of 2025 Notes

35,139

35

20,967

21,002

Stock-based compensation expense

6,735

6,735

Shares withheld related to net share settlement of equity awards

 

(2,132)

(2)

(1,601)

(1,603)

Other

(137)

(137)

Net loss

(43,202)

(43,202)

Other comprehensive income, net of tax

 

619

619

Balance, September 30, 2023

 

528,176

$

528

$

903,665

 

$

(59)

$

(852,069)

$

52,065

$

37,656

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

5

Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended

September 30, 

2023

2022

Cash flows from operating activities

    

Net (loss) income

$

(43,202)

$

130,558

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

Depreciation and amortization expense

641

751

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

 

6,581

8,858

Net amortization of premiums and accretion of discounts on marketable securities

(2,253)

Gain on change in fair value of derivatives

(6,505)

(152,169)

Gain on fair value adjustment of option

(41,333)

Exchange related (gain) loss, net

(14,207)

Impairment of option, net

138

Stock-based compensation expense

 

6,735

6,543

Provision for inventory obsolescence and net realizable value

89

Loss on disposal of assets

5

Other

56

Changes in assets and liabilities:

Accounts receivable

(998)

(151)

Prepaid expenses and other current assets

 

(129)

504

Inventory

(2,509)

(941)

Deposits and other assets

(342)

163

Accounts payable

 

669

(519)

Accrued expenses and other liabilities

1,161

(1,070)

Accrued interest

(292)

(257)

Operating lease liabilities

(596)

Net cash used in operating activities

 

(55,096)

(48,925)

Cash flows from investing activities

Capital expenditures

 

(180)

(255)

Purchase of marketable securities

(68,537)

(82,807)

Proceeds from sale and maturity of marketable securities

122,235

102,594

Net cash provided by investing activities

 

53,518

 

19,532

Cash flows from financing activities

Issuance of common stock, net of issuance costs

7,376

34,443

Issuance of stock options, net of issuance costs

71

1,083

Taxes paid related to net share settlement of equity awards

 

(1,603)

(1,184)

Repayment of 2023 Notes

 

(15,700)

Repayment of 2025 Notes

(7,500)

Repayment of term loans

 

(2,926)

Proceeds from issuance of Loan and Security Agreement, net

 

24,446

Payment of debt issuance costs

(244)

Proceeds from issuance of warrants, net

14,698

Net cash provided by financing activities

 

21,544

 

31,416

Net increase in cash, cash equivalents

 

19,966

 

2,023

Cash, cash equivalents, at beginning of period

 

35,793

33,461

Cash, cash equivalents, at ending of period

$

55,759

$

35,484

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$

3,100

$

5,137

Lease liabilities arising from obtaining right-of-use assets

3,831

2,944

Supplemental disclosure of non-cash investing and financing activities

Issuance of warrants in exchange for PHC Notes

48,564

Issuance of warrants for Loan and Security Agreement

364

Issuance of common stock converted from 2025 Notes

21,002

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

6

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 manufacturing 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. The Company has incurred substantial losses and cumulative negative cash flows from operations since its inception in October 1996 and expects to incur additional losses in the near future. We incurred total gross profit (loss) of $2.7 million, ($0.8) million, and ($17.4) million for the years ended December 31, 2022, 2021 and 2020, respectively. For the three months ending September 30, 2023, the Company had gross profit of $1.2 million and an accumulated deficit of $852.1 million. To date, the Company has funded its operations principally through the issuance of preferred stock, common stock, warrants, convertible notes and debt. As of September 30, 2023, the Company had cash, cash equivalents and marketable securities of $125.4 million.

On September 8, 2023 (the “Effective Date”), the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with the several institutions or entities party thereto (collectively, the “Lenders") and Hercules Capital, Inc., a Maryland corporation (“Hercules”) in its capacity as administrative agent and collateral agent for itself and the Lenders, pursuant to which the Lenders have agreed to make available to the Company up to $50.0 million in senior secured term loans (the “Term Loan Facility”), consisting of (i) an initial term loan of $25.0 million (the “Tranche 1 Loan”), which was funded on the Effective Date and (ii) two additional tranches of term loans in the amounts of up to $10.0 million (the “Tranche 2 Loan”) and $15.0 million (the “Tranche 3 Loan”), respectively, which will become available to the Company upon the Company’s satisfaction of certain terms and conditions set forth in the Loan Agreement. The loans under the Loan Agreement mature on September 1, 2027 (the “Maturity Date”).

On August 10, 2023, the Company entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with a limited number of holders (the “Noteholders”) of the Company’s currently outstanding 5.25% Convertible Senior Notes due 2025 (the “2025 Notes”). Under the terms of the Exchange Agreements, the Noteholders agreed to exchange with the Company (the “Exchanges”) up to $30.8 million in aggregate principal amount of the 2025 Notes (the “Exchanged Notes”) for a combination of $7.5 million of cash and newly issued shares of common stock (the “Exchange Shares”). The number of Exchange Shares was determined based upon the volume-weighted average price per share of the common stock during a 15-day averaging period commencing on August 11, 2023 and ending August 31, 2023. Based on the volume-weighted average price per share of the common stock during the averaging period, a total of 35.1 million shares of common stock were issued in the Exchanges. The Exchanges were settled on the initial share issuance date of August 14, 2023 and the final settlement date of September 5, 2023.

In August 2023, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Goldman Sachs & Co. LLC (“GS”), 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 $106.6 million through GS as its sales agent in an “at the market” offering. GS will receive a commission up to 3.0% of the gross proceeds of any common stock sold through GS under the Equity Distribution Agreement. The shares will be offered and sold pursuant

7

to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on August 10, 2023. As of September 30, 2023, no sales have been made under the Equity Distribution Agreement.

In November 2021, the Company entered into an Open Market Sale Agreement, (the “2021 Sales Agreement”) with Jefferies LLC (“Jefferies”), under which the Company could offer and sell, from time to time, at its sole discretion, shares of its common stock having an aggregate offering price of up to $150.0 million through Jefferies as its sales agent in an “at the market” offering. Jefferies received commissions up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement. During 2023, the Company received $7.4 million in net proceeds from the sale of 9,944,663 shares of its common stock under the 2021 Sales Agreement. For the nine months ended September 30, 2022, the Company received $34.4 million in net proceeds from the sale of 15,160,899 shares of its common stock under the 2021 Sales Agreement. Effective August 7, 2023, the Company and Jefferies mutually agreed to terminate the 2021 Sales Agreement. At the time of termination, approximately $106.6 million remained available for issuance pursuant to the 2021 Sales Agreement.

On November 9, 2020, the Company entered into an Equity Line Agreement (the “Equity Line Agreement”) with Energy Capital, LLC, a Florida limited liability company (“Energy Capital”), which provided that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital was committed to purchase up to an aggregate of $12.0 million of shares of the Company’s newly designated series B convertible preferred stock (the “Series B Preferred Stock”) at the Company’s request from time to time during the 24-month term of the Equity Line Agreement. Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, the Company had the right, at its sole discretion, to present Energy Capital with a purchase notice (each, a “Regular Purchase Notice”) directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of the Company’s Series B Preferred Stock at a per share price (the “Purchase Price”) equal to $1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six months after the date of its issuance, at a conversion price of $0.3951 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. The Equity Line Agreement provided that the Company was not permitted to affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the Company’s common stock on the NYSE American is less than $0.25 without the approval of Energy Capital. In addition, beginning on January 1, 2022, since there had been no sales of the Series B Preferred Stock pursuant to the Equity Line Agreement, Energy Capital had the right, at its sole discretion, by its delivery to the Company of a Regular Purchase Notice, to purchase up to the $12.0 million of Series B Preferred Stock under the Equity Line Agreement at the Purchase Price. On November 7, 2022, Energy Capital exercised in full its right to purchase $12.0 million of Series B Preferred Stock. The excess of the Purchase Price and the fair value of the Energy Capital option in the total amount of $37.6 million was recorded in additional-paid-in-capital as convertible preferred stock.

On August 9, 2020, the Company entered into a financing agreement with the parent company of Ascensia Diabetes Care Holdings AG (“Ascensia”), PHC Holdings Corporation (“PHC”), pursuant to which the Company issued $35.0 million in aggregate principal amount of Senior Secured Convertible Notes due on October 31, 2024 (the “PHC Notes”), to PHC. The Company also issued 2,941,176 shares of common stock to PHC as a financing fee. The Company also has the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022, contingent upon obtaining U.S. Food and Drug Administration (“FDA”) approval for the 180-day Eversense product for marketing in the United States before such date. The Company successfully obtained FDA approval in February 2022 and the option was not exercised. As described in Note 12, on March 13, 2023, the Company entered into an Exchange Agreement (the “PHC Exchange Agreement”) with PHC, pursuant to which PHC agreed to exchange (the “PHC Exchange”) its $35.0 million aggregate principal amount of the PHC Notes, including all accrued and unpaid interest thereon, for a warrant (the “PHC Exchange Warrant”) to purchase up to 68,525,311 shares of the Company’s common stock, $0.001 par value per share (the “PHC Exchange Warrant Shares”). The PHC Exchange Warrant is a “pre-funded” warrant with a nominal exercise price of $0.001 per PHC Exchange Warrant Share. On March 31, 2023, the PHC Exchange was consummated, and the Company issued the PHC Exchange Warrant in consideration for the cancellation of the PHC Notes.

8

On March 13, 2023, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with PHC, pursuant to which the Company issued and sold to PHC in a private placement (the “Private Placement”) a warrant (the “Purchase Warrant”) to purchase 15,425,750 shares of the Company’s common stock, $0.001 par value per share (the “Purchase Warrant Shares”). The purchase price of the Purchase Warrant was approximately $0.97 per Purchase Warrant Share, representing the undiscounted, trailing 10-day volume weighted average price of the Company’s common stock through March 10, 2023. The Purchase Warrant is a “pre-funded” warrant with a nominal exercise price of $0.001 per Purchase Warrant Share. The issuance of the Purchase Warrants enabled PHC to maintain, as of the closing of the transaction, a 15% beneficial ownership for purposes of the Investor Rights Agreement, dated August 9, 2020, between the Company and PHC. The Private Placement closed on March 13, 2023 (the “Private Placement Closing Date”) and the Company received aggregate gross proceeds of $15.0 million, before deducting private placement expenses payable by the Company.

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 September 30, 2023, and December 31, 2022, results of operations, comprehensive income (loss), and changes in stockholder’s deficit for the three and nine months ended September 30, 2023 and 2022 and cash flows for the nine months ended September 30, 2023 and 2022 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, 2022, as filed with the SEC on March 16, 2023. The interim results for September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, 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. 

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. For available-for-sale debt securities in unrealized loss positions, the new standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The Company currently holds investments in available-for-sale securities. The Company has not historically experienced collection issues or bad debts with trade receivables. The Company adopted this guidance as of January 1, 2023 and its adoption did not have a material impact on the consolidated financial statements and related disclosures.

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, fair value of investments, derivative assets and liabilities, obsolete inventory, warranty

9

obligations, variable consideration related to revenue, allowance for credit losses, depreciable lives of property and equipment, and accruals for clinical study costs, which are accrued based on estimates of work performed under contract. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses. Actual results could differ from those estimates; however, management does not believe that such differences would be material.

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, 2022.

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, 2022.

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 nine months ended September 30, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30, 2023

September 30, 2023

%

%

(Dollars in thousands)

Amount

of Total

Amount

of Total

Revenue, net:

United States

$

3,930

64.5

%

$

7,885

54.9

%

Outside of the United States

2,167

35.5

6,475

45.1

Total

$

6,097

100.0

%

$

14,360

100.0

%

Three Months Ended

Nine Months Ended

September 30, 2022

September 30, 2022

%

%

(Dollars in thousands)

Amount

of Total

Amount

of Total

Revenue, net:

United States

$

1,934

41.8

%

$

3,908

36.1

%

Outside of the United States

2,688

58.2

6,910

63.9

Total

$

4,622

100.0

%

$

10,818

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 Agre