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

~~Available-for-sale securities held as of September 30, 2017 had a weighted average days to maturity of~~ ~~122~~ ~~days. There have been no material realized gains or realized losses on available-for-sale securities for the periods presented.~~

~~As the carrying value approximates the fair value for the Company’s cash equivalents, short-term and long-term investments shown in the tables above, the~~

~~The valuation of the preferred stock warrant liabilities is discussed in Note 11.~~

In November 2012, in connection with borrowings under a convertible note, the Company issued warrants to purchase shares of Series C or New Preferred. The warrants were only exercisable if the Convertible Notes were converted into Series C or New Preferred. The warrants’ exercise price is $0.001 per share and they have a seven year term. On March 27, 2013 the Company closed the Series D financing. The warrants were converted into warrants to purchase 207,177 shares of Series D convertible preferred stock. The Company recognized a charge of $0.5 million and $0.7 million related to the change in the fair value of the warrants for the three and nine months ended September 30, 2016. Upon the IPO, the Series D preferred stock warrants converted into common stock warrants and were reclassified to additional paid-in-capital in the Company's balance sheet. As a result, the warrants are no longer subject to fair value remeasurement. As of September 30, 2017, 127,918 warrants were outstanding.

•advances and trends in new technologies and industry ~~standards~~

standards.

Because our quarterly results may fluctuate, period-to-period comparisons may not be the best indication of the underlying results of our business and should only be relied upon as one factor in determining how our business is performing.

We have noticed seasonality in the use of our ~~ZIO Service~~Zio service which, along with other factors such as severe weather, may cause quarterly fluctuations in our revenue.

During the summer months and the holiday season, we have observed that the use of our ~~ZIO Service~~Zio service decreases, which reduces our revenue during those periods. We believe that the decrease in demand may result from physicians or their patients taking ~~vacation.~~vacations. Severe weather conditions or natural disasters also may hamper or otherwise restrict when patients seeking diagnostic services, such as the ~~ZIO Service~~Zio service, visit prescribing physicians. Similarly, we generally experience some effects of seasonality due to the renewal of insurance deductibles at the beginning of the calendar year. These factors may cause our results of operations to vary from quarter to ~~quarter~~

quarter.

Reimbursement by CMS is highly regulated and subject to change; our failure to comply with applicable regulations could result in decreased revenue and may subject us to penalties or have an adverse impact on our business.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, we received approximately ~~28%~~22% of our revenue from reimbursement for our ~~ZIO Service~~Zio service by CMS. Under CMS guidelines for participation in the Medicare program CMS designates us as an independent diagnostic treatment facility (“IDTF”). CMS imposes extensive and detailed requirements on ~~manufacturers of medical devices and providers of medical services,~~IDTFs, including but not limited to, rules that govern how we structure our relationships with physicians, how and when we submit reimbursement claims, how we operate our monitoring facilities and how and where we provide our monitoring solutions. Our failure to comply with applicable CMS rules could result in a discontinuation of our reimbursement under the CMS payment programs, our being required to return funds already paid to us, civil monetary penalties, criminal penalties and/or exclusion from the CMS programs. In addition, regional Medicare Administrative Contractors, or MACs, change from time to time, which may result in changes to our reimbursement rates, increased administrative burden and reimbursement delay.

Changes in public health insurance coverage and CMS reimbursement rates for the ~~ZIO Service~~Zio service could affect the adoption and profitability of ~~the ZIO Service and~~ our ~~future revenue.~~

Zio service.

Government payors may change their coverage and reimbursement policies, as well as payment amounts, in a way that would prevent or limit reimbursement for our ~~ZIO Service,~~Zio service, which would significantly harm our business. ~~For example, government~~Government and other third-party payors require us to ~~identify~~report the service for which we are seeking reimbursement by using a Current Procedural Terminology ~~or CPT, code set~~(“CPT”) code-set maintained by the American Medical ~~Association. We have secured~~Association (“AMA”). For Zio XT, we had historically utilized temporary CPT codes (or Category III CPT codes), used for newly introduced technologies specific to our category of diagnostic ~~monitoring through 2022, but these codes are not exclusive~~monitoring. The process to the ZIO Service and our competitors’ products and services may also qualify for reimbursement under these codes. To the extent one of our competitors or a future competitor produces a product or service at a less expensive price, it may cause the reimbursement under theseconvert Category III CPT codes to ~~decrease.~~ Category I CPT codes is governed by the AMA and CMS. On October 25, 2019, the AMA’s CPT Editorial Panel established two new Category I CPT codes which are applicable to the Zio service and took effect on January 1, 2021.

In ~~addition, third-party payors often reimburse based~~November 2021, CMS published its Calendar Year 2022 Medicare Physician Fee Schedule Final Rule (the “2022 Final Rule”). In the Final Rule, CMS did not issue national pricing and continued carrier pricing for calendar year 2022 on Category I CPT codes 93241, 93243, 93245 and 93247 for extended external ECG monitoring, the relevant codes for our Zio XT service. These codes were designated by CMS ~~reimbursement rates. To the extent CMS reduces its reimbursement rates~~ for ~~the ZIO Service, third-party payors may reduce the rates at~~contractor pricing in calendar 2022, which ~~they reimburse the ZIO Service, which could adversely affect our revenue.~~

means that prices will be determined regionally by each Medicare Administrative Contractor (“MAC” or “MACs”).

Determinations of which products or services will be reimbursed under Medicare can be developed at the national level through a national coverage determination ~~or an NCD,~~(“NCD”) by CMS, or at the local level through a local coverage determination ~~or an LCD,~~(“LCD”), by one or more of the regional ~~Medicare Administrative Contractors, or~~ MACs ~~which~~who are private contractors that process and pay claims on behalf of CMS for different regions. In the absence of ana specific NCD, as is the case with Zio XT historically and for Calendar Year 2022 following the ~~ZIO Service,~~Final Rule, the MAC with jurisdiction over a specific geographic region will have the discretion to make an LCD. The Company is seeking to establish LCD pricing with one or more MACs to establish pricing for 2022 and ~~determine~~will be subject to LCD pricing until such time CMS establishes a NCD.

In January 2022, Novitas Solutions, the ~~fee schedule and reimbursement rate within~~MAC which covers the region where our Independent Diagnostic Testing Facility (“IDTF”) in Houston, Texas is located and ~~regional LCDs may not always be consistent in their determinations. We have in the past been, and in the future may be, required to respond to potential changes in~~where almost all of our Medicare services for Zio XT are processed, updated reimbursement rates for CPT codes 93243 and 93247 for the Houston jurisdiction to $223 and $233, respectively. These updated rates are retroactive to January 1, 2022. These rates were higher than the rates posted by Novitas in 2021, but continue to be significantly below our ~~products. Reductions~~historical Medicare rates for our Zio XT service. In April 2022, National Government Services or NGS, the MAC which covers the region where our IDTF in Lincolnshire, Illinois is located, updated reimbursement rates ~~if enacted, could have a material adverse effect on~~for

CPT codes 93243 and 93247 for the Suburban Chicago jurisdiction to $334 and $347, respectively.These updated rates are retroactive to April 1, 2022.These rates are higher than our ~~business. Further, a reduction in coverage by~~historical Medicare ~~could cause some commercial third-party payers to implement similar reductions in their coverage or level of reimbursement~~rates for out Zio XT service.

We remain engaged with all of the ~~ZIO Service.~~ MACs and are working with other industry participants to submit additional cost data on long-term continuous electrocardiogram (“ECG”) monitoring for consideration to establish appropriate local rates. We cannot provide certainty at this time on the potential outcome of the discussions with the MACs or on the timing of any action to be taken.

Determinations of which products or services will be reimbursed under Medicare can be developed at the national level through a national coverage determination (“NCD”) by CMS, or at the local level through a local coverage determination (“LCD”), by one or more of the regional MACs who are private contractors who establish and write LCD policies and process and pay claims on behalf of CMS for different regions. In the absence of a specific NCD, the MAC with jurisdiction over a specific geographic region will have the discretion to make an LCD. If Novitas Solutions were to change, limit or cease to cover the Zio service by altering the existing LCD, it would negatively impact our revenue from CMS.

Given the evolving nature of the healthcare industry and ~~on-going~~ongoing healthcare cost reforms, we are and will continue to be subject to changes in the level of Medicare coverage for our products, and unfavorable coverage determinations at the national or local level could adversely affect our business and results of operations.

Further, a reduction in coverage by Medicare could cause some commercial third-party payors to implement similar reductions in their coverage or level of reimbursement of the Zio service. Given the evolving nature of the healthcare industry and ongoing healthcare cost reforms, we will continue to be subject to changes in the level of Medicare coverage for its products, and unfavorable coverage determinations at the national or local level could adversely affect its results of operations. Although a large majority of commercial customers have re-contracted the Zio XT service at pre-existing rates since the establishment of the Category I codes on January 1, 2021, if we are unsuccessful in improving the Medicare rates, we believe that commercial rates may begin to be more negatively impacted.

As a result of the CPT code changes that took effect January 1, 2021, the number of claims from the first half of 2021 which contained differences between the submitted price and reimbursement rate and overall denials increased significantly compared to our historical experience as a result of CPT code transition issues with the payors. We continue to work with the payors to collect on these claims and the collection cycle for these claims is significantly longer than usual and may lead to higher write-offs of doubtful accounts for those periods and negatively impact our results of operations.

If we are unable to achieve a level of revenues adequate to support our cost structure, or is unable to reduce our overall cost structure, this would raise substantial doubts about our ability to continue as a going concern.

Controls imposed by CMS and commercial third-party payors designed to reduce costs, commonly referred to as “utilization review”, may affect our operations. Federal law contains numerous provisions designed to ensure that services rendered to CMS patients meet professionally recognized standards and are ~~medicall~~ymedically necessary, appropriate for the specific patient and ~~cost-effective~~.cost-effective. These provisions include a requirement that a sampling of CMS patients must be reviewed by quality improvement organizations, which review the appropriateness of product prescriptions, the quality of care provided, and the appropriateness of reimbursement costs. Quality improvement organizations may deny payment for services or assess fines and also have the authority to recommend to the U.S. Department of Health and Human Services, ~~or DHHS,~~ that a provider which is in substantial noncompliance with the standards of the quality improvement organization be excluded from participation in the Medicare program. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act ~~or Affordable~~(the “Affordable Care ~~Act,~~Act”), potentially expands the use of prepayment review by Medicare contractors by eliminating statutory restrictions on their use, and, as a result, efforts to impose more stringent cost controls are expected to continue. Utilization review is also a requirement of most non-governmental managed care organizations and other third-party payors. To date these controls have not had a significant effect on our operations, but significant limits on the scope of services reimbursed and on reimbursement rates and fees could have a material, adverse effect on our business, financial position and results of operations in the future.

Each state’s Medicaid program has its own coverage determinations related to our services, and some state Medicaid programs do not provide their recipients with coverage for our Zio service. Even if our Zio service is covered by a state Medicaid program, we must be recognized as a Medicaid provider by the state in which the Medicaid recipient receiving the services resides in order for us to be reimbursed by a state’s Medicaid program. Even if we are recognized as a provider in a state, Medicare’s rate for our Zio service may be low, and the Medicaid reimbursement amounts are sometimes as low, or lower, than

the Medicare reimbursement rate. In addition, and as noted above, each state’s Medicaid program has its own coverage determinations related to our Zio service, and many state Medicaid programs do not provide their recipients with coverage for our Zio service. As a result of all of these factors, our Zio service is not reimbursed or only reimbursed at a very low dollar amount by many state Medicaid programs. In some cases, a state Medicaid program’s reimbursement rate for our Zio service might be zero dollars. Additionally, certain states may require Medicaid recipients to pay for part of the Zio Service, and since the recipients of Medicaid are low income individuals, we are often unable to collect any amounts directly from individual recipients of the Zio service covered by Medicaid. Low or zero dollar Medicaid reimbursement rates for our Zio service would have an adverse effect on our business, gross margins and revenues. Most of the Zio services we provide are reimbursed through Medicare or private third party payors and not Medicaid, but if that were to change in the future, or the percentage of Zio services provided to Medicaid recipients were to increase, our gross margins would be adversely affected as a result.

Also, healthcare reform legislation or regulation may be proposed or enacted in the future that may adversely affect such policies and amounts. Changes in the healthcare industry directed at controlling healthcare costs or perceived over-utilization of ambulatory cardiac monitoring products and services could reduce the volume of ~~ZIO Services~~Zio services prescribed by physicians. If more healthcare cost controls are broadly instituted throughout the healthcare industry, the volume of cardiac monitoring solutions prescribed could decrease, resulting in pricing pressure and declining demand for our ~~ZIO Service.~~Zio service. We cannot predict whether and to what extent existing coverage and reimbursement will continue to be available. If physicians, hospitals and clinics are unable to obtain adequate coverage and government reimbursement of the ~~ZIO Service,~~Zio service, they are significantly less likely to use the ~~ZIO Service~~Zio service and our business and operating results would be harmed.

~~The current presidential administration and Congress are expected to attempt to make sweeping changes to the current health care laws. It is uncertain how modification or repeal of~~

In addition, any ~~of the provisions of the Affordable Care Act, including as a result of current and future executive orders and legislative actions, will impact us and the medical device industry as a whole. Any~~ changes to, or repeal of, the Affordable Care Act or its implementing regulations may have a material adverse effect on our results of operations. We cannot predict what other ~~health care~~healthcare programs and regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation in the United States may have on our business.

If third-party commercial payors do not provide any or adequate reimbursement, including as a result of the CMS and MAC reimbursement rates for our Zio XT service, rescind or modify their reimbursement policies or delay payments for our products, including the ~~ZIO Service,~~Zio service, or if we are unable to successfully negotiate reimbursement contracts, our commercial success could be compromised.

We receive a substantial portion of our revenue from third-party private commercial payors, such as medical insurance companies. These commercial payors may reimburse our products, including the ~~ZIO Service,~~Zio service, at inadequate rates, suspend or discontinue reimbursement at any time, impose requirements that may result in a greater number of denied claims, or require or increase co-payments from patients. The recent actions taken by CMS and MACs to reduce the reimbursement rates for use of the Zio XT service by Medicare patients could influence the price that commercial payors are willing to pay for our Zio service. Contracts with commercial payors, which set forth the Zio XT service reimbursement rates for us and prescribing physicians could be terminated or payors could seek to renegotiate them at any time to try to obtain pricing at reduced amounts at or near the Novitas Solutions reimbursement rates. Some payors do not have contracts with us and others that are already in the process of negotiating contracts may look to negotiate lower reimbursement rates for the Zio XT service in response to actions taken by Novitas Solutions. Any such actions could have a ~~negative~~significant and adverse effect on our revenue and the revenue of ~~providers prescribing~~physicians who prescribe our ~~products.~~Zio service. Physicians may not prescribe our ~~products~~Zio service unless payors reimburse a substantial portion of the submitted costs, including the physician’s, hospital’s or clinic’s charges related to the application of certain products, including the ~~ZIO Patch~~Zio monitor and the interpretation of results which may inform a diagnosis. Additionally, certain payors may require that physicians prescribe ~~a Holter monitor as~~another arrhythmia diagnostic monitoring option prior to prescribing the ~~first-line monitoring option.~~Zio service. There is significant uncertainty concerning third-party reimbursement of any new product or service until a contracted rate is established. Reimbursement by a commercial payor may depend on a number of factors, including, but not limited to, a payor’s determination that the prescribed service is:

•not experimental or ~~investigational~~

investigational;

•appropriate for the specific ~~patient~~

patient;

•cost ~~effective~~

effective;

•supported by peer-reviewed ~~publications~~

publications; and

~~advocated~~•accepted and used by ~~key opinion leaders~~

physicians within their provider network.

Since each payor makes its own decision as to whether to establish a policy concerning reimbursement or enter into a contract with us to set the price of reimbursement, seeking reimbursement on a payor-by-payor basis is a time consuming and costly process to which we dedicate substantial resources. If we do not dedicate sufficient resources to establishing contracts with

third-party commercial payors, or continue to validate the clinical value of Zio services through studies and physician adoption, the amount that we are reimbursed for our products may decline, our revenue may become less predictable, and we will need to expend more efforts on a claim-by-claim basis to obtain reimbursement for our products.

A substantial portion of our revenue is derived from third-party commercial payors who have pricing contracts with us, which means that the payor has agreed to a defined reimbursement rate for our ~~products.~~services. These contracts provide a high degree of certainty to us, physicians, clinics and hospitals ~~and clinics~~ with respect to the rate at which our ~~products~~services will be reimbursed. These contracts also impose a number of obligations regarding billing and other matters, and our noncompliance with a material term of such contracts may result in termination of the contract and loss of any associated revenue. We expect to continue to dedicate resources to maintaining compliance with these contracted payors, to ensure payors acknowledge and are aware of the clinical and economic value of our services and the interest on the part of physicians, clinics and hospitals who use our services and participate in their provider networks; however, we can provide no assurance that we will retain any given contractual payor relationship. A loss of these pricing contracts can increase the uncertainty of reimbursement of claims from third-party payors.

A portion of our revenue is derived from third-party commercial payors without such contracts in place. Without a contracted rate, reimbursement claims for our products are often denied upon submission, and we or our billing partner, XIFIN, Inc. (“XIFIN”), ~~or XIFIN,~~ must appeal the denial. The appeals process is time-consuming and expensive, and may not result in full or any payment. In cases where there is no contracted rate for reimbursement it may be more difficult for us to acquire new accounts with physicians, ~~hospitals~~clinics and ~~clinics.~~hospitals. In addition, in the absence of a contracted rate, there is typically a greater out-of-network, co-insurance or co-payment requirement which may result in payment delays or decreased likelihood of full collection. In some cases involving non-contracted insurance companies, we may not be able to collect any amount or only a portion of the invoiced amount for our ~~products.~~

services.

We expect to continue to dedicate ~~significant~~ resources to establishing pricing contracts with non-contracted insurance companies; however, we can provide no assurance that we will be successful in obtaining such pricing contracts or that such pricing contracts will contain reimbursement for our ~~products~~services at rates that are favorable to us. If we fail to establish these contracts, we will be able to recognize revenue only ~~upon the earlier of notification of payor benefits allowed or when payment is received.~~based on an estimated average collection rate per historical cash collections. In addition, XIFIN may need to expend significant resources obtaining reimbursement on a claim-by-claim basis and in adjudicating claims which are denied altogether or not reimbursed at acceptable rates. We currently pay XIFIN a percentage of the amounts it collects on our behalf and this percentage may increase in the future if it needs to expend more resources in adjudicating such claims. We sometimes informally engage physicians, hospitals and clinics to help establish contracts with third-party payors who insure their patients. We cannot provide any assurance that such physicians, hospitals and clinics will continue to help us establish contracts in the future. If we fail to establish contracts with more third-party payors it may adversely affect our ability to increase our revenue. In addition, a failure to enter into contracts could affect a physician’s willingness to prescribe our ~~products~~services because of the administrative work involved in interacting with patients to answer their questions and help them obtain reimbursement for our ~~products.~~services. If physicians are unwilling to prescribe our ~~products~~services due to the lack of certainty and administrative work involved with patients covered by non-contracted insurance companies, or patients covered by non-contracted insurance companies are unwilling to risk that their insurance may charge additional out-of-pocket fees, our revenue could decline or fail to increase.

Our continued rapid growth could strain our personnel resources and infrastructure, and if we are unable to manage the anticipated growth of our business, our future revenue and operating results may be harmed.

We have experienced rapid growth in our headcount and in our operations. Any growth that we experience in the future will provide challenges to our organization, requiring us to expand our sales personnel, manufacturing, clinical, customer care and ~~manufacturing~~billing operations and general and administrative infrastructure. In addition to the need to scale our ~~clinical operations~~operational and service capacity, future growth will impose significant added responsibilities on management, including the need to identify, recruit, train and integrate additional employees. Rapid expansion in personnel could mean that less experienced people manufacture our ~~ZIO Patch,~~Zio monitors, market, sell and ~~sell~~support our ~~ZIO Service~~Zio service, and analyze the data to produce ~~ZIO Reports,~~Zio reports, which could result in inefficiencies and unanticipated costs, reduced quality in either our ~~ZIO Reports~~Zio reports or manufactured devices, and disruptions to our service operations. Additionally, rapid expansion could require us to rely on overtime to increase capacity that could, in turn, result in greater employee attrition and/or a loss in productivity during the process of recruiting and training additional resources and add to our operating expenses.

As we seek to gain greater efficiency, we may expand the automated portion of our ~~ZIO Service~~Zio service and require productivity improvements from our certified ~~cardiac~~cardiographic technicians. Such improvements could compromise the quality of our ~~ZIO Reports.~~Zio reports. In addition, rapid and significant growth may strain our administrative and operational infrastructure. Our ability to manage our business and growth will require us to continue to improve our operational, financial and management controls,

reporting systems and procedures. We recently installed a new Enterprise Resource Planning, or ERP, platform, which is critical to our ability to track our claims processing and the delivery of our ZIO Reports to physicians, as well as to support our financial reporting systems. The time and resources required to optimize these systems are uncertain, and failure to complete optimization in a timely and efficient manner could adversely affect our operations. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our business could be harmed.

If we are unable to support demand for the ~~ZIO Service~~Zio service or any of our future products or services, our business could suffer.

As demand for the ~~ZIO Service~~Zio service or any of our future products or services increases, we will need to continue to scale our manufacturing capacity and algorithm processing technology, expand customer service, billing and systems processes and enhance our internal quality assurance program. We will also need additional certified ~~cardiac~~cardiographic technicians and other personnel to process higher volumes of data. We cannot assure you that, with any increases in scale, ~~related~~required improvements ~~and~~will be successfully implemented, quality assurance will be ~~successfully implemented~~maintained, or that appropriate personnel will be available to facilitate growth of our business. Failure to implement necessary procedures, transition to new processes or hire the necessary personnel could result in higher costs of processing data or inability to meet increased demand. There can be no assurance that we will be able to perform our data analysis on a timely basis at a level consistent with demand, quality standards and physician expectations. If we encounter difficulty meeting market demand, quality standards or physician expectations, our reputation could be harmed and our future prospects and business could suffer.

We plan to introduce new products and services and our business will be harmed if we are not successful in selling these new products and services to our existing customers and new customers

We ~~recently~~have received FDA clearance for our ~~ZIO~~Zio AT ECG Monitoring System, (“Zio AT”), which is designed to provide timely transmission of data during the wear period. ~~We refer to both the ZIO AT ECG Monitoring System, or ZIO AT Patch, and ZIO XT Patch as the ZIO Patch in this Quarterly Report on 10-Q, unless otherwise specified. We~~However, we do not yet know whether ~~the ZIO~~Zio AT ~~ECG Monitoring System~~ or any other new products and services will be well received and broadly adopted by physicians and their patients or whether sales will be sufficient for us to offset the costs of development, implementation, support, operation, sales and marketing. Although we have performed extensive testing of our new products and services, their broad-based implementation may require more support than we anticipate, which would further increase our expenses. Additionally, new products and services may subject us to additional risks of product performance, customer complaints and litigation. If sales of our new products and services are lower than we expect, or if we expend additional resources to fix unforeseen problems and develop modifications, our operating margins are likely to decrease.

~~We have limited experience manufacturing the ZIO Patch in commercial quantities and providing services on a broad scale, which could harm our business.~~

Because we have only limited experience in manufacturing the ZIO Patch in commercial quantities and providing services on a broad scale, we may encounter production or service delays or shortfalls. Such production or service delays or shortfalls may be caused by many factors, including the following:

~~we intend to continue to expand our manufacturing capacity, and our production processes may have to change to accommodate this growth~~

key components of the ZIO Patch are provided by a single supplier or limited number of suppliers, and we do not maintain large inventory levels of these components; if we experience a shortage or quality issues in any of these components, we would need to identify and qualify new supply sources, which could increase our expenses and result in manufacturing delays

~~we may experience a delay in completing validation and verification testing for new controlled environment rooms at our manufacturing facilities~~

we are subject to state and federal regulations, including the FDA’s Quality System Regulation, or the QSR, and the European Union’s, or EU’s, Medical Device Directive, or MDD, for both the manufacture of the ZIO Patch and the provision of the ZIO Service, noncompliance with which could cause an interruption in our manufacturing, distribution and services

~~to increase our manufacturing output significantly and scale our services, we will have to attract and retain qualified employees for our operations~~

If we are unable to keep up with demand for the ZIO Service, our revenue could be impaired, market acceptance for the ZIO Service could be harmed and physicians may instead prescribe our competitors’ products and services. Our inability to successfully manufacture the ZIO Patch in sufficient quantities, or provide the ZIO Service in a timely manner, would materially harm our business.

Our manufacturing facilities and processes and those of our third-party suppliers are subject to unannounced FDA, state , and Notified Body regulatory inspections for compliance with the QSR and MDD requirements. Developing and maintaining a compliant quality system is time consuming and expensive. Failure to maintain compliance with, or not fully complying with the requirements of the FDA and state regulators could result in enforcement actions against us or our third-party suppliers, which could include the issuance of warning letters, adverse publicity, seizures, prohibitions on product sales, recalls and civil and criminal penalties, any one of which could significantly impact our manufacturing supply and provision of services and impair our financial results.

~~We depend on third-party vendors to manufacture some of our components, which could make us vulnerable to supply shortages and price fluctuations that could harm our business.~~

~~We rely on third-party vendors for components used in our ZIO Patch. Our reliance on third-party vendors subjects us to a number of risks, including:~~

~~inability to obtain adequate supply in a timely manner or on commercially reasonable terms~~

~~interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations~~

•

~~production delays related to the evaluation and testing of products from alternative suppliers and corresponding regulatory qualifications~~

~~inability of the manufacturer or supplier to comply with the QSR, MDD and state regulatory authorities~~

~~delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s failure to consistently produce quality components~~

~~price fluctuations due to a lack of long-term supply arrangements with our suppliers for key components~~

~~inability to control the quality of products manufactured by third parties~~

~~delays in delivery by our suppliers due to changes in demand from us or their other customers~~

Any significant delay or interruption in the supply of components or sub-assemblies, or our inability to obtain substitute components, sub-assemblies or materials from alternate sources at acceptable prices and in a timely manner could impair our ability to meet the demand for our ZIO Service and harm our business.

We rely on single suppliers for some of the materials used in our products, and if any of those suppliers are unable or unwilling to produce these materials or supply them in the quantities that we need at the quality we require, we may not be able to find replacements or transition to alternative suppliers before our business is materially impacted.

We rely on single suppliers for the supply of our adhesive ~~substrate,~~sub-assembly, disposable plastic housings, instruments and other materials that we use to manufacture and label our ~~ZIO Patch.~~Zio monitors. These components and materials are critical and, in some cases, there are relatively few alternative sources of supply. We have not qualified additional suppliers for some of these components and materials and we do not carry a significant inventory of these items. While we believe that alternative sources of supply may be available, we cannot be certain whether they will be available if and when we need them and that any alternative suppliers would be able to provide the quantity and quality of components and materials that we would need to manufacture our ~~ZIO Patch~~Zio monitors if our existing suppliers were unable to satisfy our supply requirements. To utilize other supply sources, we would need to identify and qualify new suppliers to our quality standards, which could result in manufacturing delays and increase our expenses. Any supply interruption, such as those that we have experienced during the COVID-19 pandemic, could limit our ability to manufacture our products and could therefore harm our business, financial condition and results of operations. If our current suppliers and any alternative suppliers do not provide us with the materials we need to manufacture our products or perform our services, if the materials do not meet our quality specifications, or if we cannot obtain acceptable substitute materials, an interruption in our ~~ZIO Service~~Zio service could occur. Any such interruption may significantly affect our future revenue and harm our relations and reputation with physicians, hospitals, clinics and patients.

If our manufacturing facility becomes damaged or inoperable, or if we are required to vacate athe facility, we may be unable to manufacture ~~the ZIO Patch~~and ship our Zio monitors, or we may experience delays in production or an increase in costs which could adversely affect our results of operations.

We currently manufacture and assemble the ~~ZIO Patch~~Zio monitors in only one location. Our products are comprised of components sourced from a variety of contract manufacturers, with final assembly completed at our facility in Cypress, California. Our facility and equipment, or those of our suppliers, could be harmed or rendered inoperable by natural or man-made disasters, including fire, earthquake, terrorism, pandemic outbreaks, flooding and power outages. Any of these may render it difficult or impossible for us to manufacture new products, ship assembled products, and/or receive returned units for some period of time. If our Cypress facility is inoperable for even a short period of time, the inability to manufacture, ~~the ZIO Patch,~~ship and receive our Zio monitors, and the interruption in research and development of any future products, may result in harm to our reputation,

increased costs, the loss of orders and lower revenue. Furthermore, it could be costly and time consuming to repair or replace our facilities and the equipment we use to perform our research and development work and manufacture our products.

If we fail to increase our sales and marketing capabilities and develop broad brand awareness in a cost effective manner, our growth will be impeded and our business may suffer.

We plan to continue to expand and optimize our sales and marketing infrastructure in order to increase our prescribing physician base and our business. Identifying and recruiting qualified personnel and training them in the application of the ~~ZIO Service,~~Zio service, on applicable federal and state laws and regulations and on our internal policies and procedures requires significant time, expense and attention. It often takes several months or more before a sales representative is fully trained and productive. Our business may be harmed if our efforts to expand and train our sales force do not generate a corresponding increase in revenue. In particular, if we are unable to hire, develop and retain talented sales personnel or if new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or increase our revenue.

Our ability to increase our customer base and achieve broader market acceptance of our products will depend, to a significant extent, on our ability to expand our marketing efforts. We plan to dedicate significant resources to our marketing programs. Our business may be harmed if our marketing efforts and expenditures do not generate a corresponding increase in revenue.

In addition, we believe that developing and maintaining broad awareness of our brand in a cost effective manner is critical to achieving broad acceptance of the ~~ZIO Service~~Zio service and penetrating new accounts. Brand promotion activities may not generate patient or physician awareness or increase revenue, and even if they do, any increase in revenue may not offset the costs and expenses we incur in building our brand. If we fail to successfully promote, maintain and protect our brand, we may fail to attract or retain the physician acceptance necessary to realize a sufficient return on our brand building efforts, or to achieve the level of brand awareness that is critical for broad adoption of the ~~ZIO Service.~~

Zio service.

Billing for our ~~ZIO Service~~Zio service is complex, and we must dedicate substantial time and resources to the billing process.

Billing for ~~independent diagnostic testing facility, or~~ IDTF services is complex, time consuming and expensive. Depending on the billing arrangement and applicable law, we bill several types of payors, including CMS, third-party commercial payors, institutions and patients, which may have different billing requirements procedures or expectations. We also must bill patient co-payments, co-insurance and deductibles. We face risk in our collection efforts, including potential write-offs of doubtful accounts and long collection cycles, which could adversely affect our business, financial condition and results of operations.

Several factors make the billing and collection process uncertain, including:

•differences between the submitted price for our ~~ZIO Service~~Zio service and the reimbursement rates of ~~payors~~

payors;

•compliance with complex federal and state regulations related to billing ~~CMS~~

CMS;

•differences in coverage among payors and the effect of patient co-payments, co-insurance and ~~deductibles~~

deductibles;

•differences in information and billing requirements among ~~payors~~

payors; and

•incorrect or missing patient history, indications or billing ~~information~~

information.

As a result of the CPT code changes that took effect January 1, 2021, the number of claims from the first half of 2021 which contained differences between the submitted price and reimbursement and overall denials increased significantly compared to our historical experience as a result of CPT code transition issues with the payors. We continue to work with the payors to collect on these claims and the collection cycle for these claims is significantly longer than usual and may lead to higher write-offs of doubtful accounts for those periods and negatively impact our results of operations.

Additionally, our billing activities require us to implement compliance procedures and oversight, train and monitor our employees and undertake internal review procedures to evaluate compliance with applicable laws, regulations and internal policies. Payors also conduct audits to evaluate claims, which may add further cost and uncertainty to the billing process. These billing complexities, and the related uncertainty in obtaining payment for our ~~ZIO Service,~~Zio service, could negatively affect our revenue and cash flow, our ability to achieve profitability, and the consistency and comparability of our results of operations.

The operation of our call centers and monitoring facilities is subject to rules and regulations governing IDTFs; failure to comply with these rules could prevent us from receiving reimbursement from CMS and some commercial payors.

In order to ~~get~~be a participating provider in the Medicare program, and to be reimbursed by CMS under the program, we ~~must establish~~established an ~~IDTF. IDTFs are~~independent diagnostic treatment facility (or “IDTF”). An IDTF is a “provider-type” designation under Medicare, defined by CMS as ~~entities~~an entity(ies) independent of a hospital or physician’s office in which diagnostic tests are performed by licensed or certified nonphysician personnel under appropriate physician supervision. Our IDTFs are staffed by certified ~~cardiac~~cardiographic technicians, who are overseen by a medical director who reviews the accuracy of the data we curate and from which we prepare reports. The existence of an IDTF allows us to bill a government payor for the ~~ZIO Service~~Zio service through one or more MACs, such as Novitas Solutions, Noridian Healthcare Solutions and Palmetto GBA. MACs are companies that operate on behalf of the federal government to process Medicare claims for reimbursement and allow us to obtain reimbursement for our ~~ZIO Service~~Zio service at CMS defined rates. Certification as an IDTF requires that we follow strict regulations governing how the center operates, such as requirements regarding the experience and certifications of the certified ~~cardiac~~cardiographic technicians. In addition, many commercial payors require our IDTFs to maintain accreditation and certification with the Joint Commission of American Hospitals. To do so we must demonstrate a specified quality standard and are subject to routine inspection and audits. These rules and regulations vary from location to location and are subject to change. If they change, we may have to change the operating procedures at our IDTFs, which could increase our costs significantly. If we fail to obtain and maintain IDTF certification, our ~~ZIO Service~~Zio service may no longer be reimbursed by CMS and some commercial payors, which would have a material adverse impact on our business.

~~In 2017,~~

During the first quarter of 2022, we ~~have~~ recognized approximately ~~twelve~~six percent of our revenue from non-contracted third-party payors, and as a result, our quarterly operating results are difficult to predict.

If we do not have a contracted rate with a payor, or have an insufficient or unpredictable history of collections, we recognize revenue only upon the earlier of notification of the payor benefits allowed or when payment is received.

We have limited visibility as to when we will receive payment for our ~~ZIO Service~~Zio service with non-contracted payors and we or XIFIN must appeal any negative payment decisions, which often delay collections further. Additionally, a portion of the revenue from non-contracted payors is received from patient co-pays, which we may not receive for several months following delivery of service or at all. ~~There is currently no predictable payment history for direct-billed~~For revenue related to non-contracted payors, ~~and thus because a reasonable~~we estimate ~~of reimbursement cannot be made, we recognize revenue from such accounts only when we~~an average collection rate based on factors including historical cash collections. Subsequent adjustments, if applicable, are ~~notified of payment or it is received.~~recorded as an adjustment to revenue. Fluctuations in revenue may make it difficult for us, research analysts and investors to accurately forecast our revenue and operating results or to assess our actual performance. ~~When management’s judgement indicates a reasonable estimate of reimbursement can be made we will begin recognizing the revenue on an accrual basis upon delivery.~~ If our revenue or operating results fall below expectations, the price of our common stock would likely decline.

We rely on a third-party billing company, XIFIN, to transmit and pursue claims with payors. A delay in transmitting or pursuing claims could have an adverse effect on our revenue.

While we manage the overall processing of claims, we rely on XIFIN ~~Inc.~~ to transmit substantially all of our claims to payors, and pursue most claim denials. If claims for our ~~ZIO Service~~Zio service are not submitted to payors on a timely basis, not properly adjudicated upon a denial, or if we are required to switch to a different claims processor, we may experience delays in our ability to process receipt of payments from payors, which would have an adverse effect on our revenue and our business.

The market for ambulatory cardiac monitoring solutions is highly competitive. If our competitors are able to develop or market monitoring products and services that are more effective, or gain greater acceptance in the marketplace, than any products and services we develop, our commercial opportunities will be reduced or eliminated.

The market for ambulatory cardiac monitoring products and services is evolving rapidly and becoming increasingly competitive. Our ~~ZIO Service~~Zio service competes with a variety of products and services that provide alternatives for ambulatory cardiac monitoring, including Holter monitors and mobile cardiac telemetry monitors. Our industry is highly fragmented and characterized by a small number of large manufacturers and a large number of smaller regional service providers. These third parties compete with us in marketing to payors and prescribing physicians, recruiting and retaining qualified personnel, acquiring technology and developing products and services that compete with the ~~ZIO Service.~~Zio service. Our ability to compete effectively depends on our ability to distinguish our company and the ~~ZIO Service~~Zio service from our competitors and their products, and includes such factors as:

•safety and ~~efficacy~~

efficacy;

•acute and long term ~~outcomes~~

outcomes;

•ease of ~~use~~

use;

~~price~~

•price;

•physician, hospital and clinic ~~acceptance~~

acceptance; and

•third-party reimbursement.

~~third-party reimbursement~~

Our industry is subject to rapid change and significantly affected by new product introductions, results of clinical research, corporate combinations and other factors. Large competitors in the ambulatory cardiac market include companies that sell standard Holter ~~monitor equipment such as~~monitors including GE Healthcare, Philips Healthcare, Mortara Instrument, Inc., Spacelabs Healthcare Inc. and Welch Allyn Holdings, Inc., ~~which was acquired~~(acquired by Hill-Rom Holdings, Inc.). Additional competitors, ~~who~~such as BioTelemetry, Inc. (acquired by Royal Philips), Preventice Solutions, Inc., (acquired by Boston Scientific, Inc.) and Bardy Diagnostics, Inc., (acquired by Hill-Rom Holdings, Inc. which was recently acquired by Baxter International, Inc.) offer ~~Holter and event monitors,~~ambulatory cardiac monitoring services and also function as service ~~providers, include BioTelemetry, Inc. and Medtronic plc.~~providers. These companies have also developed other patch-based ~~mobile~~ cardiac monitors that have ~~recently~~ received FDA and foreign regulatory clearances. For example, LifeWatch AG, which was subsequently acquired by BioTelemetry in July 2017, received FDA clearance and CE mark for its mobile cardiac telemetry monitoring patch in January 2016 and December 2015, respectively. In addition, in July 2016, BioTelemetry, Inc. announced FDA clearance for its own patch-based mobile cardiac telemetry monitor. There are also several small start-up companies trying to compete in the patch-based cardiac monitoring space, as well as several entering the patch-based cardiac monitoring market. Large medical device companies may continue to acquire or form alliances with these smaller companies in order to diversify their product offering and participate in the digital health space.

We have seen a trend in the market for large medical device companies to acquire, invest in or form alliances with these smaller companies in order to diversify their product offerings and participate in the digital health space. Two examples of this are Medtronic plc’s 2014 acquisition of Corventis, Inc. and Boston Scientific Corporation’s 2015 equity investment and sales cooperation agreement with Preventice Solutions, Inc., which was formerly named eCardio Diagnostics, LLC. Future competition could come from makers of wearable fitness products or large information technology companies focused on improving healthcare. For example, Apple Inc. has added capabilities on its watch platform to measure non-continuous ECG and to alert users to the potential presence of irregular heartbeats suggestive of asymptomatic AF. These competitors and potential competitors may introduce new products and services that more directly compete with our ~~ZIO Service.~~Zio service. Recently, there has been increased acquisition activity and consolidation in our industry. Many of our competitors and potential competitors have significantly greater financial and other resources than we do and have well-established reputations, broader product offerings, and worldwide distribution channels that are significantly larger and more effective than ours. If our competitors and potential competitors are better able to develop new ambulatory cardiac monitoring solutions than us, or develop more effective or less expensive cardiac monitoring solutions, they may render our current ~~ZIO Service~~Zio service obsolete or non-competitive. Competitors may also be able to deploy larger or more effective sales and marketing resources than we currently have. Competition with these companies could result in price cutting, reduced profit margins and loss of market share, any of which would harm our business, financial condition and results of operations.

Our ability to compete depends on our ability to innovate successfully.

The market for medical devices, including the ambulatory cardiac monitoring segment, is competitive, dynamic, and marked by rapid and substantial technological development and product innovation. ~~There~~While there are ~~few~~ barriers that would ~~prevent~~challenge new entrants or existing competitors from developing products that compete directly with ~~ours.~~ours, these barriers can be overcome. Demand for the ~~ZIO Service~~Zio service and future related products or services could be diminished by equivalent or superior products and technologies offered by competitors. If we are unable to innovate successfully, our products and services could become obsolete and our revenue would decline as our customers purchase our competitors’ products and services.

In order to remain competitive, we must continue to develop new product offerings and enhancements to the ~~ZIO Service.~~Zio service. We can provide no assurance that we will be successful in ~~monetizing~~fully recognizing the strategic value of our ~~electrocardiogram, or~~ ECG database, expanding the indications for our ~~ZIO Service,~~Zio service, developing new products or commercializing them in ways that achieve market acceptance. In addition, if we develop new products, sales of those products may reduce revenue generated from our existing products. Maintaining adequate research and development personnel and resources to meet the demands of the market is essential. If we are unable to develop new products, applications or features or improve our algorithms due to constraints, such as insufficient cash resources, high employee turnover, inability to hire personnel with sufficient technical skills or a lack of other research and development resources, we may not be able to maintain our competitive position compared to other companies. Furthermore, many of our competitors devote a considerably greater amount of funds to their research and development programs than we do, and those that do not may be acquired by larger companies that would allocate greater resources to research and development programs. Our failure or inability to devote adequate research and development resources or compete effectively with the research and development programs of our competitors could harm our business.

We have entered into a development agreement with a third party that may not result in the development of commercially viable products or the generation of significant future revenues.

We have entered into a development agreement with Verily Life Sciences LLC (an Alphabet Company, referred to as “Verily”) to develop certain next-generation AF screening, detection, or monitoring products, which involve combining Verily and our technology platforms and capabilities (the “Development Agreement”). As part of the Development Agreement, we paid Verily an up-front fee of $5.0 million in cash, and $4.0 million in milestone payments during the year ended December 31, 2020 with an additional $4.0 million in milestone payments made in January of 2021. Through March 31, 2022, we have achieved milestones and related payment obligations totaling $11.0 million. We have agreed to make additional payments over the term of the Development Agreement up to an aggregate of $1.75 million, subject to the achievement of certain development and regulatory milestones. The success of our collaboration with Verily is highly dependent on the efforts provided to the collaboration by Verily and us and the skill sets of our respective employees. Support of these development efforts requires significant resources, including research and development, manufacturing, quality assurance, and clinical and regulatory personnel. Even if our development and clinical trial efforts succeed, the FDA may not clear the developed products or may require additional product testing and clinical trials before clearing the developed products, which would result in product launch delays and additional expense. If cleared by the FDA, the developed products may not be accepted in the marketplace, and there is no assurance that adequate reimbursement will be available, or that an alternative payment model can be developed.

After the initial term and scope of the Development Agreement, and in order to commercialize any developed products with Verily, we will need to enter into a commercialization agreement. There is no guarantee that we will be able to enter into such an agreement on commercially reasonable terms or at all. If we are unable to reach agreement with Verily on terms, the up-front fee and regulatory and development milestone payments and our internal development costs would not be recovered and the licenses to use Verily’s technology will expire.

This collaboration may not result in the development of products that achieve commercial success and could be terminated prior to developing any products. In the event of any termination or expiration of the Development Agreement, we may be required to devote additional resources to product development and we may face increased competition, including from Verily. Verily may use the experience and insights it develops in the course of the collaboration with us to initiate or accelerate their development of products that compete with our products, which may create competitive disadvantages for us. Accordingly, we cannot provide assurance that our collaboration with Verily or any other third party will result in the successful development of commercially viable products or result in significant additional future revenues for our company.

The continuing clinical acceptance of the ~~ZIO Service~~Zio service depends upon maintaining strong working relationships with physicians.

The development, marketing, and sale of the ~~ZIO Service~~Zio service depends upon our ability to maintain strong working relationships with physicians and other key opinion leaders. We rely on these professionals’ knowledge and experience for the development, marketing and sale of our products. Among other things, physicians assist us in clinical trials and product development matters and provide public presentations at trade conferences regarding the ~~ZIO Service.~~Zio service. If we cannot maintain our strong working relationships with these professionals and continue to receive their advice and input, the development and marketing of the ~~ZIO Service~~Zio service could suffer, which could harm our business, financial condition and results of operations.

The medical device industry’s relationship with physicians is under increasing scrutiny by the Health and Human Services Office of the Inspector General, ~~or OIG,~~(“OIG”), the Department of Justice ~~or DOJ,~~(“DOJ”), state attorneys general, and other foreign and domestic government agencies. Our failure to comply with laws, rules and regulations governing our relationships with physicians, or an investigation into our compliance by the OIG, DOJ, state attorneys general or other government agencies, could significantly harm our business.

We have a significant amount of debt, which may affect our ability to operate our business and secure additional financing in the future.

As of ~~September 30, 2017,~~March 31, 2022, we had ~~$34.4~~$34.9 million ~~in principal and interest~~ outstanding under our ~~credit facilities consisting~~term loan provided by of our loan ~~agreements~~agreement with ~~Pharmakon and SVB and a promissory note issued to California HealthCare Foundation.~~Silicon Valley Bank (“SVB”). We must make significant annual debt payments under the loan ~~agreements and the promissory note,~~agreement which will divert resources from other activities. Our debt with ~~Pharmakon and~~ SVB is collateralized by substantially all of our assets and contains customary financial and operating covenants limiting our ability to, among other things, dispose of assets, undergo a change in control, merge or consolidate, enter into certain transactions with affiliates, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions. The covenants in ~~these~~the loan ~~agreements, the promissory note and the note purchase~~ agreement, ~~pursuant to which the promissory note was issued,~~ as well as in any future financing agreements into which we may enter, may restrict our ability to finance our operations and engage in, expand

or otherwise pursue our business activities and strategies. Our ability to comply with these covenants may be affected by events beyond our control and future breaches of any of these covenants could result in a default under the loan ~~agreements, the promissory note and the note purchase~~ agreement. If not waived, future defaults could cause all of the outstanding indebtedness under the loan ~~agreements and the promissory note~~agreement to become immediately due and payable and terminate commitments to extend further credit. If we do not have or are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, either upon maturity or in the event of a default, we may not be able to obtain additional debt or equity financing on favorable terms, if at all, which may negatively impact our ability to operate and continue our business as a going concern.

We are also exposed to the risk that our earnings and cash flows could be adversely impacted by fluctuations in interest rates. Our policy is to manage interest costs using the mix of fixed- and floating-rate debt, which we cannot guarantee will mitigate the risk of interest rate fluctuation.

We may experience inflationary pressures, caused by the COVID-19 pandemic or as a result of general macroeconomic factors, which could increase our manufacturing costs and operating expenses and have a material adverse impact on our results of operations.

We continuously monitor the effects of inflationary factors, such as increases in our cost of goods sold and selling and operating expenses, which may adversely affect our results of operations. Specifically, we may experience inflationary pressure affecting the cost of the components for our Zio service and in the wages that we pay our employees due to challenging labor market conditions. Competitive and regulatory conditions may restrict our ability to fully recover these costs through price increases. As a result, it may be difficult to fully offset the impact of persistent inflation. Our inability or failure to do so could have a material adverse effect on our business, financial condition and results of operations or cause us to need to obtain additional capital in future earlier than anticipated.

We have recently experienced management turnover, which creates uncertainties and could harm our business.

We have recently experienced significant changes in our executive leadership. In September 2021, we announced the appointment of Quentin S. Blackford, as our President and Chief Executive Officer, effective October 4, 2021. In June 2021, our former Chief Executive Officer, Michael J. Coyle, announced he was resigning and our Chief Financial Officer, Douglas J. Devine, assumed the position of Interim Chief Executive Officer. In December 2020, our prior Chief Executive Officer, Kevin M. King, announced his retirement as our Chief Executive Officer. In June 2020, our Chief Financial Officer, Matthew C. Garrett, announced that he was resigning for personal reasons and in March 2020, our Chief Operating Officer, Karim Karti, resigned.

Changes to strategic or operating goals, which can often times occur with the appointment of new executives, can create uncertainty, may negatively impact our ability to execute quickly and effectively, and may ultimately be unsuccessful. In addition, executive leadership transition periods are often difficult as the new executives gain detailed knowledge of our operations, and friction can result from changes in strategy and management style. Management turnover inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution. If we do not integrate new executives successfully, we may be unable to manage and grow our business, and our financial condition and profitability may suffer as a result. In addition, to the extent we experience additional management turnover, competition for top management is high and it may take months to find a candidate that meets our requirements. If we are unable to attract and retain qualified management personnel, our business could suffer.

We depend on our senior management team and the loss of one or more key employees or an inability to attract and retain highly skilled employees could harm our business.

Our success depends largely on the continued services of key members of our executive management team and others in key management positions. For example, the services of ~~Kevin M. King,~~Quentin S. Blackford, our President and Chief Executive Officer, and ~~Matthew C. Garrett,~~Douglas J. Devine, our Chief Financial Officer and Chief Operating Officer, are essential to formulating and executing on corporate strategy and to ensuring the continued operations and integrity of financial reporting within our company. In addition, the services provided by David A. Vort, our ~~Executive Vice President of Sales,~~Chief Commercial Officer, are critical to the growth that we have experienced in the sales of our ~~ZIO Service.~~Zio service. The services of Patrick Murphy, our Chief Legal Counsel, are critical for managing our legal and compliance functions. The services of Mark Day, our Chief Technology Officer are critical for managing our research and development programs. Our employees may terminate their employment with us at any time. If we lose one or more key employees, we may experience difficulties in competing effectively, developing our technologies and implementing our business strategy. We do not currently maintain key person life insurance policies on these or any of our employees.

In addition, our research and development programs and clinical operations depend on our ability to attract and retain highly skilled engineers and certified ~~cardiac~~cardiographic technicians. We may not be able to attract or retain qualified engineers and

certified ~~cardiac~~cardiographic technicians in the future due to the competition for qualified personnel. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than us. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources and, potentially, damages. In addition, job candidates and existing employees, particularly in the San Francisco Bay Area, often consider the value of the stock awards they receive in connection with their employment. If the perceived value of our stock awards declines, ~~either because we are a public company or otherwise,~~ it may harm our ability to recruit and retain highly skilled employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be harmed.

~~We added two new directors to our board of directors in July 2017, which may lead to changes in our operations.~~

Two new directors were elected to our board of directors on July 17, 2017. One of these directors, Bruce G. Bodaken, served as Chairman and Chief Executive Officer of a payor, and the other director, Dr. Ralph Snyderman, served as founding Chief Executive Officer and President of a provider. Another of our directors has served on our board of directors for less than 18 months. Because of these recent additions, our board of directors has not worked together as a group for an extended period of time. This change in the composition of our board of directors from directors affiliated with financial investors to directors with industry experience may lead to changes in our operations as these new directors analyze our business and contribute to the formulation of business strategies and objectives. If our board of directors does not align on the business strategies and objectives of our company, our operating results could be adversely affected.

International expansion of our business exposes us to market, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.

Our business strategy includes international expansion. Doing business internationally involves a number of risks, including:

•multiple, conflicting and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and ~~licenses~~

licenses;

•obtaining and sustaining regulatory approvals, certifications, and regulatory compliance where required for the sale of our products and services in various ~~countries~~

countries;

•requirements to maintain data and the processing of that data on servers located within such ~~countries~~

countries;

•complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay ~~systems~~

systems;

•logistics and regulations associated with shipping and returning ~~ZIO Patches~~our Zio monitors following ~~use~~

use;

•limits on our ability to penetrate international markets if we are required to process the ~~ZIO Service locally~~

Zio service locally;

•financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the effect of local and regional financial pressures on demand and payment for our products and services and exposure to foreign currency exchange rate ~~fluctuations~~

fluctuations;

•natural disasters, political and economic instability, including wars, terrorism, political unrest, outbreak of disease, boycotts, curtailment of trade and other market ~~restrictions~~

restrictions;

•regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the United States Foreign Corrupt Practices Act of 1977 ~~or FCPA,~~(“FCPA”), U.K. Bribery Act of 2010 and comparable laws and regulations in other ~~countries~~

countries; and

•compliance risks associated with the General Data Protection Regulation (“GDPR”) (including as it applies in the United Kingdom by virtue of the Data Protection Act 2018), enacted to protect the privacy of all individuals in the European Union and the United Kingdom, and places certain restrictions on the export of personally identifiable data outside of the European Union or the United Kingdom, as applicable.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenue and results of operations.

Our relationships with business partners in new international markets may subject us to an increased risk of litigation.

As we expand our business internationally, if we cannot successfully manage the unique challenges presented by international markets and our relationships with new business partners within those markets, our expansion activities may be adversely affected and we may become subject to an increased risk of litigation.

We may become involved in disputes relating to our products, contracts and business relationships. Such disputes include litigation against persons whom we believe have infringed on our intellectual property, infringement litigation filed against us, litigation against a competitor or litigation filed against us by distributors or service providers resulting from a breach of contract or other claim. Any of these disputes may result in substantial costs to us, judgments, settlements and diversion of our management’s attention, which could adversely affect our business, financial condition or operating results. There is also a risk of adverse judgments, as the outcome of litigation in foreign jurisdictions can be inherently uncertain.

We could be adversely affected by violations of the ~~U.S. Foreign Corrupt Practices Act, or~~ FCPA, and similar worldwide anti-bribery laws ~~and the ongoing investigation, and outcome of the investigation, by government agencies of possible violations by us of the FCPA~~which could have a material adverse effect on our business.

The FCPA and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from corruptly providing any benefits to government officials for the purpose of obtaining or retaining business. We are in the process of designing and implementing policies and procedures intended to help ensure compliance with these laws. In the future, we may operate in parts of the world that have experienced governmental corruption to some degree. We cannot assure you that our internal control policies and procedures will protect us from improper acts committed by our employees or agents. Violations of these laws, or allegations of such violations, could disrupt our business and have a material adverse effect on our business and operations.

In addition, the DOJ or other governmental agencies could impose a broad range of civil and criminal sanctions under the FCPA and other laws and regulations including, but not limited to, injunctive relief, disgorgement, fines, penalties, modifications to business practices including the termination or modification of existing business relationships, the imposition of compliance programs and the retention of a monitor to oversee compliance with the FCPA. The imposition of any of these sanctions or remedial measures could have a material adverse effect on our business and results of operations.

Our proprietary data analytics engine may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business and operating results.

The ECG data that is gathered through ~~the ZIO Patch~~our Zio monitors is curated by algorithms that are part of our ~~ZIO Service~~Zio service and a ~~ZIO Report~~Zio report is delivered to the prescribing physician for diagnosis. The continuous development, maintenance and operation of our ~~machine-learned~~deep-learned backend data analytics engine is expensive and complex, and may involve unforeseen difficulties including material performance problems, undetected defects or errors. We may encounter technical obstacles, and it is possible that we may discover additional problems that prevent our proprietary algorithms from operating properly. We may also attempt to develop new capabilities and incorporate new technologies, including artificial intelligence, which could impact our data analytics platform’s performance. If our data analytics platform does not function reliably or fails to meet physician or payor expectations in terms of performance, physicians may stop prescribing the ~~ZIO Service~~Zio service and payors could attempt to cancel their contracts with us.

Any unforeseen difficulties we encounter in our existing or new software, cloud-based applications, telecommunication service providers, and analytics services, and any failure by us to identify and address them could result in loss of revenue or market share, diversion of development resources, injury to our reputation and increased service and maintenance costs. Correction of defects or errors could prove to be impossible or impracticable. The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating results.

Provision of the ~~ZIO Service~~Zio service is dependent upon third-party vendors who are subject to disruptions, which could directly or indirectly harm our business and operating results.

The analysis we perform to create the diagnostic report for the ~~ZIO XT Service and the final report for the ZIO AT Service~~Zio service is dependent upon a recording made by each device, which requires the physical return of the ~~ZIO Patch~~Zio monitor to one of our clinical centers. We predominantly rely on the U.S. Postal Service ~~or USPS,~~(“USPS”) to perform this delivery service. Delivery of the ~~ZIO Patch~~Zio monitor to one of our clinical centers may be subject to disruption by natural disasters such as earthquake or flooding, labor disagreements or errors on behalf of USPS staff, operational and funding reductions negatively impacting USPS service capabilities, structural issues timely processing in some geographies, or other disruption to the USPS delivery infrastructure. Further, for the ~~ZIO~~Zio AT ~~Service,~~monitor, we rely on the provision of cellular communication services for the timely transmission of patient information and reportable events. ~~These~~Once received, all data from both Zio XT and AT monitors is processed, curated and reported on through cloud-computing resources. The reliability of these communication and cloud services ~~are~~is also subject to natural disasters, labor disruptions, human error, and infrastructure failure.

Any of these disruptions may render it difficult or temporarily impossible for us to provide some or all of the ~~ZIO Service,~~Zio service, adversely affecting our operating results, causing significant distraction for management, and negatively impacting our business reputation.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or patients, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we and our third-party billing and collections provider, XIFIN, collect, process, and store sensitive data, including legally-protected personally identifiable health information about patients in the United States and in the United Kingdom. This personally identifiable information may include, among other information, names, addresses, phone numbers, email addresses, insurance account information, age, gender, and heart rhythm data. We also process and store, and use additional third parties to process and store, sensitive intellectual property and other proprietary business information, including that of our customers, payors and collaborative partners. ~~Our patient information is encrypted but not de-identified.~~ We manage and maintain our applications and data utilizing a combination of on-site systems, managed data center systems and cloud-based computing center systems. These applications and data encompass a wide variety of business critical information, including research and development information, commercial information and business and financial information.

We are highly dependent on information technology networks and systems, including the internet and services hosted by Amazon Web Services and other third party service providers, to securely process, transmit and store this critical information. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns, or unauthorized disclosure or modifications of confidential information involving patient health information to become publicly available. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such ~~information.~~information, including executing Business Associates Agreements (HIPAA) and Data Processing Agreements (UK GDPR) with applicable vendors. Although we take measures to protect sensitive information from unauthorized access or disclosure, cyber-attacks are becoming more sophisticated and frequent, and our information technology and infrastructure, and that of XIFIN and other third parties we utilize to process or store data, may be vulnerable to viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, attacks by hackers, ~~or viruses or~~ breaches due to employee error, malfeasance, or ~~other disruptions.~~misuse, or similar disruptions from unauthorized tampering. We have in the past been subject to cyber-attacks and data breaches and expect that we will be subject to additional cyber-attacks in the future and may experience future data breaches. While we have implemented data privacy and security measures that we believe are compliant with applicable privacy laws and regulations, some confidential and protected health information, ~~or PHI,~~ is transmitted to us by third parties, who may not implement adequate security and privacy measures.

Further, if third party service providers that process or store data on our behalf experience security breaches or violate applicable laws, agreements, or our policies, such events may also put our information at risk and could in turn have an adverse effect on our business.

A security breach or privacy violation that leads to disclosure or modification of, or prevents access to, patient information, including protected health information, could harm our reputation, compel us to comply with disparate state breach notification laws, require us to verify the correctness of database contents and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures in a timely manner, the market perception of the effectiveness of our security measures could be harmed, our operations could be disrupted, our brand could be adversely affected, demand for our products and services may decrease, we may be unable to provide the ~~ZIO Service~~Zio service, we may lose sales and customers, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive patient data. We may be required to expend significant capital and financial resources to invest in security measures, protect against such threats or to alleviate problems caused by breaches in security. In addition, these breaches and other inappropriate or unauthorized access can be difficult to detect, and any delay in identifying them may lead to increased ~~harm.~~

harm to individuals. Although we have invested in our systems and the protection of our data to reduce the risk of an intrusion or interruption, and we monitor our systems on an ongoing basis for any current or potential threats, we can give no assurances that these measures and efforts will prevent all intrusions, interruptions, or breakdowns.

Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched, we may be unable to anticipate these techniques or to implement adequate preventive measures.

In the event that patients or physicians authorize or enable third parties to access their data on our systems, we cannot ensure the complete integrity or security of such data in our systems as we would not control that access. Third parties may also attempt to fraudulently induce our employees, or patients or physicians who use our technology, into disclosing sensitive information such as user names, passwords or other information. Third parties may also otherwise compromise our security measures in order to gain unauthorized access to the information we store. This could result in significant legal and financial exposure, a loss in confidence in the security of our service, interruptions or malfunctions in our service, and, ultimately, harm to our future business prospects and revenue.

Any such breach or interruption of our systems, or those of XIFIN or any of our ~~third-party~~third party information technology partners, could compromise our networks or data security processes and sensitive information could be inaccessible or could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such interruption in access, improper access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of patient information, such as the federal Health Insurance Portability and Accountability Act of 1996, or ~~HIPAA,~~("HIPAA"), the General Data Protection Regulation, and the ~~European Union~~UK Data Protection ~~Directive,~~Act 2018. Regardless of the merits of any such claim or proceeding, defending it could be costly and ~~regulatory penalties.~~divert management’s attention from leading our business. Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to perform our services, bill payors or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our current and future solutions and engage in other patient and clinician education and outreach efforts. Any such breach could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our business and competitive position.

Depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to or acquisition of our customer, employee and patient data, we may also have obligations to notify users about the incident and we may need to provide some form of remedy for the individuals affected by the incident. A growing number of legislative and regulatory bodies have adopted consumer notification requirements in the event of unauthorized access to or acquisition of certain types of personal data. Such breach notification laws continue to evolve and may be inconsistent from one jurisdiction to another. Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises personal data within our control (such as that of customers, patients and employees). In addition, the interpretation and application of consumer, health-related and data protection laws, rules and regulations in the United States, ~~Europe~~the UK, European Union and elsewhere are often uncertain, contradictory and in flux. It is possible that these laws, rules and regulations may be interpreted and applied in a manner that is inconsistent with our practices or those of our distributors and partners. If we or these third parties are found to have violated such laws, rules or regulations, it could result in government-imposed fines, orders requiring that we or these third parties change our or their practices, or criminal charges, which could adversely affect our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business.

In addition, California has enacted the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020, and requires, among other things, disclosures to California consumers and afford such consumers abilities to opt out of certain sales of their personal information by us. It remains unclear how various provisions of the CCPA will be interpreted and enforced. The effects of the CCPA are potentially significant and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply with this legislation.

The use, misuse or off-label use of the ~~ZIO Service~~Zio service may result in injuries that lead to product liability suits, which could be costly to our business.

The use, misuse or off-label use of the ~~ZIO Service~~Zio service may in the future result in outcomes and complications potentially leading to product liability claims. For example, we are aware that physicians have prescribed the ~~ZIO Patch~~Zio service off-label for pediatric patients. We have also received and may in the future receive product liability or other claims with respect to the ~~ZIO Service,~~Zio service, including claims related to skin irritation and alleged burns. In addition, if the ~~ZIO Patch~~Zio monitor is defectively designed, manufactured or labeled, contains defective components or is misused, we may become subject to costly litigation initiated by physicians, or the hospitals and clinics where physicians prescribing our ~~ZIO Service~~Zio service work, or their patients. Product liability claims are especially prevalent in the medical device industry and could harm our reputation, divert management’s attention from our core business, be expensive to defend and may result in sizable damage awards against us.

Although we maintain product liability insurance, we may not have sufficient insurance coverage for future product liability claims. We may not be able to obtain insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilities. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, harm our reputation, significantly increase our expenses, and reduce product sales. Product liability claims in excess of our insurance coverage would be paid out of cash reserves, harming our financial condition and operating results.

Our forecasts of market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not increase at similar rates, if at all.

Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. Our forecasts relating to, among other things, the expected growth in the ambulatory cardiac monitoring solutions market may prove to be inaccurate.

Our growth is subject to many factors, including whether the market for first-line ambulatory cardiac monitoring solutions continues to improve, the rate of market acceptance of the ~~ZIO Service~~Zio service as compared to the products of our competitors and our success in implementing our business strategies, each of which is subject to many risks and uncertainties. If our ~~ZIO Service~~Zio service works as anticipated to provide a correct first-line diagnosis, it may lead to a decrease in the amount of ambulatory cardiac monitoring prescriptions each year in the United States. This outcome would result if our ~~ZIO Service~~Zio service is proven to produce the right diagnosis the first time, thereby reducing the need for additional testing. Accordingly, our forecasts of market opportunity should not be taken as indicative of our future growth.

We may acquire other companies or technologies, or enter into joint ventures or other strategic alliances, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

We may in the future seek to acquire or invest in businesses, applications or technologies that we believe could complement or expand our ambulatory cardiac monitoring solutions portfolio, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various costs and expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated. We may not be able to identify desirable acquisition targets or be successful in entering into an agreement with any particular target or obtain the expected benefits of any acquisition or investment.

In addition, any of these transactions could be material to our financial condition and operating results and expose us to many risks, including:

•disruption in our relationships with existing strategic partners or suppliers as a result of such a transaction;

•unanticipated liabilities related to acquired companies;

•difficulties integrating acquired personnel, technologies and operations into our existing business;

•retention of key employees;

•diversion of management time and focus from operating our business to management of strategic alliances or joint ventures or acquisition integration challenges;

•increases in our expenses and reductions in our cash available for operations and other uses;

•possible write-offs or impairment charges relating to acquired businesses; and

•possible compliance, regulatory, or product issues.

To date, the growth of our operations has been largely organic, and we have limited experience in acquiring other businesses or ~~technologies. We may not be able to successfully integrate acquired personnel, operations and~~ technologies or ~~effectively manage the combined business following an acquisition.~~entering into joint ventures or strategic alliances. Acquisitions, joint ventures or strategic alliances could also result in dilutive issuances of equity securities, the use of our available cash, or the incurrence of debt, which could harm our operating results. In addition, if an acquired business, joint venture or strategic alliance fails to materialize or fails to meet our expectations, our operating results, business and financial condition may suffer.

Consolidation of commercial payors could result in payors eliminating coverage or reducing reimbursement rates for our ~~ZIO Service.~~

Zio service.

When payors combine their operations, the combined company may elect to reimburse our ~~ZIO Service~~Zio service at the lowest rate paid by any of the participants in the consolidation or use its increased size to negotiate reduced rates. If one of the payors participating in the consolidation does not reimburse for the ~~ZIO Service~~Zio service at all, the combined company may elect not to reimburse for the ~~ZIO Service,~~Zio service, which would adversely impact our operating results. While ~~recent~~ attempts by Aetna Inc. to acquire Humana Inc. and Anthem Inc. to acquire Cigna Corp. have been largely abandoned due to antitrust challenges by the DOJ, it is possible that these or other payor consolidations may occur in the future.

Our ability to utilize our net operating loss carryovers may be limited.

As of December 31, ~~2016,~~2021, we had federal and state net operating loss carryforwards ~~or NOLs,~~(“NOLs”) of ~~$104.6~~$464.3 million and ~~$58.6~~$279.1 million, respectively, which if not utilized will begin to expire in 2027 for federal purposes and ~~2017~~have begun expiring for state purposes. We may use these NOLs to offset against taxable income for U.S. federal and state income tax purposes. However, Section 382 of the Internal Revenue Code, ~~of 1986,~~ as amended, may limit the NOLs we may use in any year for U.S. federal income tax purposes in the event of certain changes in ownership of our company. A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points (by value) over their lowest ownership percentage within a rolling three year period. Similar rules may apply under state tax laws. Future issuances or sales of our stock, including certain transactions involving our stock that are outside of our control, could cause an “ownership change.” If an “ownership change” has occurred in the past or occurs in the future, Section 382 would impose an annual limit on the amount of pre-ownership change NOLs and other tax attributes we can use to reduce our taxable income, potentially increasing and accelerating our liability for income taxes, and also potentially causing those tax attributes to expire unused. Any limitation on using NOLs could, depending on the extent of such limitation and the NOLs previously used, result in our retaining less cash after payment of U.S. federal and state income taxes during any year in which we have taxable income, rather than losses, than we would be entitled to retain if such NOLs were available as an offset against such income for U.S. federal and state income tax reporting purposes, which could adversely impact our operating results.

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decrease.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal controls over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. Section 404 of the Sarbanes-Oxley Act, or Section 404, requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. As an “emerging growth company,” we avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404.

We ~~will no longer be able to take advantage of this exemption beginning on December 31, 2017, when we will be deemed~~have identified a large accelerated filer and, as a result, cease to be an “emerging growth company.” When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements.

Section 404 also requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the year ending December 31, 2017, provide a management report on our internal control over financial reporting along with auditor attestation. If we have material ~~weaknesses~~weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements.

We are responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act. As disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022, we ~~may~~identified a material weakness in our internal control over financial reporting. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not ~~detect errors~~be prevented or detected on a timely ~~basis~~basis. As a result of this material weakness, we concluded that our internal control over financial reporting was not effective based on criteria set forth by the Committee of Sponsoring Organization of the Treadway Commission in Internal Control-An Integrated Framework (2013).

To implement remedial measures as disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022, we committed additional resources, hired additional staff, and provided additional management oversight. If our ~~financial statements may be materially misstated.~~ Weremedial measures are ~~implementing~~insufficient to address the process and documentation necessary to perform the evaluation needed to comply with Section 404, but we may not be able to complete our evaluation, testing and any required remediation in a timely fashion.

~~During the evaluation and testing process, if we identify one or more~~ material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our ~~management will be unable to conclude that our internal control over~~consolidated financial ~~reporting is effective. Moreover, when~~statements may contain material misstatements, and we ~~are no longer an emerging growth company, our independent registered public accounting firm will~~could be required to ~~issue an attestation report on the effectiveness of~~restate our ~~internal control over~~ financial reporting. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.

~~If we identify material weaknesses in our internal control over financial reporting,~~results. In addition, if we are unable to ~~comply with~~successfully remediate the ~~requirements of Section 404 in a timely manner,~~material weakness that continues to exist and if we are unable to ~~conclude that~~produce accurate and timely financial statements, our internal control over financial reporting is effective, or when we are no longer an emerging growth company if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting because we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures, which could cause thestock price of our common stock to decline. Internal control deficiencies could also result in a restatement of our financial results in the future. We could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission, or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions or other remedies.

may be adversely affected.

Risks Related to Our Intellectual Property

We may become a party to intellectual property litigation or administrative proceedings that could be costly and could interfere with our ability to provide the ~~ZIO Service.~~

Zio service.

The medical device industry has been characterized by extensive litigation regarding patents, trademarks, trade secrets, and other intellectual property rights, and companies in the industry have used intellectual property litigation to gain a competitive advantage. It is possible that U.S. and foreign patents and pending patent applications or trademarks controlled by third parties, especially those held by our competitors, may be alleged to cover our products or services, or that we may be accused of misappropriating third parties’ trade secrets. Additionally, our products include hardware and software components that we purchase from vendors, and may include design components that are outside of our direct control. Our competitors, many of which have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, trademarks, and competing technologies, may have applied for or obtained, or may in the future apply for or obtain, patents or trademarks that will prevent, limit or otherwise interfere with our ability to make, use, sell and/or export our products and services or to use product names. Moreover, in recent years, individuals and groups that are non-practicing entities, commonly referred to as “patent trolls,” have purchased patents ~~and~~or otherwise obtained rights to other intellectual property assets for the purpose of making claims of infringement in order to extract settlements. From time to time, we may receive threatening letters, notices or “invitations to license,” or may be the subject of claims that our products and business operations infringe or violate the intellectual property rights of others. The defense of these matters can be ~~time consuming,~~time-consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand, and cause us to incur significant expenses or make

substantial payments to satisfy judgments or settle claims. Vendors from ~~whom~~which we purchase hardware or software may not indemnify or defend us in the event that such hardware or software is accused of infringing a third-party’s patent or trademark or of misappropriating a third-party’s trade ~~secret.~~

secrets.

Further, if such patents, trademarks, or trade secrets are successfully asserted against us, this may harm our business and result in injunctions preventing us from selling our products, license fees, damages and the payment of ~~attorney~~attorney’s fees and court costs. In addition, if we are found to have willfully ~~infringe~~infringed third-party patents or trademarks or to have misappropriated trade secrets, we could be required to pay treble damages in addition to other penalties. Although patent, trademark, trade secret, and other intellectual property disputes in the medical device and services area have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. We may be unable to obtain necessary licenses on satisfactory terms, if at all. If we do not obtain necessary licenses, we may not be able to redesign our ~~ZIO Patch~~Zio monitors or our ~~ZIO Service~~Zio service to avoid infringement and our product development efforts may be negatively affected as a result.

Similarly, interference or derivation proceedings provoked by third parties or brought by the U.S. Patent and Trademark Office ~~or USPTO,~~(“USPTO”) may be necessary to determine priority with respect to our patents, patent applications, trademarks or trademark applications. We may also become involved in other proceedings, such as reexamination, inter partes review, derivation or opposition proceedings before the USPTO or other jurisdictional body relating to our intellectual property rights or the intellectual property rights of others. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing the ~~ZIO Patch~~Zio monitors and selling the ~~ZIO Service~~Zio service or using product names, which would have a significant adverse impact on our business.

Additionally, we may need to commence proceedings against others to enforce our patents or trademarks, to protect our trade secrets or know how, or to determine the enforceability, scope and validity of the proprietary rights of others. These proceedings would result in substantial expense to us and significant diversion of effort by our technical and management personnel. We may not prevail in any lawsuits that we initiate, a scenario that could also result in the invalidation of our asserted patents, and the damages or other remedies awarded, if any, may not be commercially meaningful. We may not be able to stop a competitor from marketing and selling products that are the same or similar to our products and services or from using product or service names that are the same or similar to ours, and our business may be harmed as a result.

We use certain open source software in the ~~ZIO Service. We~~infrastructure supporting the Zio service. Licensees of open source software may be required to make public and use certain source code, to license proprietary software for free or to make certain derivative works available to others. As a result, we may face claims from companies that incorporate open source software into their products or from open source licensors, claiming ownership of, or demanding release of, the source code, the open source software or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to cease offering the ~~ZIO Service~~Zio service unless and until we can re-engineer it to avoid infringement. This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. While we monitor and control the use of open source software in the Zio service and in any third party software that is incorporated into the Zio service, and we try to ensure that no open source software is used in such a way as to require us to disclose the source code underlying the Zio service, there can be no guarantee that such use could not inadvertently occur. These risks could be difficult to eliminate or manage, and, if not addressed, could harm our business, intellectual property protection, financial condition and operating results.

Intellectual property rights may not provide adequate protection, which may permit third parties to compete against us more effectively.

In order to remain competitive, we must develop and maintain protection of the proprietary aspects of our technologies. We rely on a combination of patents, copyrights, trademarks, trade secret laws and confidentiality and invention assignment agreements with employees and third parties to protect our intellectual property rights. As of ~~September 30, 2017,~~December 31, 2021, we owned, or retained exclusive license to, ~~nine~~twenty-three issued U.S. patents, the earliest of which will expire in 2028. As of ~~September 30, 2017,~~December 31, 2021, we also owned, or retained an exclusive license to, eight issued patents from the Japanese Patent Office, two issued patents from the Australian Patent Office, four issued patents from the Canadian Patent Office, five issued patents from the European Patent Office, three issued patents ~~in Japan, two in each of Canada and Australia,~~from the Korean Patent Office, and one ~~in each of~~issued patent from the ~~European Union and Korea.~~Chinese Patent Office. The earliest expiration date of these international patents is 2027. As of ~~September 30, 2017,~~December 31, 2021, we had ~~twenty~~twenty-six pending patent applications globally, including ~~four~~twelve in the United States, ~~one in Australia, two in Canada, one in China, five~~three in the European ~~Union, one in India,~~Patent Office, four in Japan, three Patent Cooperation Treaty (“PCT”) international applications, and ~~two~~one in ~~Korea.~~each of Australia, Korea, China and India. Our patents and patent applications ~~include claims~~are directed to covering key aspects of the design, manufacture and use of the ~~ZIO Patch~~Zio monitor and the ~~ZIO Service.~~

Zio service.

We rely, in part, on our ability to obtain and maintain patent protection for our proprietary products and processes. The process of applying for and obtaining a patent is expensive, ~~time consuming~~time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patent applications at a reasonable cost, in a timely manner, or in all jurisdictions where protection may be commercially advantageous, or we may not be able to protect our proprietary rights at all. Despite our efforts to protect our proprietary rights, unauthorized parties may be able to obtain and use information that we regard as proprietary. In addition, the issuance of a patent does not ensure that it is valid or enforceable, so even if we obtain patents, they may not be valid or enforceable against third parties. Our patent applications may not result in issued patents and our patents may not be sufficiently broad to protect our technology. Issued international patents may carry a requirement to “work” a patent in the applicable geography; failure to do so could lead to loss of the patent or the requirement to accept licensing terms, both of which would be favorable to our competitors. Furthermore, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that could prevent us from marketing our own products and practicing our own technology. Alternatively, third parties may seek approval to market their own products similar to or otherwise competitive with our products. In these circumstances, we may need to defend and/or assert our patents, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or agency with jurisdiction may find our patents invalid or unenforceable; competitors may then be able to market products and use manufacturing and analytical processes that are substantially similar to ours. Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.

Litigation is time-consuming and expensive and would divert our resources.

If we are unable to protect the confidentiality of our trade secrets and other proprietary information, our business and competitive position may be harmed.

We rely heavily on trade secrets as well as invention assignment and confidentiality provisions that we have in contracts with our employees, consultants, collaborators and others to protect our algorithms and other aspects of our ~~ZIO Service.~~Zio service. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by consultants, vendors or former or current employees, despite the existence generally of these confidentiality agreements and other contractual restrictions. These agreements may not provide meaningful protection for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information. There can be no assurance that employees, consultants, vendors and clients have executed such agreements or have not breached or will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors. Despite the protections we do place on our intellectual property, monitoring unauthorized use and disclosure of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be adequate. In addition, the laws of many foreign countries will not protect our intellectual property rights to the same extent as the laws of the United States. Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology.

We may also employ individuals who were previously or are concurrently employed at research institutions or other medical device companies, including our competitors or potential competitors. We may be subject to claims that these employees, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former or concurrent employers, or that patents and applications we have filed to protect inventions of these employees, even those related to one or more of our products, are rightfully owned by their former or concurrent employer. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

To the extent our intellectual property protection is incomplete, we are exposed to a greater risk of direct competition. A third party could, without authorization, copy or otherwise obtain and use our products or technology, or develop similar technology. Our competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts or design around our protected technology. Our failure to secure, protect and enforce our intellectual property rights could substantially harm the value of our ~~ZIO Service,~~Zio service, brand and business. The theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our products and harm our business, the value of our investment in development or business acquisitions could be reduced and third parties might make claims against us related to losses of their confidential or proprietary information. Any of the foregoing could materially and adversely affect our business.

Further, it is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and nondisclosure provisions. If we fail to obtain or maintain trade secret protection, or if our competitors obtain our trade secrets or independently develop technology similar to ours or competing technologies, our competitive market position could be materially and adversely affected. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets, and agreement terms that address non-competition are difficult to enforce in many jurisdictions, and might not be enforceable in certain cases.

If our trademarks and tradenames are not adequately protected, then we may not be able to build name recognition in our markets and our business may be adversely affected.

We rely on trademarks, service marks, ~~tradenames~~trade names and brand names, such as our registered trademark “ZIO,” to distinguish our products from the products of our competitors, and have registered or applied to register these trademarks. We cannot assure you that our trademark applications will be approved. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in proceedings before the USPTO and in proceedings before comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources towards advertising and marketing new brands. Further, we cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks. Additionally, we ~~do not own any registered trademarks for the mark “IRHYTHM” and we~~ are aware of at least one ~~third-party~~third party that has registered the “IRHYTHM” mark in the ~~United States, the~~ European Union ~~and Taiwan~~ in connection with computer software for controlling and managing patient medical information, heart rate monitors, and heart rate monitors to be worn during moderate exercise, among other uses. We and the third party are involved in adversary proceedings before the Trademark ~~Offices~~Office in ~~the United States and~~ the European Union, and those proceedings could impact our ability to ~~register~~obtain a European Union trade mark registration for the “IRHYTHM” mark, although we already own many national registrations for IRHYTHM in those jurisdictions. It is possible that the third-party could bring suit against us claiming infringement of the “IRHYTHM” mark, and if it did so and if there were a court determination against us, we might then be obligated to pay monetary damages, enter into a license agreement, or cease use of the “IRHYTHM” name and mark, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Europe.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our existing and future products.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. In 2011, the Leahy-Smith America Invents Act ~~or the~~ (“Leahy-Smith ~~Act,~~Act”) was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and also may affect patent litigation. These also include provisions that switched the United States from a “first-to-invent” system to a “first-to-file” system, allow third-party submission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTO, administered post grant proceedings. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective in 2013. Under the new post grant provisions of the Leahy-Smith Act, the USPTO introduced procedures that provide additional administrative pathways for third parties to challenge issued patents. Inter partes review ~~or IPR,~~(“IPR”) is one of these procedures. The number of IPR challenges filed is increasing, and in many cases, the USPTO is canceling or significantly narrowing issued patent claims. Accordingly, even if a patent is granted by the USPTO, there is risk that it may not withstand an IPR challenge. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement and defense of our patents and applications. Furthermore, the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Recent case law has increased uncertainty regarding the availability of patent protection for certain technologies and the costs associated with obtaining patent protection for those technologies. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In particular, the 2014 decision by the U.S. Supreme Court in Alice Corp. v. CLS Bank International has increased the ~~difficultly~~difficulty of obtaining new software patents and enforcing existing software patents. Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future.

Risks Related to Government Regulation

Changes in the regulatory environment may constrain or require us to restructure our operations, which may harm our revenue and operating results.

Healthcare laws and regulations change frequently and may change significantly in the future. We may not be able to adapt our operations to address every new regulation, and new regulations may adversely affect our business. We cannot assure you that a review of our business by courts or regulatory authorities would not result in a determination that adversely affects our revenue and operating results, or that the healthcare regulatory environment will not change in a way that restricts our operations. In addition, there is risk that the U.S. Congress may implement changes in laws and regulations governing healthcare service providers, including measures to control costs, or reductions in reimbursement levels, which may adversely affect our business and results of operations.

Government payors, such as CMS, as well as insurers, have increased their efforts to control the cost, utilization and delivery of healthcare services. From time to time, the U.S. Congress has considered and implemented changes in the CMS fee schedules in conjunction with budgetary legislation. Further reductions of reimbursement by CMS for services or changes in policy regarding coverage of tests or other requirements for payment, such as prior authorization or a physician or qualified practitioner’s signature on test requisitions, may be implemented from time to time. Reductions in the reimbursement rates and changes in payment policies of other third-party payors may occur as well. Similar changes in the past have resulted in reduced payments as well as added costs and have added more complex regulatory and administrative requirements. For example, on January 29, 2021, Novitas Solutions, a MAC that we, physicians and hospitals rely on to process Medicare reimbursement claims related to our Zio service recently published reimbursement rates that were considerably lower than those than expected. On January 10, 2022, Novitas Solutions published rates for 2022 that were retroactive to January 1, 2022 and replaced the rates that it had published in 2021. These revised rates were higher than the rates posted in 2021, but continue to be significantly below the historical Medicare rates for our Zio XT service. Further changes in federal, state, local and third-party payor regulations or policies may have a material adverse impact on our business. Actions by agencies regulating insurance or changes in other laws, regulations, or policies may also have a material adverse effect on our business.

If we fail to comply with healthcare and other governmental regulations, we could face substantial penalties and our business, results of operations and financial condition could be adversely affected.

The products and services we offer are highly regulated, and there can be no assurance that the regulatory environment in which we operate will not change significantly and adversely in the future. Our arrangements with physicians, hospitals and clinics may expose us to broadly applicable fraud and abuse and other laws and regulations that may restrict the financial arrangements and relationships through which we market, sell and distribute our products and services. Our employees, consultants, and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements. Federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation:

•federal and state laws and regulations regarding billing and claims payment applicable to our ~~ZIO Service~~Zio service and regulatory agencies enforcing those laws and ~~regulations~~

regulations;

•the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the CMS ~~programs~~

programs;

•the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal ~~government~~

government;

•federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare ~~matters~~

matters;

•the FCPA, the U.K. Bribery Act of 2010, and other local anti-corruption laws that apply to our international ~~activities~~

activities;

•the federal Physician Payment Sunshine Act, or Open Payments, created under the Affordable Care Act, and its implementing regulations, which requires manufacturers of drugs, medical devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the ~~DHHS,~~U.S. Department of Health and Human Services, information related to payments or other transfers of value made to licensed physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family ~~members~~

members;

•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information; HIPAA also created criminal liability for knowingly and willfully falsifying or concealing a material fact or making a materially false statement in connection with the delivery of or payment for healthcare benefits, items or ~~services~~

•

~~the federal physician self-referral prohibition, commonly known as the Stark Law~~

services;

•The E.U. General Data Protection Regulation and the U.K. Data Protection Act 2018, which each provide legal requirements for the handling and disclosure (including across borders) of personal data collected in the European Union and the United Kingdom, respectively;

•the federal physician self-referral prohibition, commonly known as the Stark Law;

•the FDA’s Code of Federal Regulations, including but not limited to, 21 CFR Parts 820, 803, 806, and 801 that outlines requirements for medical device design, manufacturing, labeling, distribution, and post-market surveillance requirements;

•the European Union’s Medical Device Directives and Medical Device Regulations (“EU MDR”) that outline requirements for medical device CE marking;

•the United Kingdom’s Medical Device Regulations which, post the United Kingdom’s withdrawal from the European Union, replaces the CE marking requirement for medical devices sold in the United Kingdom with a UK Conformity Assessment (UKCA) mark; and

•state law equivalents of each of the above U.S. 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 state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance ~~efforts~~

efforts.

The Affordable Care Act was enacted in 2010. The Affordable Care Act, among other things, amends the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible that some of our activities could be subject to challenge under one or more of such laws. Any action brought against us for violations of these laws or regulations, even successfully defended, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. We may be subject to private “qui tam” actions brought by individual whistleblowers on behalf of the federal or state governments, with potential liability under the federal False Claims Act including mandatory treble damages and significant per-claim penalties, ~~currently set at $10,957~~which were increased to ~~$21,916~~$11,665 to $23,331 per false ~~claim.~~

claim in 2020.

Although we have adopted policies and procedures designed to comply with these laws and regulations and conduct internal reviews of our compliance with these laws, our compliance is also subject to governmental review. The growth of our business and sales organization and our expansion outside of the United States may increase the potential of violating these laws or our internal policies and procedures. The risk of our being found in violation of these or other laws and regulations is further increased by the fact that many have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action brought against us for violation of these or other laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If our operations are found to be in violation of any of the federal, state and foreign laws described above or any other current or future fraud and abuse or other healthcare laws and regulations that apply to us, we may be subject to penalties, including significant criminal, civil, and administrative penalties, damages, fines, imprisonment, for individuals, exclusion from participation in government programs, such as Medicare and Medicaid, and we could be required to curtail or cease our operations. Any of the foregoing consequences could seriously harm our business and our financial results.

If we fail to obtain and maintain necessary regulatory clearances or approvals for the ~~ZIO Patch~~Zio monitors and ~~ZIO Service,~~Zio service, or if clearances or approvals for future products and indications are delayed or not issued, our commercial operations would be harmed.

The ~~ZIO Patch~~Zio monitors, including the associated software and ~~ZIO Service~~algorithm, and the Zio service are subject to extensive regulation by the FDA in the United States, and by ~~our Notified Body~~the Competent Authorities in the ~~EU. Government~~European Union and the United Kingdom. Such regulations ~~specific to medical devices~~ are wide ranging and govern, among other things:

•product design, development, manufacture, and ~~manufacture~~

release;

•laboratory, preclinical and clinical testing, labeling, packaging, storage and ~~distribution~~

distribution;

•premarketing clearance or ~~approval~~

approval;

•service operations

•record ~~keeping~~

keeping;

•product marketing, promotion and advertising, sales and ~~distribution~~

distribution; and

~~post-marketing~~•post-market surveillance, including reporting of deaths or serious injuries and ~~recalls and~~certain categories of field correction and ~~removals~~

removals.

Before a new medical device or service, or a new intended use for an existing product or service, can be marketed in the United States, a company must first submit and receive either 510(k) clearance or premarketing approval from the FDA, unless an exemption applies. Either process can be expensive, lengthy and unpredictable. We may not be able to obtain the necessary clearances or approvals or may be unduly delayed in doing so, which could harm our business. Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses for the product, which may limit the market for the product. Although we have obtained 510(k) clearance to market the ~~ZIO Patch~~Zio monitors and ~~ZIO Service,~~the Zio service (Software as a Medical Device elements), our clearance can be revoked if safety, efficacy, or ~~efficacy~~significant regulatory compliance problems develop.

In addition, we are required to file various reports with the FDA, and E.U. or U.K. regulators, including reports required by the ~~medical device reporting regulations, or MDRs,~~Medical Device Reporting Regulations (“MDRs”) that require that we report to the regulatory authorities if our ~~ZIO Service~~Zio service 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. If these reports are not filed in a timely manner, regulators may impose sanctions and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.

If we initiate a correction or removal for our ~~ZIO Service~~Zio service to reduce a risk to health posed by the ~~ZIO Service,~~Zio service, we would be required to submit a publicly available Correction and Removal report to the FDA and, in many cases, similar reports to other regulatory agencies. This report could be classified by the FDA as a device recall which could lead to increased scrutiny by the FDA, other international regulatory agencies and our customers regarding the quality and safety of our ~~ZIO Service.~~Zio service. Furthermore, the submission of these reports are public and could be used by competitors against us and cause physicians to delay or cancel prescriptions, which could harm our reputation.

If we assess a potential quality issue or complaint as not requiring either field action or notification, respectively, regulators may review documentation of that decision during a subsequent audit. If regulators disagree with our decision, or take issue with either our investigation process or the resulting documentation, regulatory agencies may impose sanctions and we may be subject to regulatory enforcement actions, including warning letters, all of which could harm our business.

The FDA and the Federal Trade Commission ~~or FTC,~~(“FTC”) also regulate the advertising and promotion of our products and services to ensure that the claims we make are consistent with our regulatory clearances, that there is adequate and reasonable data to substantiate the claims and that our promotional labeling and advertising is neither false nor misleading. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions.

Similar to the FDA and FTC, the European Union under the EU Medical Device Regulations and the United Kingdom under the UK Medical Device Regulations have similar requirements and enforcement action regarding promotional material.

The FDA and state and international authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by ~~the FDA or state agencies,~~any such agency, which may include any of the following sanctions:

•adverse publicity, warning letters, fines, injunctions, consent decrees and civil ~~penalties~~

penalties;

•repair, replacement, refunds, recall or seizure of our ~~products~~

products;

•operating restrictions, partial suspension or total shutdown of either production,

distribution or service operation;

•denial of our requests for ~~510(k)~~regulatory clearance or premarket approval of new products or services, new intended uses or modifications to existing products or ~~services~~

services;

•withdrawal of ~~510(k)~~regulatory clearance or premarket approvals that have already been ~~granted~~

granted; and

•criminal ~~prosecution~~

prosecution.

If any of these events were to occur, our business and financial condition could be harmed.

Material modifications to the ~~ZIO Patch, labelling~~Zio monitors, labeling of the ~~ZIO Patch,~~Zio monitors, or ~~ZIO Service~~Zio service may require new 510(k) clearances, CE ~~Marks~~Mark, UKCA Mark or other premarket approvals or may require us to recall or cease marketing our products and services until clearances are obtained.

Material modifications to the intended use or technological characteristics of the ~~ZIO Patch~~Zio monitors or ~~ZIO Service~~Zio service will require new 510(k) clearances, premarket approvals or CE Mark ~~grants,~~certification (E.U.) or UKCA Mark certification (U.K.), or require us to recall or cease marketing the modified devices until these clearances or approvals are obtained. Based on FDA published guidelines, the FDA requires device manufacturers to initially make and document a determination of whether or not a modification requires a new ~~approval, supplement~~clearance or ~~clearance;~~approval; however, the FDA can review a manufacturer’s decision. Any modification to an FDA cleared device or service that would significantly affect its safety or efficacy or that would constitute a major change in its intended use would require a new 510(k) clearance or possibly a premarket approval. We may not be able to obtain additional 510(k) clearances or premarket approvals for new products or for modifications to, or additional indications for, the ~~ZIO Patch~~Zio monitors or ~~ZIO Service~~Zio service in a timely fashion, or at all. Delays in obtaining required future clearances would harm our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth. We have made modifications to the ~~ZIO Patch~~Zio monitors and ~~ZIO Service~~Zio service in the past that we believe do not require additional clearances or approvals, and we may make additional modifications in the future. If the FDA or ~~an EU~~a Notified Body disagrees and requires new clearances or approvals for any of these modifications, we may be required to recall and to stop selling or marketing the ~~ZIO Patch~~Zio monitors and ~~ZIO Service~~Zio service as modified, which could harm our operating results and require us to redesign our products or services. In these circumstances, we may be subject to significant enforcement actions.

If we or our suppliers fail to comply with the FDA’s QSR or the European Union’s Medical Device Directive and Medical Device Regulations, or United Kingdom's Medical Device Regulations, our manufacturing or distribution operations could be delayed or shut down and our revenue could suffer.

Our manufacturing and design processes and those of our third-party suppliers are required to comply with the FDA’s Quality System Regulation ~~or QSR~~(“QSR”) and the EU’s Medical Device Directive ~~or MDD, both~~(“MDD”), through May 2021, after which time compliance with the MDR transitional provisions will be required until full transition to MDR compliance is achieved. Additionally, the UK will require the UKCA marking per new policies released by MHRA. All of ~~which~~these regulations cover procedures and documentation ofrequirements for the design, testing, production, control, quality assurance, labeling, packaging, storage, shipping, and ~~shipping~~post-market surveillance of ~~ZIO Patches.~~Zio monitors and associated software. We are also subject to similar state requirements and licenses, and to ongoing ISO ~~13485~~13485:2016 compliance in all operations ~~including design, manufacturing, and service,~~ to maintain our CE Mark. In addition, we must engage in extensive recordkeeping and reporting and must make available our facilities and records for periodic unannounced inspections by governmental agencies, including the FDA, state authorities, EU Notified Bodies and comparable agencies in other countries. If we ~~fail~~perform poorly in a regulatory inspection, our operations could be disrupted and our manufacturing interrupted. Failure to take adequate corrective action in response to an adverse regulatory inspection could result in, among other things, a shutdown of our manufacturing or product distribution operations, significant fines, suspension of marketing clearances and approvals, seizures or recalls of our device, operating restrictions, warning letters, and criminal prosecutions, any of which would cause our business to suffer. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements, which may result in manufacturing delays for our product and cause our revenue to decline.

We are registered with the FDA as a medical device specifications developer and manufacturer. The FDA has broad post-market and regulatory enforcement powers. We are subject to announced or unannounced inspections by the FDA and the Food and Drug Branch of the California Department of Public Health ~~or CDPH,~~(“CDPH”) to determine our compliance with the QSR and other regulations at both our design and manufacturing facilities, and these inspections may include the manufacturing facilities

of our suppliers. ~~Our~~The most recent FDA inspection of our manufacturing facility occurred in October 2021 and no FDA Form 483 observations were issued. The FDA also performed a Remote Regulatory Assessment (“RRA”) of our design facilities in San Francisco, California, ~~were most recently audited by~~which concluded in May 2021. Unlike on-site inspections, the FDA ~~in June 2016 and no~~does not issue formal 483 observations ~~resulted. For our manufacturing facility in Cypress, California,~~at the ~~most recent FDA audit occurred in August 2017 and no formal observations resulted. We believe that we are in substantial compliance with the QSR.~~

conclusion of RRAs.

We are also registered with the EU as a medical device developer, manufacturer, distributor, and service operator through the National Standard Authority of Ireland ~~or NSAI,~~(“NSAI”) our European Notified Body. Most recently, the NSAI ~~conducted~~completed an ISO 13485 ~~recertification~~surveillance audit of our design, manufacturing and service operations in ~~March, April~~May 2021 and ~~June 2017.~~

a renewal of our ISO 13485 certification was issued in August 2021.

We can provide no assurance that we will continue to remain in compliance with the QSR or ~~MDD.~~MDD, MDR, or UK MDR. If the FDA, CDPH, NSAI, or ~~NSAI~~other EU or UK Notified Bodies inspect any of our facilities and discover compliance problems, we may have to cease manufacturing and product distribution until we can take the appropriate remedial steps to correct the audit findings. Taking corrective action may be expensive, time consuming and a distraction for management and if we experience a delay at our manufacturing facility we may be unable to produce ~~ZIO Patches,~~Zio monitors, which would harm our business.

~~ZIO Patches~~

Zio monitors may in the future be subject to product recalls that could harm our reputation.

The FDA and similar governmental authorities in other countries have the authority to require the recall of commercialized products in the event of material regulatory deficiencies or ~~defects in design or manufacture.~~device defects. A government mandated or voluntary recall by us could occur as a result of component failures, manufacturing errors, design issues, labeling issues, or ~~design or labeling defects.~~various regulatory compliance topics. Recalls of ~~ZIO Patches~~Zio monitors and associated software would divert managerial attention, be expensive, harm our reputation with customers and harm our financial condition and results of operations. A recall announcement would also negatively affect our stock price.

Healthcare reform measures could hinder or prevent the ~~ZIO Service’s~~Zio service’s commercial success.

In the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system in ways that could harm our future ~~revenue~~revenues and ~~profitability.~~profitability and the demand for the Zio service. Federal and state lawmakers regularly propose and, at times, enact legislation that would result in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. ~~For example, the~~The Affordable Care Act contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which will impact existing government healthcare programs and will result in the development of new programs. ~~The Affordable Care Act, among other things, imposes an excise tax~~We face uncertainties that might result from modifications or repeal of ~~2.3% on~~any of the ~~sale~~provisions of most medical devices, including ours. Although this excise tax has temporarily been suspended for two years beginning on January 1, 2016, any failure to pay this amount if it becomes due in the future could result in an injunction on the sale of our products, fines and penalties.

~~We cannot assure you that~~ the Affordable Care Act, including as a result of current and future executive orders and legislative actions. The impact of those changes on us and potential effect on the medical device industry as a whole is currently ~~enacted or as amended, repealed or replaced in~~unknown. Any changes to the ~~future, will not harm~~Affordable Care Act are likely to have an impact on our ~~business~~results of operations, and ~~financial~~may have a material adverse effect on our results ~~and we~~of operations. We cannot predict ~~how future~~what other health care programs and regulations will ultimately be implemented at the federal or state ~~legislative~~level or ~~administrative changes relating to healthcare reform will affect our business. There likely will continue to be legislative and regulatory proposals at~~ the ~~federal and state levels directed at containing~~effect of any future legislation or ~~lowering the cost of healthcare. We cannot predict the initiatives that may be adopted~~regulation in the ~~future or their full impact.~~ United States may have on our business.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may harm:

•our ability to set a price that we believe is fair for our ~~ZIO Service~~

Zio service;

•our ability to generate revenue and achieve or maintain ~~profitability~~

profitability; and

•the availability of ~~capital~~

capital.

Compliance with environmental laws and regulations could be expensive, and failure to comply with these laws and regulations could subject us to significant liability.

Our research and development and manufacturing operations may involve the use of hazardous substances and are subject to a variety of federal, state, local and foreign environmental laws and regulations relating to the storage, use, discharge, disposal, remediation of, and human exposure to, hazardous substances and the sale, labeling, collection, recycling, treatment and disposal of products containing hazardous substances. Liability under environmental laws and regulations can be joint and several and without regard to fault or negligence. Compliance with environmental laws and regulations may be expensive and noncompliance could result in substantial liabilities, fines and penalties, personal injury and third-party property damage claims and substantial investigation and remediation costs. Environmental laws and regulations could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes. The expense associated with environmental regulation and remediation could harm our financial condition and operating results.

Exposure to United Kingdom political developments, including the outcome of its withdrawal from membership in the

European Union, could be costly and difficult to comply with and could seriously harm our business.

We have based a significant portion of our non-U.S. operations in the United Kingdom. In June 2016, a referendum was held in the U.K. which resulted in a majority voting in favor of the U.K. withdrawing from the E.U. (commonly referred to as "Brexit"). Pursuant to legislation approved by the U.K. Parliament and the E.U. Parliament in January 2020, the U.K. withdrew from the E.U. with effect from 11 p.m. (GMT) on January 31, 2020 on the terms of a withdrawal agreement agreed between the U.K. and the E.U. in October 2019. On December 24, 2020, the U.K. and E.U. agreed to a trade deal (the “Trade and Cooperation Agreement”) which was ratified by the U.K. on December 30, 2020. The Trade and Cooperation Agreement is subject to formal approval by the European Parliament and the Council of the European Union before it comes into effect and has been applied provisionally since January 1, 2021. There are still a number of areas of uncertainty in connection with the future of the U.K. and its relationship with the E.U. and the application and interpretation of the Trade and Cooperation Agreement, and Brexit related matters may take several years to be clarified and resolved.For example, because a significant proportion of the regulatory framework in the U.K. is currently derived from E.U. directives and regulations, Brexit could result in material changes to the regulatory regime applicable to many of our current operations. Although the Trade and Cooperation Agreement offers U.K. and E.U. companies preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas, economic relations between the U.K. and the E.U. will now be on more restricted terms than existed previously. Therefore, at this time, we cannot predict the impact that the Trade and Cooperation Agreement and any future agreements contemplated under the terms of the Trade and Cooperation Agreement will have on our future business efforts to commercialize our Zio service in the U.K. and E.U. Accordingly, it is possible that new terms of the Trade and Cooperation Agreement may adversely affect our operations and financial results. We are currently in the process of evaluating our own risks and uncertainties to ascertain what financial, trade, regulatory and legal implications the Trade and Cooperation Agreement could have on our operations in the U.K. and otherwise. Finally, uncertainty surrounding Brexit has contributed to recent fluctuations in the U.K. economy as a whole which could experience future disruptions. As a result, Brexit could cause financial and capital markets within and outside the U.K. or the E.U. to constrict, thereby negatively impacting our ability to finance our U. K. operations which could also have an adverse effect on our results of operations and financial condition.

Risks Related to Our Common Stock

Future sales and issuances of securities could negatively affect our stock price and dilute the ownership interest of our existing investors.

Our expected future capital requirements may depend on many factors, including expanding our customer base, the expansion of our salesforce, and the timing and extent of spending on the development of our technology to increase our product offerings. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Additionally, new investors could gain rights, preferences and privileges senior to those of existing holders of our common stock. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, ~~has only recently become publicly traded,~~make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we ~~expect~~raise may contain terms that are not favorable to us or our stockholders.

Sales or issuances of a substantial amount of securities, or the perception that such sales could occur, may cause a decline in the price of our common ~~stock will fluctuate substantially.~~

~~Our common stock has only recently become publicly traded, and we cannot be certain that an active trading market for~~stock. Future resales of our common stock ~~will be sustained.~~by our existing stockholders could cause the market price of our common stock to decline. In addition, the shares of common stock subject to outstanding options and restricted stock units under our 2016 Equity Incentive Plan and our 2016 Employee Stock Purchase Plan and the shares reserved for future issuance

under both such plans may become eligible for sale in the public markets in the future, subject to certain legal and control limitations.

We may sell shares or other securities in any offering at a price per share that is less than the price per share paid by existing investors, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The ~~lack of an active market may impair the value~~price per share at which we sell additional shares of our common stock, or ~~your ability to sell your shares at the time you wish to sell them~~securities convertible or ~~at a price that you consider reasonable. An inactive market may also impair our ability to raise capital to continue to fund operations by selling~~exchangeable into common stock, ~~and~~in future transactions may ~~impair our ability to acquire other companies~~be higher or products by using our common stock as consideration. Although our common stock is listed on the NASDAQ Global Market, if we fail to satisfy the continued listing standards of the NASDAQ Global Market, we could be de-listed, which would negatively impactlower than the price ~~of our common stock.~~

per share paid by existing investors.

The market price of our common stock ~~is likely~~may fluctuate substantially, and you could lose all or part of your investment.

The market price of our common stock may continue to ~~be highly volatile and may~~ fluctuate substantially in response to, among other things, the risk factors described in this Quarterly Report on Form 10-Q and other factors, many of which are beyond our control, including:

•changes in analysts’ estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ ~~estimates~~

estimates;

•quarterly variations in our or our competitors’ results of ~~operations~~

operations;

•the impact or anticipated impact of the COVID-19 pandemic on us;

•periodic fluctuations in our revenue, due in part to the way in which we recognize ~~revenue~~

revenue;

•the financial projections we may provide to the public, any changes in these projections or our failure to meet these ~~projections~~

projections;

•general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors,

including deteriorating market conditions due to investor concerns regarding inflation and continuing hostilities between Russia and Ukraine, which could lead to volatility in foreign currency and capital markets;

market valuations (for example, valuations based upon multiples of revenue and earnings before interest, taxes, depreciation and amortization) of
comparable companies and changes in market valuations

~~decreases in our market valuations on an absolute basis or relative to comparable companies~~

•changes in reimbursement coverage and rates by current or potential ~~payors~~

•

~~changes in operating performance and stock market valuations of other technology companies generally, or those in the medical device industry in particular~~

payors;

•changes in CPT codes or the establishment of new CPT codes applicable to the Zio service;

•changes in operating performance and stock market valuations of other technology companies generally, or those in the medical device industry in particular;

•actual or anticipated changes in regulatory oversight of our ~~products~~

products;

•the results of our clinical ~~trials~~

trials;

•the loss of key personnel, including changes in our board of directors and ~~management~~

management;

•legislation or regulation ofaffecting our ~~market~~

market;

•lawsuits threatened or filed against us

us;

•the announcement of new products or product enhancements by us or our ~~competitors~~

competitors;

•announced or completed acquisitions of businesses or technologies by us or our ~~competitors~~

competitors;

•announcements related to patents issued to us or our competitors and to ~~litigation~~

litigation; and

•developments in our ~~industry~~

industry.

In addition, the market prices of the stock of many new issuers in the medical device industry and of other companies with smaller market capitalizations like us have been volatile and from time to time have experienced significant share price and trading volume changes unrelated or disproportionate to the operating performance of those companies.

Fluctuations in our stock price, volume of shares traded, and changes in our market valuations may make our stock less attractive to certain investors. ~~In the past, stockholders have filed~~Stockholders may file securities class action litigation following periods of market volatility. IfSecurities litigation, like the current action we ~~were~~are subject to ~~become involved~~ in ~~securities litigation, it~~the District Court for the Northern District of California, could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, results of operations, financial condition, reputation and cash flows. These factors may materially and adversely affect the market price of our common stock.

If securities or industry analysts do not publish research or reports about our business, or ~~publish negative reports about~~if they issue adverse or misleading opinions regarding our ~~business,~~stock, our ~~share~~stock price and trading volume could decline.

The trading market for our common stock ~~depends in part on~~will be influenced by the research and reports that ~~securities~~industry or ~~industry~~securities analysts publish about us or our ~~business, our market and our competitors. We do not have~~business. If any ~~control over these analysts. If one or more~~ of the analysts who cover us ~~downgrade our shares~~issue an adverse or ~~change their~~misleading opinion ofregarding us, our business model, our ~~share~~intellectual property or our stock performance, or if our target studies and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of ~~our company~~us or fail to ~~regularly~~

publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our ~~share~~stock price or trading volume to decline.

~~Sales of a substantial number of shares of our common stock in the public market, including by our existing stockholders, could cause our stock price to fall.~~

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that these sales and others may have on the prevailing market price of our common stock.

In addition, certain of our stockholders can require us to register shares of our capital stock owned by them for public sale in the United States. We have also filed a registration statement to register shares of our common stock reserved for future issuance under our equity compensation plans. Subject to the satisfaction of applicable exercise periods and applicable volume and restrictions that apply to affiliates, the shares of our common stock issued upon exercise of outstanding options will become available for immediate resale in the public market upon issuance.

Future sales of our common stock may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause the market price of our common stock to decline and make it more difficult for you to sell shares of our common stock.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd Frank Act, the listing requirements of The NASDAQ Stock Market and other applicable securities laws, rules and regulations. Compliance with these laws, rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time consuming or costly and increase demand on our systems and ~~resources, particularly after we no longer qualify as an “emerging growth company,” under the JOBS Act.~~resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, our management and other personnel divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we ~~will~~ incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section ~~404, which has increased now that we will no longer be an emerging growth company under the JOBS Act starting with our next fiscal year.~~404. We continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. We cannot predict or estimate the amount of additional costs we will incur in order to remain compliant with our public company reporting requirements or the timing of such costs. Additional compensation costs and any future equity awards will increase our compensation expense, which will increase our general and administrative expense and could adversely affect our profitability.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

We will incur additional compensation costs in the event that we decide to pay our executive officers cash compensation closer to that of executive officers of other public medical device companies, which would increase our general and administrative expense and could harm our profitability. Any future equity awards will also increase our compensation expense. We also expect that being

As a public company, ~~and compliance with applicable rules and regulations will make~~ it is more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and members of our board of directors, particularly to serve on our audit committee and compensation committee.

In addition, compliance with applicable rules and regulations for public companies is generally more expensive than it is for private companies.

As a result of disclosure of information in this filing and in other filings required of a public company, our business and financial condition is more visible, which could be advantageous to our competitors and other third parties and could result in threatened or actual litigation. If such claims are successful, our business and operating results could be harmed, and even if the claims are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results.

~~We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.~~

We currently qualify as an “emerging growth company” under the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from reporting requirements that are applicable to other public companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive to the extent we rely on available exemptions. If some investors do find our common stock less attractive, there may be a less active trading market for our common stock and our stock price may be more volatile or may decline.

Based on our market capitalization as of June 30, 2017, our status as an emerging growth company will cease on December 31, 2017 and we will be required to comply with, among other requirements, the auditor attestation requirements of Section 404 for our next annual report.

Anti-takeover provisions in our amended and restated certificate of incorporation and bylaws, and Delaware law, could discourage a change in control of our company or a change in our management.

Our amended and restated certificate of incorporation and bylaws contain provisions that might enable our management to resist a takeover. These provisions include:

•a classified board of ~~directors~~

directors;

•advance notice requirements applicable to stockholders for matters to be brought before a meeting of stockholders and requirements as to the form and content of a stockholders’ ~~notice~~

notice;

•a supermajority stockholder vote requirement for amending certain provisions of our amended and restated certificate of incorporation and ~~bylaws~~

bylaws;

•the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile ~~acquirer~~

acquirer;

•allowing stockholders to remove directors only for ~~cause~~

cause;

•a requirement that the authorized number of directors may be changed only by resolution of the board of ~~directors~~

directors;

•allowing all vacancies, including newly created directorships, to be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, except as otherwise required by ~~law~~

law;

•a requirement that our stockholders may only take action at annual or special meetings of our stockholders and not by written ~~consent~~

consent;

•limiting the forum to Delaware for certain litigation against us

us; and

•limiting the persons that can call special meetings of our stockholders to our board of directors, the chairperson of our board of directors, the chief executive officer or the president (in the absence of a chief executive officer)

These provisions might discourage, delay or prevent a change in control of our company or a change in our management. The existence of these provisions could adversely affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares of our common stock. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

Our amended and restated certificate of incorporation ~~provides~~and bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ abilities to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation ~~provides~~and bylaws provide that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or to our stockholders, (iii) any action asserting a claim against the company or any director or officer of the company arising pursuant to the Delaware General Corporation Law, or our amended and restated certificate of incorporation or bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or bylaws, or (v) any action asserting a claim against us governed by the internal affairs ~~doctrine.~~doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. Our investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Our bylaws further provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. The enforceability of similar exclusive federal forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and while the Delaware Supreme Court has ruled that this type of exclusive federal forum provision is facially valid under Delaware law, there is uncertainty as to whether other courts would enforce such provisions. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation or bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition and operating results.

We have not paid dividends in the past and do not expect to pay dividends in the future, and, as a result, any return on investment may be limited to the value of our stock.

We have never paid ~~cash~~ dividends and do not anticipate paying ~~cash~~ dividends in the foreseeable future. The payment of dividends will depend on our earnings, capital requirements, financial condition, prospects and other factors our board of directors may deem relevant. In addition, our loan ~~agreements limit~~agreement with Silicon Valley Bank limits our ability to, among other things, pay dividends or make other distributions or payments on account of our common stock, ~~in each case~~ subject to certain exceptions. If we do not pay dividends, our stock may be less valuable because a return on your investment will only occur if our stock price appreciates and you sell our common stock ~~after our stock price appreciates.~~

thereafter.

~~ITEM 2~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~Unregistered Sales of Equity Securities~~

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

~~Use of Proceeds~~

Our initial public offering of 7,238,235 shares of common stock was effected through a registration statement on Form S-1 (Registration Nos. 333-213773 and 333-214179), which was declared effective on October 19, 2016. Our initial public offering closed on October 25, 2016 and resulted in net proceeds of approximately $110.9 million, after deducting underwriting discounts and commissions of approximately $8.6 million and other expenses of approximately $3.5 million. No payments for such expenses were made directly or indirectly to any of our officers or directors.

J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Canaccord Genuity Inc. and BTIG, LLC acted as the underwriters. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC on October 20, 2016.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES.~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES.~~

~~Not applicable.~~

ITEM 5. OTHER INFORMATION

We were incorporated in Delaware on September 14, 2006. Our principal executive offices are now located at 699 8th Street, Suite 600, San Francisco, CA 94103, and our telephone number is (415) 632-5700. Our website address is www.iRhythmTech.com. Investors and others should note that we announce material financial information to our investors using SEC filings, press releases, our investor relations website, public conference calls and webcasts. We use these channels as well as social media to communicate with investors, customers and the public about our company, our products and other issues. It is possible that information we post on social media channels could be deemed to be material information. We encourage investors, our customers and others interested in our company to review the information we post on our Facebook page (https://www.facebook.com/iRhythmTechnologies/) and Twitter feed (https://twitter.com/iRhythmTech). The information on, or that may be accessed through, our website and social media channels is not incorporated by reference into this Quarterly Report on Form 10-Q and should not be considered a part of this Quarterly Report on Form 10-Q.

ITEM 6. EXHIBITS

The exhibits listed in the accompanying exhibit index are filed as part of, and incorporated by reference into, this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

Incorporated by Reference

Exhibit
Number

Description

Form

Date

Number

Filed Herewith

3.1

Amended and Restated Certificate of Incorporation.

8-K

10/25/16

3.1

3.2

Certificate of Amendment to Amended and Restated Certificate of Incorporation.

8-K

6/23/20

3.1

3.3

Amended and Restated Bylaws.

8-K

10/25/16

3.2

3.4

Certificate of Amendment to the Amended and Restated Bylaws.

8-K

8/14/20

3.1

31.1

Certification of Chief Executive Officer required by Securities Exchange Act Rules 13a-14(a) and 15d-14(a).

31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a)

32.1*

Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350.

101.INS

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

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

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

* The certifications filed as Exhibits 32.1 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Company under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~ITEM 5.~~	~~OTHER INFORMATION~~
		iRhythm Technologies, Inc.

Date: May 6, 2022		By:	/s/ Quentin S. Blackford
			Quentin S. Blackford President and Chief Executive Officer (Principal Executive Officer)

~~Not applicable.~~



Date: May 6, 2022	By:	/s/ Douglas J. Devine
		Douglas J. Devine Chief Financial Officer and Chief Operating Officer (Principal Financial Officer)

~~ITEM 6.~~

~~EXHIBITS~~

~~The exhibits listed in the accompanying exhibit index are filed as part of, and incorporated by reference into, this Quarterly Report on Form 10-Q.~~

~~EXHIBIT~~ ~~INDEX~~

~~Exhibit~~ ~~Number~~		~~Description~~

~~10.29~~		~~Form of Change of Control and Severance Agreement.~~

~~31.1~~		~~Certification of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

~~31.2~~		~~Certification of Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

32.1*		~~Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~		~~XBRL Instance Document~~

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~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.~~

	~~iRhythm Technologies, Inc.~~

~~Date: November 14, 2017~~	~~By:~~	~~/s/ Kevin M. King~~
		~~Kevin M. King~~
		~~President and Chief Executive Officer~~
		~~(Principal Executive Officer)~~

~~Date: November 14, 2017~~	~~By:~~	~~/s/ Matthew C. Garrett~~
		~~Matthew C. Garrett~~
		~~Chief Financial Officer~~
		~~(Principal Financial Officer and Chief Accounting Officer)~~


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, Par Value $.001 Per Share	IRTC	The Nasdaq Stock Market

	~~Page No.~~
		Page No
PART I. FINANCIAL INFORMATION			1

Item 1. Financial Statements (Unaudited):			1
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Loss			3
Condensed Consolidated Statements of Cash Flows			4
Condensed Consolidated Statements of Stockholders’ Equity		5
Notes to Condensed Consolidated Financial Statements			5 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22 25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30 31
Item 4. Controls and Procedures			30 32

PART II. OTHER INFORMATION			31 34

Item 1. Legal Proceedings			31 34
Item 1A. Risk Factors			31 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			59 69
Item 3. Defaults Upon Senior Securities			59 69
Item 4. Mine Safety Disclosures			59 69
Item 5. Other Information			59 69
Item 6. Exhibits			59 69

Exhibit Index			60 70

Signatures			61 71


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	94,786	$	127,562
Short-term investments	113,998		111,569
Accounts receivable, net	55,286		46,430
Inventory	12,446		10,268
Prepaid expenses and other current assets	9,838		9,693
Total current assets	286,354		305,522
Property and equipment, net	57,135		55,944
Operating lease right-of-use assets	65,256		84,587
Goodwill	862		862
Other assets	19,110		16,052
Total assets	$	428,717	$	462,967
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,413	$	10,509
Accrued liabilities	41,935		51,486
Deferred revenue	2,933		3,049
Debt, current portion	—		11,667
Operating lease liabilities, current portion	11,501		11,142
Total current liabilities	61,782		87,853
Debt, noncurrent portion	34,917		9,690
Other noncurrent liabilities	832		697
Operating lease liabilities, noncurrent portion	86,344		85,212
Total liabilities	183,875		183,452
Commitments and contingencies (Note 7)	0		0
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding at March 31, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value; 100,000,000 shares authorized; 29,768,718 shares at March 31, 2022 and 29,493,726 at December 31, 2021 issued and outstanding	27		27
Additional paid-in capital	701,822		685,594
Accumulated other comprehensive income	(353)		(61)
Accumulated deficit	(456,654)		(406,045)
Total stockholders’ equity	244,842		279,515
Total liabilities and stockholders’ equity	$	428,717	$	462,967

	September 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	20,429		$	51,643
Investments, short-term		87,017			54,407
Accounts receivable, net		12,039			9,406
Inventory		1,314			1,390
Prepaid expenses and other current assets		1,989			1,671
Restricted cash		—			91
Total current assets		122,788			118,608
Investments, long-term		—			10,981
Property and equipment, net		6,207			4,653
Goodwill		862			862
Other assets		3,798			3,052
Total assets	$	133,655		$	138,156
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,076		$	2,103
Accrued liabilities		11,436			10,165
Deferred revenue		904			947
Accrued interest, current portion		149			—
Debt, current portion		1,479			—
Total current liabilities		16,044			13,215
Debt		32,053			32,227
Deferred rent, noncurrent portion		169			26
Accrued interest, net of current portion		—			126
Total liabilities		48,266			45,594
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value – 5,000,000 authorized at September 30, 2017 and December 31, 2016, respectively; and none issued and outstanding at September 30, 2017 and December 31, 2016, respectively		—			—
Common stock, $0.001 par value – 100,000,000 shares authorized at September 30, 2017 and December 31, 2016, respectively; 22,978,954 and 22,139,346 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		28			22
Additional paid-in capital		230,831			219,718
Accumulated other comprehensive loss		(30	)		(9	)
Accumulated deficit		(145,440	)		(127,169	)
Total stockholders’ equity		85,389			92,562
Total liabilities and stockholders’ equity	$	133,655		$	138,156


	Three Months Ended March 31,
	2022		2021
Revenue, net	$	92,378	$	74,311
Cost of revenue	30,619		23,458
Gross profit	61,759		50,853
Operating expenses:
Research and development	10,542		8,510
Selling, general and administrative	73,158		69,813
Impairment and restructuring charges	26,608		—
Total operating expenses	110,308		78,323
Loss from operations	(48,549)		(27,470)
Interest expense	(2,029)		(335)
Other income, net	16		124
Loss before income taxes	(50,562)		(27,681)
Income tax provision	47		98
Net loss	$	(50,609)	$	(27,779)
Net loss per common share, basic and diluted	$	(1.71)	$	(0.95)
Weighted-average shares, basic and diluted	29,596,325		29,164,430

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

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue	$	25,035		$	16,780		$	70,327		$	45,368
Cost of revenue		6,920			5,282			20,002			15,097
Gross profit		18,115			11,498			50,325			30,271
Operating expenses:
Research and development		3,790			1,635			9,187			4,847
Selling, general and administrative		20,308			12,529			57,787			36,658
Total operating expenses		24,098			14,164			66,974			41,505
Loss from operations		(5,983	)		(2,666	)		(16,649	)		(11,234	)
Interest expense		(862	)		(807	)		(2,522	)		(2,388	)
Other income (expense), net		321			(602	)		900			(1,015	)
Net loss	$	(6,524	)	$	(4,075	)	$	(18,271	)	$	(14,637	)
Net loss per common share, basic and diluted	$	(0.29	)	$	(2.80	)	$	(0.81	)	$	(10.20	)
Weighted-average shares used to compute net loss per common share, basic and diluted		22,811,907			1,454,307			22,446,399			1,434,583


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities
Net loss	$	(50,609)	$	(27,779)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,143		2,036
Stock-based compensation	13,903		20,230

Accretion of discounts on investments, net and other	432		498
Provision for doubtful accounts and contractual allowances	14,022		9,768
Amortization of operating lease right-of-use assets	6,547		1,555
Impairment charges	23,164		—
Changes in operating assets and liabilities:
Accounts receivable	(22,878)		(39,818)
Inventory	(2,377)		(1,608)
Prepaid expenses and other current assets	(146)		387
Other assets	(3,058)		(775)
Accounts payable	(5,308)		673
Accrued liabilities	(9,429)		(6,140)
Deferred revenue	(116)		495
Operating lease liabilities	(6,175)		(1,364)

Net cash used in operating activities	(38,885)		(41,842)
Cash flows from investing activities
Purchases of property and equipment	(5,572)		(4,211)
Purchases of available-for-sale investments	(45,974)		(30,054)
Sales of available-for-sale investments	15,019		—
Maturities of available-for-sale investments	28,000		151,300
Net cash provided by (used in) investing activities	(8,527)		117,035
Cash flows from financing activities
Payment of long-term debt	(21,389)		(2,917)
Proceeds from term loan	35,000		—
Proceeds from issuance of common stock in connection with employee equity incentive plans	1,076		1,576
Tax withholding upon vesting of restricted stock awards	—		(25,105)
Payments of issuance costs for long term debt	(51)		—
Net cash provided by (used in) financing activities	14,636		(26,446)
Net (decrease) increase in cash and cash equivalents	(32,776)		48,747
Cash and cash equivalents beginning of period	127,562		88,628
Cash and cash equivalents end of period	$	94,786	$	137,375
Supplemental disclosures of cash flow information
Interest paid	$	1,967	$	331
Non-cash investing and financing activities
Property and equipment costs included in accounts payable and accrued liabilities	$	225	$	115
Right-of-use assets obtained in exchange for operating lease liabilities	$	7,666	$	5,757
Capitalized stock-based compensation	$	1,250	$	911


	Common Stock							Accumulated Other		Total
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Comprehensive Income		Stockholders' Equity
Balances at December 31, 2020	29,019,350	$	27	$	646,258	$	(304,684)	$	11	$	341,612
Issuance of common stock in connection with employee equity incentive plans, net	268,399	—		1,576		—		—		1,576
Tax withholding upon vesting of restricted stock awards	—	—		(25,105)		—		—		(25,105)
Stock-based compensation expense	—	—		19,267		—		—		19,267
Net loss	—	—		—		(27,779)		—		(27,779)
Net change in unrealized gain on investments	—	—		—		—		1		1
Balances at March 31, 2021	29,287,749	$	27	$	641,996	$	(332,463)	$	12	$	309,572

	September 30,			December 31,
	2017			2016
Balance, beginning of period	$	1,792		$	1,125
Add: provision for doubtful accounts		1,855			1,960
Less: write-offs, net of recoveries and other adjustments		(852	)		(1,293	)
Balance, end of period	$	2,795		$	1,792


	Three Months Ended March 31, 2022		Year Ended December 31, 2021		Three Months Ended March 31, 2021
Balance, beginning of period	$	14,012	$	12,711	$	12,711
Add: provision for doubtful accounts	4,413		9,615		3,095

Less: write-offs, net of recoveries and other adjustments	(60)		(8,314)		(3,046)
Balance, end of period	$	18,365	$	14,012	$	12,760

	September 30, 2017
	Amortized		Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
Money market funds	$	5,722	$	—	$	—		$	5,722
U.S. government securities		35,942		1		(26	)		35,917
Corporate notes		15,669		1		(4	)		15,666
Commercial paper		48,130		—		—			48,130
Total available-for-sale securities	$	105,463	$	2	$	(30	)	$	105,435
Classified as:
Cash equivalents								$	18,418
Short-term investments									87,017
Total cash equivalents and investments								$	105,435

	December 31, 2016										March 31, 2022
	Amortized		Gross Unrealized					Estimated			Amortized Cost				Gross Unrealized								Estimated Fair Value
	Cost		Gains		Losses			Fair Value					Gains				Losses						Estimated Fair Value
Money market funds	$	45,937	$	—	$	—		$	45,937	Money market funds	Amortized Cost		$	42,589			$	—			$	—			$	42,589
U.S. government securities		16,479		11		—			16,490	U.S. government securities	88,328				5				(322)				88,011
Corporate notes		23,947		—		(20	)		23,927	Corporate notes	13,039				—				(36)				13,003
Commercial paper		24,971		—		—			24,971	Commercial paper	12,984				—				—				12,984
Total available-for-sale securities	$	111,334	$	11	$	(20	)	$	111,325
Total cash equivalents and available-for-sale investments										Total cash equivalents and available-for-sale investments	$	156,940			$	5			$	(358)			$	156,587
Classified as:										Classified as:
Cash equivalents								$	45,937	Cash equivalents													$	42,589
Short-term investments									54,407	Short-term investments													113,998
Long-term investments									10,981
Total cash equivalents and investments								$	111,325
Total cash equivalents and available-for-sale investments										Total cash equivalents and available-for-sale investments													$	156,587
											December 31, 2021
											Amortized Cost				Gross Unrealized								Estimated Fair Value
													Gains				Losses						Estimated Fair Value
Money market funds										Money market funds	Amortized Cost		$	110,137			$	—			$	—			$	110,137
U.S. government securities										U.S. government securities	50,490				—				(46)				50,444
Corporate notes										Corporate notes	31,158				—				(15)				31,143
Commercial paper										Commercial paper	29,982				—				—				29,982
Total cash equivalents and available-for-sale investments										Total cash equivalents and available-for-sale investments	$	221,767			$	—			$	(61)			$	221,706
Classified as:										Classified as:
Cash equivalents										Cash equivalents													$	110,137
Short-term investments										Short-term investments													111,569
Total cash equivalents and available-for-sale investments										Total cash equivalents and available-for-sale investments													$	221,706


	September 30, 2017									March 31, 2022
	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets									Assets
Money market funds	$	5,722	$	—	$	—	$	5,722	Money market funds	$	42,589	$	—	$	—	$	42,589
U.S. government securities		—		35,917		—		35,917	U.S. government securities	—		88,011		—		88,011
Corporate notes		—		15,666		—		15,666	Corporate notes	—		13,003		—		13,003
Commercial paper		—		48,130		—		48,130	Commercial paper	—		12,984		—		12,984
Total	$	5,722	$	99,713	$	—	$	105,435	Total	$	42,589	$	113,998	$	—	$	156,587

	Nine Months Ended September 30, 2017		Nine Months Ended September 30, 2016
Beginning balance	$	—	$	2,949
Total change in fair value recorded as other expense, net		—		996
Ending balance	$	—	$	3,945


ROU Asset	$	20,451
Furniture and Fixtures	2,211
Leasehold Improvements	502
Total	$	23,164


Period Ended March 31:
2022	$	6,550
2023	13,995
2024	14,265
2025	14,681
2026	15,108
Thereafter	75,390
Total lease payments	139,989
Less: imputed interest	(42,144)
Total lease liabilities	$	97,845

Period Ending December 31:
2017 (remainder of year)	$	1,263
2018		5,089
2019		5,108
2020		1,178
2021		406
Thereafter		2,541
Total	$	15,585

Reported on the consolidated balance sheet as:
Inventory	$	1,314	$	1,390
Other assets		3,542		2,773
Total	$	4,856	$	4,163


	December 31, 2021		Charges		Cash Payments		March 31, 2022
Employee severance	$	—	$	3,444	$	(542)	$	2,902
Total	$	—	$	3,444	$	(542)	$	2,902


Year Ending December 31,
2022	$	893
2023	1,331
2024	1,334
2025	14,289
2026	18,026
Thereafter	4,403
Total	40,276
Less: Amount representing interest	(5,276)
Less: Debt Issuance Costs	(83)
Total Carrying Value	$	34,917

Reported as:
Short-term debt	$	—
Long-term debt	34,917
Total	$	34,917

	~~Options~~ ~~Available for~~ ~~Grant~~
		Awards Available for Grant
Balance at December 31, ~~2015~~ 2020		6,505,390	~~331,938~~
Additional ~~options~~awards authorized		1,450,967	~~3,865,000~~
~~Options~~Awards granted		(1,289,567)	~~(466,914~~	)
~~Options~~Awards forfeited		356,999	~~13,013~~
Awards withheld for tax purposes		135,886
Balance at December 31, ~~2016~~ 2021		7,159,675	~~3,743,037~~
Additional ~~options~~awards authorized		1,474,686	~~1,106,966~~
~~Options~~Awards granted		(377,339)	~~(800,846~~	)
~~Options~~Awards forfeited		56,908	~~15,415~~
Awards withheld for tax purposes		—
Balance at ~~September 30, 2017~~ March 31, 2022		8,313,930	~~4,064,572~~

				Options Outstanding
	Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value (in thousands)
Balances at December 31, 2015		2,685,913		$	4.81		7.63	$	11,589
Options granted		361,385			15.65
Options exercised		(57,067	)		2.33
Options forfeited		(13,013	)		6.92
Balances at December 31, 2016		2,977,218			6.16		6.93	$	70,979
Options granted		449,556			36.24
Options exercised		(649,213	)		3.97
Options forfeited		(11,659	)		15.72
Balances at September 30, 2017		2,765,902		$	11.52		7.29	$	111,634
Options exercisable – September 30, 2017		1,656,418		$	5.43		6.36	$	76,940
Options vested and expected to vest – September 30, 2017		2,698,510		$	11.21		7.25	$	109,750

	Three Months Ended September 30						Nine Months Ended September 30
	2017			2016			2017			2016
Expected term (in years)		6.1			6.1			6.1			6.1
Expected volatility		46.9	%		60.0	%		52.1	%		60.0	%
Risk-free interest rate		1.94	%		1.28	%		2.07	%		1.45	%
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%

	As of September 30,
	2017		2016
Convertible preferred stock on an as-if converted basis		—		13,343,981
Options to purchase common stock		2,765,902		2,732,538
RSUs issued and unvested		453,063		—
Warrants to purchase convertible preferred stock on an as-if converted basis		—		328,114
Warrants to purchase common stock		127,918		—
Total		3,346,883		16,404,633

	Three Months Ended September 30,
	2017			2016			$ Change			% Change
Revenue	$	25,035		$	16,780		$	8,255			49%
Cost of revenue		6,920			5,282			1,638			31%
Gross profit		18,115			11,498			6,617			58%
Gross margin		72	%		69	%
Operating expenses:
Research and development		3,790			1,635			2,155			132%
Selling, general and administrative		20,308			12,529			7,779			62%
Total operating expenses		24,098			14,164			9,934			70%
Loss from operations		(5,983	)		(2,666	)		(3,317	)		124%
Interest expense		(862	)		(807	)		(55	)		7%
Other income (expense), net		321			(602	)		923			153%
Net loss and comprehensive loss	$	(6,524	)	$	(4,075	)	$	(2,449	)		60%

	Nine Months Ended September 30,
	2017			2016			$ Change			% Change
Revenue	$	70,327		$	45,368		$	24,959			55%
Cost of revenue		20,002			15,097			4,905			32%
Gross profit		50,325			30,271			20,054			66%
Gross margin		72	%		67	%
Operating expenses:
Research and development		9,187			4,847			4,340			90%
Selling, general and administrative		57,787			36,658			21,129			58%
Total operating expenses		66,974			41,505			25,469			61%
Loss from operations		(16,649	)		(11,234	)		(5,415	)		48%
Interest expense		(2,522	)		(2,388	)		(134	)		6%
Other income (expense), net		900			(1,015	)		1,915			-189%
Net loss and comprehensive loss	$	(18,271	)	$	(14,637	)	$	(3,634	)		25%

	Nine Months Ended September 30,
(in thousands)	2017			2016
								Three months ended March 31,
								2022		2021
Net cash (used in) provided by:							Net cash (used in) provided by:
Operating activities	$	(11,188	)	$	(15,617	)	Operating activities	$	(38,885)	$	(41,842)
Investing activities		(24,121	)		(1,821	)	Investing activities	(8,527)		117,035
Financing activities		4,095			(2,009	)	Financing activities	14,636		(26,446)
Net decrease in cash and cash equivalents	$	(31,214	)	$	(19,447	)
Net increase in cash and cash equivalents							Net increase in cash and cash equivalents	$	(32,776)	$	48,747