10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2017

or

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

For the transition period from ______ to ______

Commission file number: 001-37717

Senseonics Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 3841
(Primary Standard Industrial
Classification Code Number) 47‑1210911
(I.R.S. Employer
Identification Number)

20451 Seneca Meadows Parkway

Germantown, MD 20876‑7005

(301) 515‑7260

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

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

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

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

Large accelerated filer ☐	Accelerated filer ☐	Non‑accelerated filer   ☒ (Do not check if a smaller reporting company)
Smaller reporting company ☐		Emerging growth company ☒

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

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

There were 136,754,458 shares of common stock, par value $0.001, outstanding as of October 30, 2017.

TABLE OF CONTENTS

PART I: Financial Information
ITEM 1:Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016	2
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for three and nine months ended September 30, 2017 and 2016	3
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	4
Notes to Unaudited Condensed Consolidated Financial Statements	5
ITEM 2:Management Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 3:Quantitative and Qualitative Disclosures about Market Risk	28
ITEM 4:Controls and Procedures	28
PART II Other Information
ITEM 1:Legal Proceedings	29
ITEM 1A:Risk Factors	29
ITEM 2:Unregistered Sales of Equity and Securities and Use of Proceeds	33
ITEM 3:Defaults Upon Senior Securities	33
ITEM 4:Mine Safety Disclosures	33
ITEM 5:Other Information	33
ITEM 6:Exhibits	34
SIGNATURES	35

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Senseonics Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

	September 30,		December 31,
	2017		2016
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	29,783	$	13,047
Marketable securities		22,917		7,291
Accounts receivable		2,063		251
Inventory, net		2,413		477
Prepaid expenses and other current assets		1,899		365
Total current assets		59,075		21,431
Deposits and other assets		176		105
Property and equipment, net		887		735
Total assets	$	60,138	$	22,271
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	5,125	$	3,070
Accrued expenses and other current liabilities		7,554		4,666
Notes payable, current portion		7,500		3,889
Total current liabilities		20,179		11,625
Notes payable, net of discount		16,801		15,177
Accrued interest		842		273
Other liabilities		66		73
Total liabilities		37,888		27,148
Commitments and contingencies (Note 7)
Stockholders’ equity (deficit):
Common stock, $0.001 par value per share; 250,000,000 shares authorized, 136,691,128 and 93,569,642 shares issued and outstanding as of September 30, 2017 and December 31, 2016		136		94
Additional paid-in capital		269,662		199,751
Accumulated deficit		(247,548)		(204,722)
Total stockholders' equity (deficit)		22,250		(4,877)
Total liabilities and stockholders’ equity (deficit)	$	60,138	$	22,271

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

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Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Revenue	$	2,097	$	37	$	3,464	$	56
Cost of sales		2,957		114		5,716		148
Gross profit		(860)		(77)		(2,252)		(92)
Expenses:
Sales and marketing expenses		2,089		733		4,478		2,001
Research and development expenses		9,765		6,883		22,368		20,838
General and administrative expenses		3,891		2,819		11,545		10,060
Operating loss		(16,605)		(10,512)		(40,643)		(32,991)
Other income (expense), net:
Interest income		129		35		187		69
Interest expense		(915)		(502)		(2,365)		(1,045)
Other income (expense):		12		92		(5)		3
Net loss		(17,379)		(10,887)		(42,826)		(33,964)
Total comprehensive loss	$	(17,379)	$	(10,887)	$	(42,826)	$	(33,964)
Basic and diluted net loss per common share	$	(0.13)	$	(0.12)	$	(0.39)	$	(0.39)
Basic and diluted weighted-average shares outstanding		128,898,682		93,386,139		108,959,779		87,838,031

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

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Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended
	September 30,
	2017		2016
Cash flows from operating activities
Net loss	$	(42,826)	$	(33,964)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		145		107
Non-cash interest expense (debt discount and deferred costs)		339		87
Change in fair value of warrants		—		304
Stock-based compensation expense		2,740		1,780
Provision for lower of cost or net realizable value		208		—
Net realized gain on marketable securities		(59)		—
Changes in assets and liabilities:
Accounts receivable		(1,812)		—
Prepaid expenses and other current assets		(1,534)		432
Inventory		(2,144)		(329)
Deposits and other assets		(71)		68
Accounts payable		2,055		4,095
Accrued expenses and other current liabilities		2,927		(195)
Accrued interest		569		(200)
Deferred rent		13		18
Net cash used in operating activities		(39,450)		(27,797)
Cash flows from investing activities
Capital expenditures		(297)		(452)
Purchases of marketable securities		(25,867)		(9,176)
Sales and maturities of marketable securities		10,300		—
Net cash used in investing activities		(15,864)		(9,628)
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs		66,870		45,737
Proceeds from exercise of stock options		239		65
Proceeds from notes payable, net of costs		4,896		17,500
Proceeds from issuance of warrants		104		—
Repayments of notes payable		—		(12,500)
Principal payments under capital lease obligations		(59)		(820)
Net cash provided by financing activities		72,050		49,982
Net increase in cash and cash equivalents		16,736		12,557
Cash and cash equivalents, at beginning of period		13,047		3,939
Cash and cash equivalents, at end of period	$	29,783	$	16,496
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	1,304	$	529

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

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Senseonics Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization

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

ASN Technologies, Inc. (“ASN”) was incorporated in Nevada on June 26, 2014. On December 4, 2015, ASN reincorporated in Delaware and changed its name to Senseonics Holdings, Inc. On December 7, 2015, Senseonics Holdings, Inc. acquired 100% of the outstanding capital stock of Senseonics, Incorporated (the "Acquisition"). Senseonics, Incorporated was originally incorporated on October 30, 1996 and commenced operations on January 15, 1997. Senseonics Holdings and its wholly-owned subsidiary Senseonics, Incorporated are hereinafter referred to as the “Company” unless the context requires otherwise.

2.Liquidity

The Company’s operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, lack of operating history and uncertainty of future profitability. Since inception, the Company has incurred substantial operating losses, principally from expenses associated with the Company’s research and development programs. The Company has not generated significant revenues from the sale of products and its ability to generate revenue and achieve profitability largely depends on the Company’s ability, alone or with others, to complete the development of its products or product candidates, and to obtain necessary regulatory approvals for the manufacture, marketing and sales of those products. These activities, including planned significant research and development efforts, will require significant uses of working capital through the remainder of 2017 and beyond.

On March 23, 2016, the Company effected the initial closing of its public offering of 15,800,000 shares of its common stock at a price to the public of $2.85 per share (the “March 2016 Offering”). Additionally, the Company closed on the partial exercise of the underwriters’ option to purchase additional shares on April 5, 2016. The Company received aggregate net proceeds from the March 2016 Offering of $44.8 million. On June 30, 2016, the Company entered into Amended and Restated Loan and Security Agreement with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) to potentially borrow up to an aggregate principal amount of $30.0 million. On June 1, 2017, the Company effected the closing of its offering of 29,078,014 shares of its common stock at a price of $1.41 per share (the “May 2017 Offering”). The Company received aggregate net proceeds from the May 2017 Offering of $40.4 million. On August 23, 2017, the Company effected the closing of its offering of 13,383,125 shares of its common stock at a price of $2.15 per share (the “August 2017 Offering”). The Company received aggregate net proceeds from the August 2017 Offering of $26.5 million. Management has concluded that, based on the Company’s current operating plans, its existing cash, cash equivalents, and marketable securities available for sale will be sufficient to meet the Company’s anticipated operating needs into the third quarter of 2018.  Accordingly, since management has concluded that the Company does not have sufficient funds to support operations through October 2018, the Company believes that doubt about the Company’s ability to continue as a going concern exists.

Historically, the Company has financed its operating activities through the sale of equity and equity linked securities and the issuance of debt. Although the Company began generating revenue from product sales of Eversense, its continuous glucose monitoring system, in June 2016, the Company does not expect product revenues to be sufficient to satisfy its operating needs for several years, if ever. Accordingly, the Company plans to continue financing its operations with external capital for the foreseeable future. However, the Company may not be able to raise additional funds on acceptable terms, or at all. If the Company is unable to secure sufficient capital to fund its research and development and other operating activities, the Company may be required to delay or suspend operations, enter into collaboration agreements with partners that could require the Company to share commercial rights to its products to a greater extent or

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at earlier stages in the product development process than is currently intended, merge or consolidate with other entities, or liquidate.

3.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the Company’s opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly its financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2016, has been derived from audited financial statements as of that date. The interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, recoverability of long-lived assets, deferred taxes and valuation allowances, depreciable lives of property and equipment, and estimated accruals for clinical and preclinical study costs, which are accrued based on estimates of work performed under contracts. Actual results could differ from those estimates; however management does not believe that such differences would be material.

Segment Information

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

Comprehensive Loss

Comprehensive loss comprises net loss and other changes in equity that are excluded from net loss. For the three and nine months ended September 30, 2017 and 2016, the Company’s net loss equaled its comprehensive loss and, accordingly, no additional disclosure is presented.

Cash Equivalents

The Company considers highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value.

Marketable Securities

Marketable securities consist of government and agency securities and corporate debt securities. The Company’s investments are classified as available for sale. Such securities are carried at fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in consolidated results of

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operations. A decline in the market value of any available for sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value, which is charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income is recognized when earned. The cost of securities sold is calculated using the specific identification method. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date as non-current assets.

Inventory

Inventory is valued at the lower of cost or market (net realizable value). Cost is determined using the standard cost method that approximates first in, first out. The Company periodically reviews inventory to determine if a write down is necessary for inventory that has become obsolete, inventory that has a cost basis less than net realizable value, and inventory in excess of future demand taking into consideration the product shelf life.

Accounts Receivable

The Company grants credit to various customers in the normal course of business. Accounts receivable consist of amounts due from distributors. The Company records an allowance for doubtful accounts at the time potential collection risk is identified. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

Property and Equipment

Property and equipment are stated at historical cost and depreciated on a straight-line basis over the estimated useful lives, generally five years. Equipment under capital leases is depreciated on a straight-line basis over the lesser of its estimated useful life or the lease term. Leasehold improvements are depreciated over the shorter of the remaining lease term or useful lives of the assets. Upon disposition of the assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statements of operations and comprehensive loss.

Management reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If the undiscounted cash flows are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Management did not identify any indicators of impairment through September 30, 2017.

Warranty Reserve

The Company may replace Eversense system components that do not function in accordance with the product specifications. Estimated replacement costs associated with a product are recorded at the time of shipment. The Company estimates future replacement costs by analyzing historical replacement experience for the timing and amount of returned product, and the Company evaluates the reserve quarterly and makes adjustments when appropriate.

Revenue Recognition

Revenue is generated from sales of sensor kits, transmitter kits, and related supplies under agreements for third-party distributors that resell the product to customers. The Company is paid for its sales directly by third-party distributors, regardless of whether or not the distributors resell the products to their customers.

The Company recognizes product sales revenue when all of the following criteria are met:

· persuasive evidence of an arrangement exists;

· delivery has occurred;

· the price is fixed or determinable; and

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· collectability is reasonably assured.

The Company offers no rights of return and has no significant post-delivery obligations and therefore, the above criteria are generally met as products are shipped to, or received by, third-party distributors.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses include costs related to employee compensation, preclinical studies and clinical trials, supplies, outsource testing, consulting and depreciation and other facilities‑related expenses.

Stock‑Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options, based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant is amortized on a straight‑line basis over the requisite service period for each separately vesting portion of the award for those awards with service conditions only. For awards that also contain performance conditions, expense is recognized beginning at the time the performance condition is considered probable of being met over the remaining vesting period.

The Company uses the Black‑Scholes option pricing model to determine the fair value of stock‑option awards. Valuation of stock awards requires management to make assumptions and to apply judgment to determine the fair value of the awards. These assumptions and judgments include estimating the fair value of the Company’s common stock, future volatility of the Company’s stock price, dividend yields, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can affect the fair value estimate.

Under Accounting Standards Codification (“ASC”) 718, the cumulative amount of compensation cost recognized for instruments classified as equity that ordinarily would result in a future tax deduction under existing tax law shall be considered to be a deductible difference in applying ASC 740, Income Taxes. The deductible temporary difference is based on the compensation cost recognized for financial reporting purposes; however, these provisions currently do not impact the Company, as all the deferred tax assets have a full valuation allowance.

Since the Company had net operating loss (“NOL”) carryforwards as of September  30, 2017, no excess tax benefits for the tax deductions related to stock-based awards were recognized in the statements of operations and comprehensive loss.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Management uses a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. Management does not expect the outcome related to accrued uncertain tax provisions to have a material adverse effect on the Company’s financial position, results of operations or cash flows.  The Company recognizes interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense. The Company did not have any amounts accrued relating to interest and penalties as of September 30, 2017 and December 31, 2016.

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The Company is subject to taxation in various jurisdictions in the United States and remains subject to examination by taxing jurisdictions for the year 1998 and all subsequent periods due to the availability of NOL carryforwards. In addition, all of the NOLs and research and development credit carryforwards that may be used in future years are still subject to adjustment.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses  approximate fair value because of their short maturities. Based on the borrowing rates currently available for loans with similar terms, the Company believes that the fair value of its long-term notes payable approximates its carrying value.

Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

For periods of net loss, diluted net loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti‑dilutive. The total number of anti‑dilutive shares, which have been excluded from the computation of diluted loss per share, was 15,986,298 and 11,484,459 common stock options and 4,570,902 and 5,127,176 stock purchase warrants exercisable for common stock as of September 30, 2017 and 2016, respectively.

For periods of net income, and when the effects are not anti-dilutive, diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options and stock purchase warrants using the treasury stock method.

Recent Accounting Pronouncements

Recently Adopted

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-11, which requires that inventory accounted for under the first-in, first-out or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted the guidance in the first quarter of fiscal year 2017. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue arising from contracts with customers. In August 2015, the FASB issued guidance approving a one-year deferral, making the standard effective for reporting periods beginning after December 15, 2017, with early adoption permitted only for reporting periods beginning after December 15, 2016. In March 2016, the FASB issued guidance to clarify the implementation guidance on principal versus agent considerations for reporting revenue gross rather than net, with the same deferred effective date. In April 2016, the FASB issued guidance to clarify the implementation guidance on identifying performance obligations and the accounting for licenses of intellectual property, with the same deferred effective date. In May 2016, the FASB issued guidance rescinding SEC paragraphs related to revenue recognition, pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting. In May 2016, the FASB also issued guidance to clarify the

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implementation guidance on assessing collectability, presentation of sales tax, noncash consideration, and contracts and contract modifications at transition, with the same effective date. The Company is currently analyzing the effect of the standard by reviewing the current accounting policy and practices to identify potential differences which would result from applying the requirements of the new standard to its revenue contracts. The Company has identified only one revenue stream, completed the contract reviews and is nearing the completion of its assessment of all potential effects of the standard. The Company plans to adopt the guidance on January 1, 2018 using the full retrospective method. 

In February 2016, the FASB issued ASU 2016-02, guidance for accounting for leases. The guidance requires lessees to recognize assets and liabilities related to long-term leases on the balance sheet and expands disclosure requirements regarding leasing arrangements. The guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The Company is currently evaluating the impact of adopting the guidance will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-015, guidance on the classification of certain cash receipts and cash payments in the statements of cash flows, including those related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, and distributions received from equity method investees. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The guidance must be adopted on a retrospective basis and must be applied to all periods presented, but may be applied prospectively if retrospective application would be impracticable. The Company is currently evaluating the impact of adopting the guidance will have on its consolidated statements of cash flows.

The Company has evaluated all other issued unadopted Accounting Standards Updates and believes the adoption of these standards will not have a material impact on its consolidated statements of earnings, balance sheets, or cash flows.

4.  Marketable Securities

Marketable securities available for sale, consisting of government and agency securities and corporate debt securities, were as follows (in thousands):

	September 30, 2017
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Government and agency securities	$	3,982	$		$		$	3,982
Corporate debt securities		18,935						18,935
Total	$	22,917	$	—	$	—	$	22,917

	December 31, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Government and agency securities	$	1,201	$	—	$	—	$	1,201
Corporate debt securities		6,090		—		—		6,090
Total	$	7,291	$	—	$	—	$	7,291

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5.  Inventory, net

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

	September 30,		December 31,
	2017		2016
Finished goods	$	523	$	477
Work-in-process		1,981		—
Raw materials		117		—
Reserve for lower of cost or net realizable value		(208)		—
Total	$	2,413	$	477

6.Accrued Expenses and Other Current Liabilities

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

	September 30,		December 31,
	2017		2016
Clinical and preclinical	$	510	$	500
Contract manufacturing		2,304		1,328
Compensation and benefits		1,754		1,774
Legal		235		314
Audit and tax related		217		320
Other		394		244
Total accrued expenses		5,414		4,480
Accrued purchases		1,541		—
Equipment lease, current portion		40		79
Compensation and benefits		38		29
Product warranty		457		78
Other		64		—
Total accrued expenses and other current liabilities	$	7,554	$	4,666

7.Commitments and Contingencies

The Company leases approximately 32,000 square feet of research and office space under a non‑cancelable operating lease expiring in 2023. The Company has an option to renew the lease for one additional five‑year term. Expense recognition is based upon a straight‑line basis and was $155,884 and $149,427 for the three months ended September 30, 2017 and 2016, respectively, and $467,653 and $376,651 for the nine months ended September 30, 2017 and 2016, respectively.

On March 31, 2016, the Company amended a corporate development agreement with a supplier to include a minimum purchase commitment per year. Total research and development expense related to the minimum payment was $242,372 and $291,000 for the three months ended September 30, 2017 and 2016, respectively, and $767,993 and $544,890 for the nine months ended September 30, 2017 and 2016, respectively. There were approximately $1.6 million of future minimum payments under this commitment at September 30, 2017.

8.401(k) Plan

The Company has a defined contribution 401(k) plan available to all full-time employees. Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal income tax regulations. Participants are fully vested in their contributions. There have been no employer contributions to this plan. Administrative expenses for the plan, which are paid by the Company, were not material in the three and nine months ended September 30, 2017.

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9.Notes Payable

Term Notes Payable

On June 30, 2016, the Company entered into an Amended and Restated Loan and Security Agreement with Oxford and SVB (the “Lenders”). Pursuant to the Amended and Restated Loan and Security Agreement, the Company may potentially borrow up to an aggregate principal amount of $30.0 million in the following four tranches: $15.0 million (“Tranche 1 Term Loan”); $5.0 million (“Tranche 2 Term Loan”); $5.0 million (“Tranche 3 Term Loan”); and $5.0 million (“Tranche 4 Term Loan”) (each, a “Term Loan,” and collectively, the “Term Loans”). The funding conditions for the Tranche 1 Term Loan were satisfied as of June 30, 2016. Therefore, the Company issued secured notes to the Lenders for aggregate gross proceeds of $15.0 million (the “Notes”) on June 30, 2016. The Company used approximately $11.0 million from the proceeds from the Notes to repay the outstanding balance under the Company’s previously existing Loan and Security Agreement with Oxford, dated as of July 31, 2014, including the applicable final payment fee due thereunder of $1 million. The Company borrowed the Tranche 2 Term Loan in November 2016 upon the Lenders’ confirmation that the Company received positive data in its U.S. pivotal trial of Eversense, and the Company submitted a pre-market approval (“PMA”) application for Eversense in the United States with the FDA. The Company borrowed the Tranche 3 Term Loan in March 2017 upon completion of the first commercial sale of its second-generation transmitter in the European Union. The Company may borrow the Tranche 4 Term Loan on or before December 31, 2017 if it receives PMA approval from the FDA for Eversense, and achieves trailing six-month revenue for the applicable period of measurement of at least $4.0 million. The maturity date for all Term Loans is June 1, 2020 (the “Maturity Date”).

The Term Loans bear interest at a floating annual rate of 6.31% plus the greater of (i) 90-day U.S. Dollar LIBOR reported in the Wall Street Journal or (ii) 0.64%, provided that the minimum floor interest rate is 6.95%, and require monthly payments. The monthly payments initially consist of interest-only.  After 18 months, the monthly payments will convert to payments of principal and monthly accrued interest, with the principal amount being amortized over the ensuing 30 months.

The Company may elect to prepay all Term Loans prior to the Maturity Date subject to a prepayment fee equal to 3.00% if the prepayment occurs within one year of the funding date of any Term Loan, 2.00% if the prepayment occurs during the second year following the funding date of any Term Loan, and 1.00% if the prepayment occurs more than two years after the funding date of any Term Loan and prior to the Maturity Date. 

The Amended and Restated Loan and Security Agreement contains customary events of default, including bankruptcy, the failure to make payments when due, the occurrence of a material impairment on the Lenders’ security interest over the collateral, a material adverse change, the occurrence of a default under certain other agreements entered into by the Company, the rendering of certain types of judgments against the Company, the revocation of certain government approvals of the Company, violation of covenants, and incorrectness of representations and warranties in any material respect.  Upon the occurrence of an event of default, subject to specified cure periods, all amounts owed by the Company would begin to bear interest at a rate that is 5.00% above the rate effective immediately before the event of default, and may be declared immediately due and payable by Lenders.

Pursuant to the Amended and Restated Loan and Security Agreement, the Company also issued 10-year stock purchase warrants to purchase an aggregate of 116,581,  63,025 and 80,645 shares of common stock at an exercise price of $3.86,  $2.38 and $1.86 per share, respectively (see Note 10).

The Notes are collateralized by all of the Company’s consolidated assets other than its intellectual property. The Notes also contain certain restrictive covenants that limit the Company’s ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions, as well as financial reporting requirements. The Company incurred issuance costs related to the Notes of approximately $568,648 that are being amortized as additional interest expense over the term of the Notes using the effective interest method. The fair value of the stock purchase warrants, which was estimated to be $526,209, was recorded as a discount to the Notes, which is also being amortized as

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additional interest expense over the term of the Notes using the effective interest method.

At maturity (or earlier prepayment), the Company is also required to make a final payment equal to 9.00% of the aggregate principal balances of the funded Term Loans. This fee is being accrued as additional interest expense over the term of the Notes using the effective interest method. In the event that the Company achieves the requirements to borrow the Tranche 4 Term Loan, and elects not to borrow the Tranche 4 Term Loan, the Company is obligated to pay the Lenders a non-utilization fee of 2.00% of the undrawn amounts.

The following are the scheduled maturities of the Term Loans as of September 30, 2017 (in thousands):

2017 (remaining three months)	$	—
2018		10,000
2019		10,000
2020		5,000
Total	$	25,000

10.Stockholders’ Equity (Deficit)

Preferred Stock

As of September 30, 2017 and December 31, 2016, the Company’s authorized capital stock included 5,000,000 shares of undesignated preferred stock, par value $0.001 per share.  No shares of preferred stock were outstanding as of September 30, 2017 or December 31, 2016.

Common Stock

As of September 30, 2017 and December 31, 2016, the Company’s authorized capital stock included 250,000,000 shares of common stock, par value $0.001 per share. The Company had 136,691,128 and 93,569,642 shares of common stock issued and outstanding at September 30, 2017 and December 31, 2016, respectively.

Stock Purchase Warrants

In connection with the issuance of the Notes, the Company also issued to the Lenders 10-year stock purchase warrants to purchase an aggregate of 116,581,  63,025 and 80,645 shares of common stock at an exercise price of $3.86,  $2.38 and $1.86 per share, respectively. The fair value of the warrants, which the Company estimated to be $526,209, was recorded as a discount to the Notes. These warrants expire on June 30, 2026, November 22, 2026, and March 29, 2027, respectively, and are classified in equity. In connection with the Company’s original Loan and Security Agreement with Oxford in 2014, the Company issued to Oxford 10-year stock purchase warrants to purchase an aggregate of 167,570 shares of common stock at an exercise price of $1.79 per share. The fair value of the warrants, which the Company estimated to be $205,150, was recorded as a discount to the promissory notes issued to Oxford in connection with the original Loan and Security Agreement. These warrants expire on November 2, 2020, July 14, 2021 and August 19, 2021, and are classified in equity. The unamortized deferred financing fees and debt discount related to the notes rollover amount will be amortized along with the deferred financing costs and the discount created by the new issuance of the warrants over the term of the loan using the effective interest method. For the three months ended September 30, 2017 and 2016, the Company recorded amortization of discount of debt of $59,061 and $38,825, respectively, and for the nine months ended September 30, 2017 and 2016, the Company recorded amortization of discount of debt of $170,859 and $65,835, respectively, within interest expense in the accompanying statements of operations and comprehensive loss.

Restricted Stock Awards

The Company issued 398,525 shares of restricted stock to the chairman of the Company’s board of directors (the “Chairman”) in December 2015, half of which were vested upon grant and half of which vested upon the completion of the March 2016 Offering, pursuant to an agreement between the Company and the Chairman, as described in greater detail

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in Note 11. In June 2016, the Company issued a fully vested restricted stock award for 300,000 shares of common stock to the Chairman to settle the outstanding obligations under the agreement. The Company recognized stock-based compensation expense of $0 and $1.2 million in the three and nine months ended September 30, 2016, respectively, related to the grant and vesting of this restricted stock. No compensation expense was recognized related to the grant or vesting of this restricted stock in 2017.

Stock‑Based Compensation

In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”) under which incentive stock options and non-qualified stock options may be granted to the Company’s employees and certain other persons in accordance with the 2015 Plan provisions. In connection with the March 2016 Offering, the Company’s board of directors adopted and the Company’s stockholders approved an Amended and Restated 2015 Equity Incentive Plan (the “amended and restated 2015 Plan”). The amended and restated 2015 Plan became effective as of the date of the pricing of the March 2016 Offering. The Company’s board of directors may terminate the amended and restated 2015 Plan at any time. Options granted under the amended and restated 2015 Plan expire ten years after the date of grant.

Pursuant to the amended and restated 2015 Plan, the number of shares initially reserved for issuance pursuant to equity awards was 17,251,115 shares, representing 8,000,000 shares plus up to an additional 9,251,115 shares in the event that options that were outstanding under the Company’s equity incentive plans as of February 16, 2016 expire or otherwise terminate without having been exercised (in such case, the shares not acquired will revert to and become available for issuance under the amended and restated 2015 Plan). The number of shares of the Company’s common stock reserved for issuance under the amended and restated 2015 Plan will automatically increase on January 1 of each year, beginning on January 1, 2017 and ending on January 1, 2026, by 3.5% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. As of September 30, 2017,  3,124,950 shares remained available for grant under the amended and restated 2015 Plan.

On May 8, 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”), under which incentive stock options and non‑qualified stock options may be granted to the Company’s employees and certain other persons in accordance with the 1997 Plan provisions. Approximately 8,393,136  shares of the Company’s common stock underlying options have vested or are expected to vest under the 1997 Plan. Upon the effectiveness of the 2015 Plan, the Company no longer grants any awards under the 1997 Plan.

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options, based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award for those awards with service conditions only. For awards that also contain performance conditions, expense is recognized beginning at the time the performance condition is considered probable of being met over the remaining vesting period.

11.Related Party Transactions

In December 2015, the Chairman received a restricted stock award of 398,525 shares of common stock pursuant to an agreement entered into with the Company (the “December Agreement”) that superseded a pre-existing agreement. One half of the shares covered by this restricted stock award were fully vested on grant. The remainder vested in full upon the completion of the Company’s March 2016 Offering, which was the specific performance condition of the award. Additionally, as a result of the completion of the March 2016 Offering, pursuant to the December Agreement, the Chairman was entitled to receive estimated compensation in the amount of $785,000.  In June 2016, the Chairman received a restricted stock award of 300,000 shares of common stock pursuant to an agreement entered into with the Company that superseded the December Agreement and satisfied the outstanding compensation obligation under the December Agreement. All of the shares covered by this restricted stock award were fully vested on date of grant.

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12.Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date. Fair value has a three level hierarchy from highest priority (Level 1) to lowest priority (Level 3). The fair value hierarchy reflects whether the inputs are observable from independent sources or rely on unobservable inputs based on the Company’s market assumptions. The three levels of the fair value hierarchy are described below:

· Level 1—Quoted prices for identical assets or liabilities (unadjusted) in active markets.

· Level 2—Observable inputs other than quoted prices that are either directly or indirectly observable for the assets or liability.

· Level 3—Unobservable inputs that are supported by little or no market activity.

The levels are not necessarily an indication of the risk of liquidity associated with the financial assets or liabilities disclosed.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has segregated its financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. The inputs used in measuring the fair value of the Company’s money market funds included in cash equivalents are considered to be Level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the funds.

The following table represents the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands):

	September 30, 2017
	Total		Level 1		Level 2		Level 3
Money market funds	$	20,349	$	20,349	$	—	$	—
Government and agency securities		3,982		—		3,982		—
Corporate debt securities		18,935		—		18,935		—

	December 31, 2016
	Total		Level 1		Level 2		Level 3
Money market funds	$	10,601	$	10,601	$	—	$	—
Government and agency securities		1,201		—		1,201		—
Corporate debt securities		6,589		—		6,589		—

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company has no financial assets and liabilities that are measured at fair value on a non-recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has no non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non‑Financial Assets and Liabilities Measured at Fair Value on a Non‑Recurring Basis

The Company measures its long‑lived assets, including property and equipment, at fair value on a non‑recurring basis. These assets are recognized at fair value when they are deemed to be impaired. No such fair value impairment was recognized in the three and nine months ended September 30, 2017 and 2016.

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13.Income Taxes

The Company has not recorded any tax provision or benefit for the three and nine months ended September 30, 2017 or September 30, 2016. The Company has provided a valuation allowance for the full amount of its net deferred tax assets since realization of any future benefit from deductible temporary differences, NOL carryforwards and research and development credits is not more-likely-than-not to be realized at September 30, 2017 and December 31, 2016.

14.Litigation

From time to time, the Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company has evaluated claims in accordance with the accounting guidance for contingencies that it deems both probable and reasonably estimable and, accordingly, has recorded aggregate liabilities for all claims of approximately $40,000 as of December 31, 2016. These amounts are reported on the consolidated balance sheets within accrued and other liabilities and other noncurrent liabilities. This liability was settled for $43,237 on April 4, 2017. As of September 30, 2017, there were  no recorded liabilities related to pending litigation, claims arising from the ordinary course of business, or other legal matters.

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

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2016, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2017.

Overview

We were originally incorporated as ASN Technologies, Inc. in Nevada on June 26, 2014. On December 4, 2015, we were reincorporated in Delaware and changed our name to Senseonics Holdings, Inc. Also, on December 4, 2015, we entered into a merger agreement with Senseonics, Incorporated and SMSI Merger Sub, Inc., or the Merger Agreement, to acquire Senseonics, Incorporated. Senseonics, Incorporated was originally incorporated on October 30, 1996 and commenced operations on January 15, 1997. The transactions contemplated by the Merger Agreement were consummated on December 7, 2015, referred to herein as the Acquisition. Pursuant to the terms of the Merger Agreement, (i) all issued and outstanding shares of Senseonics, Incorporated's preferred stock were converted into shares of Senseonics, Incorporated common stock, $0.01 par value per share, or the Senseonics Shares, (ii) all outstanding Senseonics Shares were exchanged for 57,739,953 shares of our common stock, $0.001 par value per share, or the Company Shares, reflecting an exchange ratio of one Senseonics Share for 2.0975 Company Shares, or the Exchange Ratio, and (iii) all outstanding options and warrants to purchase Senseonics Shares, or the Senseonics Options and Senseonics Warrants, respectively, were each exchanged or replaced with options and warrants to acquire shares of our common stock, or the Company Options and Company Warrants, respectively. Accordingly, Senseonics, Incorporated became our wholly-owned subsidiary.

Following the closing of the Acquisition, the business of Senseonics, Incorporated became our sole focus and all of our operations following the closing of the Acquisition consist of the historical Senseonics, Incorporated business. Unless otherwise indicated or the context otherwise requires, all references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section to "the Company," "we," "our," "ours," "us" or similar terms refer to (i) Senseonics, Incorporated prior to the closing of the Acquisition, and (ii) Senseonics Holdings, Inc. and its subsidiaries subsequent to the closing of the Acquisition and all share and per share information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section gives retroactive effect to the exchange of Senseonics Shares, Senseonics Options and Senseonics Warrants for Company Shares, Company Options and Company Warrants, respectively, in the Acquisition, as well as the corresponding exercise price adjustments for the such options and warrants.

We are a medical technology company focused on the design, development and commercialization of glucose monitoring products to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy. Our continuous glucose monitoring, or CGM, systems,  Eversense and Eversense XL,  are

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reliable, long‑term, implantable CGM systems that we have designed to continually and accurately measure glucose levels in people with diabetes for a period of up to 90 and 180 days, respectively, as compared to six to fourteen days for currently available CGM systems. We believe Eversense and Eversense XL will provide people with diabetes with a more convenient method to monitor their glucose levels in comparison with the traditional method of self‑monitoring of blood glucose, or SMBG, as well as currently available CGM systems. Our Eversense and Eversense XL systems are currently approved for sale in Europe and we submitted our Eversense system pre-market approval, or PMA, application to the U.S. Food and Drug Administration, or FDA, in October 2016. We intend to initiate commercial launch in the United States promptly following the receipt of PMA approval.

Corporate History

From our founding in 1996 until 2010, we devoted substantially all of our resources to researching various sensor technologies and platforms. Beginning in 2010, we narrowed our focus to designing, developing and refining a commercially viable glucose monitoring system. On May 10, 2016, we received regulatory approval to commercialize Eversense in Europe. In June 2016, we made our first product shipment of Eversense through our distribution agreement with Rubin Medical, or Rubin. Since our inception, we have funded our activities primarily through equity and debt financings.

In March 2016, we completed a public offering of our common stock, or the March 2016 Offering, selling 15,800,000 shares of common stock at a price to the public of $2.85 per share, for aggregate gross proceeds of $45.0 million. Net proceeds from the March 2016 Offering were approximately $40.9 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs payable by us. In April 2016, the underwriters for the March 2016 Offering partially exercised their option to purchase additional shares of common stock, purchasing an additional 1,439,143 shares, from which we received additional net proceeds of approximately $3.9 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs payable by us.

On June 30, 2016 we entered into an Amended and Restated Loan and Security Agreement with Oxford Finance LLC, or Oxford, and Silicon Valley Bank, or SVB, to potentially borrow up to an aggregate principal amount of $30.0 million. Under the terms of the agreement, we initially borrowed an aggregate of $15 million from Oxford and SVB on June 30, 2016. We used $11 million of the $15 million to retire existing loans with Oxford, including a final payment fee of $1 million. In each of November 2016 and March 2017, we borrowed an additional $5 million upon achieving certain milestones. The agreement also permits us to borrow up to an additional $5 million upon the achievement of specified milestones through the end of 2017. The agreement provides for monthly payments of interest only for a period of 18 months, followed by an amortization period of 30 months.

In June 2017, we completed an underwritten offering of our common stock, or the May 2017 Offering, selling 29,078,014 shares of common stock at a price of $1.41 per share, for aggregate gross proceeds of $41.0 million. Net proceeds from the May 2017 Offering were approximately $40.4 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs payable by us.

In August 2017, we completed an underwritten offering of our common stock, or the August 2017 Offering, selling 13,383,125 shares of common stock at a price of $2.15 per share, for aggregate gross proceeds of $28.8 million. Net proceeds from the August 2017 Offering were approximately $26.5 million after deducting underwriting discounts and commissions and estimated offering-related transaction costs payable by us.

We have never been profitable and our net losses were $17.4 million and $10.9 million for three months ended September 30, 2017 and 2016, respectively, and $42.8 million and $34.0 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, our accumulated deficit totaled $247.5 million, primarily as a result of expenses incurred in connection with our research and development programs and from general and administrative expenses associated with our operations. We expect to continue to incur significant expenses and increasing operations and net losses for the foreseeable future.

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European Development and Commercialization of Eversense

In May 2016, we received our CE mark for Eversense, which allows us to market and sell Eversense in Europe. In connection with our CE Mark, we have agreed to conduct post market surveillance activities. In June 2016, we commenced commercialization of Eversense in Sweden through our distribution agreement with Rubin, which also has the right to distribute Eversense in Norway and Denmark. Rubin markets and sells medical products for diabetes treatment in the Scandinavian region, including as the exclusive Scandinavian distributor for the insulin pump manufacturer Animas Corporation.

In May 2016, we entered into a distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH, together referred to as Roche, pursuant to which we granted Roche the exclusive right to market, sell and distribute Eversense in Germany, Italy and the Netherlands.  In November 2016, we entered into an amendment to the distribution agreement granting Roche the exclusive right to market, sell and distribute Eversense in Europe, the Middle East and Africa, excluding Sweden, Norway, Denmark, Finland and Israel. Roche is a pioneer in the development of blood glucose monitoring systems and a global leader for diabetes management systems and services. We began distributing Eversense through Roche in Germany in September 2016 and in Italy and the Netherlands in the fourth quarter of 2016. To date, we have begun distributing Eversense in an aggregate of 13 European countries through Rubin and Roche.

In September 2017, we received the CE Mark for Eversense XL, which is indicated for a sensor life to up to 180 days. We plan to begin to commercialize Eversense XL in selected European countries by the end of 2017. We are also developing Eversense Now, an application designed to remotely monitor the Eversense users’ CGM data in real time. We expect to receive approval to market Eversense Now in Europe by the end of 2017.

United States Development of Eversense

In 2016, we completed our Precise II pivotal clinical trial in the United States. This trial, which was fully enrolled with 90 subjects, was conducted at eight sites in the United States. In the trial, we measured the accuracy of Eversense measurements through 90 days after insertion. We also assessed safety through 90 days after insertion or through sensor removal. In the trial, we observed a mean absolute relative difference, or MARD, of 8.8% utilizing two calibration points for Eversense across the 40-400 mg/dL range when compared to YSI blood reference values during the 90-day continuous wear period. We also observed a MARD of 9.5% utilizing one calibration point for Eversense across the 40-400 mg/dL range when compared to YSI blood reference values during the 90-day continuous wear period. Based on the data from this trial, in October 2016 we submitted a pre-market approval, or PMA, application to the FDA to market Eversense in the United States. We are currently anticipating approval in the first half of 2018. However, the ultimate timing of PMA approval is uncertain and will depend on many factors, including whether the FDA would require the review of Eversense by an advisory panel and the related logistics of convening a panel, the degree and nature of questions raised by the FDA in its review process, and our ability to submit additional data or other information that adequately addresses questions raised by the FDA. Accordingly, we cannot guarantee the timing of receipt of PMA approval, if at all. For commercialization in the United States, we intend to distribute our product through our own direct sales and marketing organization. We have received Category III CPT codes for the insertion and removal of the Eversense sensor. Following PMA approval, we intend to pursue a Category I CPT code.

We expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. In addition, we expect that our expenses will increase substantially as we continue the research and development of our other products and maintain, expand and protect our intellectual property portfolio and seek regulatory approvals in other jurisdictions. Furthermore, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. We will need to obtain substantial additional funding in connection with our continuing operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. However, we may be unable to raise additional funds when needed on favorable terms or at all. Our failure to raise such capital as and when needed would have a material and adverse impact on our financial condition and our ability to develop and commercialize Eversense and future products and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.

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Financial Overview

Revenue

During the three and nine months ended September 30, 2017, we generated product revenue from sales of the Eversense system in Europe pursuant to distribution agreements with Roche and Rubin, and we expect to continue marketing Eversense in additional European countries during 2017 and begin marketing Eversense XL in selected European countries by the end of 2017.  We expect our revenue from European product sales will increase as we ramp up our commercialization efforts through the remainder of 2017 and into 2018. In the future, subject to regulatory approval, we also intend to seek to commercialize the Eversense system in the United States, as well as other international markets. If we fail to successfully commercialize or are otherwise unable to complete the development of the Eversense system, our ability to generate future revenue, and our results of operations and financial position, will be adversely affected.

Cost of Sales

We utilize contract manufacturers to produce the Eversense system. Cost of sales consists primarily of the components of the Eversense system and assembly, as well as reserves for warranty costs. Other cost of sales includes distribution-related expenses such as logistics and shipping costs of Eversense to Roche and Rubin for distribution in various regions in Europe, the Middle East and Africa. We calculate gross margin as revenue less costs of sales divided by revenue. We expect our overall gross margin to improve over the long term, as our sales increase and we have more opportunities to spread our costs over larger production volumes. However, our gross margins may fluctuate from period to period.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries and other related costs, including stock‑based compensation, for personnel who perform sales and marketing functions. Other significant costs include promotional materials and tradeshow expenses.

We anticipate that our sales and marketing expenses will increase in the future as we continue to expand our commercialization of the Eversense system.

Research and Development

Research and development expenses consist of expenses incurred in performing research and development activities in developing the Eversense system, including our clinical trials and feasibility studies. Research and development expenses include compensation and benefits for research and development employees including stock‑based compensation, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, costs related to regulatory operations, fees paid to contract research organizations and other consultants, and other outside expenses. Research and development costs are expensed as incurred.

We have incurred significant research and development expenses from inception, with the substantial majority of the expenses spent on the development of Eversense. We expect to continue to commit significant resources to continue to develop Eversense and future product enhancements and to conduct ongoing and future clinical trials. We expect that our overall research and development expenses will continue to increase in absolute dollars, but to decline as a percentage of total expenses as we expand the commercialization of Eversense.

General and Administrative

General and administrative expenses consist primarily of salaries and other related costs, including stock‑based compensation, for personnel in our executive, finance, accounting, business development, and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and fees for accounting and consulting services.

Our general and administrative expenses have increased, and we expect them to continue to increase in the future, as a result of operating as a public company. These increases include increased costs related to the hiring of additional personnel and increased fees to outside consultants, lawyers and accountants as well as expenses related to

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maintaining compliance with NYSE American listing rules and SEC requirements, insurance, and investor relations costs. These expenses may further increase when we no longer qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, which will require us to comply with certain reporting requirements from which we are currently exempt.

Other Income (Expense), Net

Interest income consists of interest earned on our cash equivalents and interest expense primarily consists of interest expense on the secured notes, or the Notes, we issued to Oxford in connection with our original Loan and Security Agreement in July and December 2014 and the Notes we issued to Oxford and SVB in connection with our Amended and Restated Loan and Security Agreement in June 2016, November 2016 and March 2017. We refer to Oxford and SVB together as the Lenders. This interest expense primarily consists of (i) contractual interest on the Notes, (ii) amortization of debt discount related to warrants, or the warrants, that we issued to the Lenders in connection with the Notes, and (iii) the accrual into interest expense of a final payment obligation that we are required to pay to the Lenders at maturity of the Notes. 

Results of Operations

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

The following table sets forth our results of operations for the three months ended September 30, 2017 and 2016.

	Three Months Ended
	September 30,				Period-to-
	2017		2016		Period Change
	(in thousands)
Revenue	$	2,097	$	37	$	2,060
Cost of sales		2,957		114		2,843
Gross profit		(860)		(77)		(783)
Expenses:
Sales and marketing expenses		2,089		733		1,356
Research and development expenses		9,765		6,883		2,882
General and administrative expenses		3,891		2,819		1,072
Operating loss		(16,605)		(10,512)		(6,093)
Other income (expense), net:
Interest income		129		35		94
Interest expense		(915)		(502)		(413)
Other income		12		92		(80)
Total other expense, net		(774)		(375)		(399)
Net loss	$	(17,379)	$	(10,887)	$	(6,492)

Revenue

Our revenue increased to $2.1 million for the three months ended September 30, 2017, compared to $37,000 for the three months ended September 30, 2016. This increase was due to a higher number of shipments of Eversense to Rubin and Roche for distribution in Europe during the three months ended September 30, 2017.

Cost of sales

Our cost of sales increased to $3.0 million for the three months ended September 30, 2017, compared to $114,000 for the three months ended September 30, 2016. This increase was due to increased manufacturing and distribution of Eversense to Roche and Rubin for distribution in Europe during the three months ended September 30,  2017.

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Our gross profit was $(0.9) million and $(77,000) for the three months ended September 30, 2017 and 2016, respectively. Gross profit as a percentage of revenue, or gross margin, was  (41.0)% in the three months ended September 30, 2017. 

Sales and marketing expenses

Sales and marketing expenses were $2.1 million for the three months ended September 30, 2017, compared to $0.7 million for the three months ended September 30, 2016, an increase of $1.4 million. The $1.4 million increase was primarily due to a $0.7 million increase in salaries, bonuses and payroll related costs for additional headcount, and a $0.7 million increase in other sales and general marketing expenses to support our European distribution of Eversense as well as in preparation for our potential U.S. launch of Eversense.

Research and development expenses

Research and development expenses were $9.8 million for the three months ended September 30, 2017, compared to $6.9 million for the three months ended September 30, 2016, an increase of $2.9 million. The increase of $2.9  million was primarily due to a $0.9 million increase in salaries, bonuses and payroll related costs for additional headcount and a $2.0 million increase in research and development expenses related to development of future generations of Eversense,  including conducting a pediatric clinical trial in Canada and additional feasibility trials in Romania.

General and administrative expenses

General and administrative expenses were $3.9 million for the three months ended September 30, 2017, compared to $2.8 million for the three months ended September 30, 2016, an increase of $1.1 million. The increase was primarily due to a $0.4 million increase in salaries, bonuses and payroll related costs for additional headcount, a $0.2 million increase in recruiting and relocation costs to support hiring efforts, and a $0.5 million increase in legal and other general and administrative costs.

Total other expense, net

Total other expense, net, for the three months ended September 30, 2017 and 2016 was $0.8 million and $0.4 million, respectively, consisting primarily of interest expense on our debt facilities.

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

The following table sets forth our results of operations for the nine months ended September 30, 2017 and 2016.

	Nine Months Ended
	September 30,				Period-to-
	2017		2016		Period Change
	(in thousands)
Revenue	$	3,464	$	56	$	3,408
Cost of sales		5,716		148		5,568
Gross profit		(2,252)		(92)		(2,160)
Expenses:
Sales and marketing expenses		4,478		2,001		2,477
Research and development expenses		22,368		20,838		1,530
General and administrative expenses		11,545		10,060		1,485
Operating loss		(40,643)		(32,991)		(7,652)
Other income (expense), net:
Interest income		187		69		118
Interest expense		(2,365)		(1,045)		(1,320)
Other income (expense)		(5)		3		(8)
Total other expense, net		(2,183)		(973)		(1,210)
Net loss	$	(42,826)	$	(33,964)	$	(8,862)

Revenue

Our revenue increased to $3.5 million for the nine months ended September 30, 2017, compared to $56,000 for the nine months ended September 30,  2016. This increase was due to a higher number of shipments of Eversense to Rubin and Roche for distribution in Europe during the nine months ended September 30, 2017.

Cost of sales

Our cost of sales increased to $5.7 million for the nine months ended September 30, 2017, compared to $148,000 for the nine months ended September 30,  2016. This increase was due to increased manufacturing and distribution of Eversense to Roche and Rubin for distribution in Europe during the nine months ended September 30, 2017.

Our gross profit was $(2.3) million and $(92,000) for the nine months ended September 30, 2017 and 2016, respectively.  Gross margin was (65.0)% in the nine months ended September 30, 2017.

Sales and marketing expenses

Sales and marketing expenses were $4.5 million for the nine months ended September 30, 2017, compared to $2.0 million for the nine months ended September 30, 2016, an increase of $2.5 million. The $2.5 million increase was primarily due to a $1.1 million increase in salaries, bonuses and payroll related costs for additional headcount, and a $1.4 million increase in other sales and general marketing expenses,  primarily driven by $0.9 million of travel and consulting expenses, to support European distribution of Eversense.

Research and development expenses

Research and development expenses were $22.4 million for the nine months ended September 30, 2017, compared to $20.8 million for the nine months ended September 30, 2016, an increase of $1.5 million. The increase of $1.5 million was primarily due to a $1.9 million increase in salaries, bonuses and payroll related costs for additional headcount and a $1.0 million increase in expenses related to development of future generations of Eversense, partially offset by a $1.4 million decrease in clinical and consulting expenses related to the completion of our U.S. pivotal trial in 2016.

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General and administrative expenses

General and administrative expenses were $11.5 million for the nine months ended September 30, 2017, compared to $10.1 million for the nine months ended September 30, 2016, an increase of $1.4 million. The increase was primarily due to a $0.7 million increase in recruiting and relocation costs, a $0.4 increase in information and technology spending for services to support our operations, and a $0.3 million increase in legal and general spending.

Total other expense, net

Total other expense, net, for the nine months ended September 30, 2017 and 2016 was $2.2 million and $1.0 million, respectively, consisting primarily of interest expense on our debt facilities.

Liquidity and Capital Resources

Sources of Liquidity

From our founding in 1996 until 2010, we devoted substantially all of our resources to researching various sensor technologies and platforms. Beginning in 2010, we narrowed our focus to designing, developing and refining a commercially viable glucose monitoring system. However, to date, we have not generated any significant revenue from product sales. We have incurred substantial losses and cumulative negative cash flows from operations since our inception in October 1996. We have never been profitable and our net losses were $17.4 million and $10.9 million for the three months ended September 30, 2017 and 2016, respectively, and $42.8 million and $34.0 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, our accumulated deficit totaled $247.5 million.

To date, we have funded our operations principally through the issuance of preferred stock, common stock and debt. As of September  30, 2017, we had cash and cash equivalents and marketable securities of $52.7 million. Under the terms of the Amended and Restated Loan and Security Agreement with Oxford and SVB, we may borrow up to an aggregate principal amount of $30.0 million. Under this debt facility, we initially borrowed an aggregate of $15 million from Oxford and SVB on June 30, 2016. We used $11 million of the $15 million to retire existing loans with Oxford, including a final payment fee of $1 million. In each of November 2016 and March 2017, we borrowed an additional $5 million from Oxford and SVB upon achieving certain milestones. The agreement provides for monthly payments of interest only for a period of 18 months, followed by an amortization period of 30 months.

Our ability to generate revenue and achieve profitability depends on our completion of the development of Eversense and future product candidates and obtaining of necessary regulatory approvals for the manufacture, marketing and sales of those products. These activities, including our planned significant research and development efforts, will require significant uses of working capital through 2017 and beyond. Upon the completion of the audit of our consolidated financial statements for the year ended December 31, 2016, we did not have sufficient cash to fund our operations beyond the third quarter of 2017 without additional financing and, therefore, we concluded there was substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph regarding this uncertainty in its report on those consolidated financial statements. The financial information throughout this Quarterly Report and the unaudited consolidated financial statements included elsewhere in this Quarterly Report have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and these statements do not include any adjustments that may result from the outcome of this uncertainty.

We expect our existing cash, cash equivalents, and marketable securities available for sale as of September 30, 2017 will enable us to fund our operations into the third quarter of 2018, without receiving additional funding. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Additionally, the process of clinical and regulatory development of medical devices is costly, and the timing of progress of these efforts is uncertain.

We anticipate that we will continue to incur losses for the foreseeable future. We expect that our research and

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development expenses and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations. Until such time, if ever, as we can generate substantial revenue, we expect to finance our cash needs through a combination of equity offerings, which may include additional follow-on offerings or through an at-the-market facility, debt financings and revenue from potential research and development and other collaboration agreements. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant licenses to develop and market products that we would otherwise prefer to develop and market ourselves.

Indebtedness

On June 30, 2016, we entered into an Amended and Restated Loan and Security Agreement with the Lenders. Pursuant to the Amended and Restated Loan and Security Agreement, we may potentially borrow up to an aggregate principal amount of $30.0 million in the following four tranches: $15.0 million, or the Tranche 1 Term Loan; $5.0 million, or the Tranche 2 Term Loan; $5.0 million, or the Tranche 3 Term Loan; and $5.0 million, or the Tranche 4 Term Loan. We refer to each of the tranches as a Term Loan, and collectively, the Term Loans. The funding conditions for the Tranche 1 Term Loan were satisfied as of June 30, 2016. Therefore, we issued secured notes to the Lenders for aggregate gross proceeds of $15.0 million, or the Notes, on June 30, 2016. We used approximately $11.0 million from the proceeds from the Notes to repay the outstanding balance under our previously existing Loan and Security Agreement with Oxford, dated as of July 31, 2014, including the applicable final payment fee due thereunder of $1 million. On November 22, 2016, the funding conditions for the Tranche 2 Term Loan were satisfied; therefore we issued secured notes to the Lenders for aggregate gross proceeds of $5.0 million. On March 29, 2017, the funding conditions for the Tranche 3 Term Loan were satisfied; therefore we issued secured notes to the Lenders for aggregate gross proceeds of $5.0 million. We may borrow the Tranche 4 Term Loan on or before December 31, 2017 if we receive PMA approval from the FDA for Eversense, and achieve trailing six-month revenue for the applicable period of measurement of at least $4.0 million. The maturity date for all Term Loans is June 1, 2020, or the Maturity Date.

The Term Loans bear interest at a floating annual rate of 6.31% plus the greater of (i) 90-day U.S. Dollar LIBOR reported in the Wall Street Journal or (ii) 0.64%, provided that the minimum floor interest rate is 6.95%, and require monthly payments. The monthly payments initially consist of interest-only. After 18 months, the monthly payments will convert to payments of principal and monthly accrued interest, with the principal amount being amortized over the ensuing 30 months.

We may elect to prepay all Term Loans prior to the Maturity Date subject to a prepayment fee equal to 3.00% if the prepayment occurs within one year of the funding date of any Term Loan, 2.00% if the prepayment occurs during the second year following the funding date of any Term Loan, and 1.00% if the prepayment occurs more than two years after the funding date of any Term Loan and prior to the Maturity Date. 

The Amended and Restated Loan and Security Agreement contains customary events of default, including bankruptcy, the failure to make payments when due, the occurrence of a material impairment on the Lenders’ security interest over the collateral, a material adverse change, the occurrence of a default under certain other agreements entered into by us, the rendering of certain types of judgments against us, the revocation of certain of our government approvals, violation of covenants, and incorrectness of representations and warranties in any material respect.  Upon the occurrence of an event of default, subject to specified cure periods, all amounts owed by us would begin to bear interest at a rate that is 5.00% above the rate effective immediately before the event of default, and may be declared immediately due and payable by Lenders.

Pursuant to the Amended and Restated Loan and Security Agreement, we also issued to the Lenders 10‑year stock purchase warrants to purchase an aggregate of 116,581, 63,025 and 80,645 shares of common stock with an exercise price of $3.86, $2.38, and $1.86 per share.

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The Notes are collateralized by all of our consolidated assets other than our intellectual property. The Notes also contain certain restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions, as well as financial reporting requirements. We incurred issuance costs related to the Notes of approximately $568,648 that are being amortized as additional interest expense over the term of the Notes using the effective interest method. The fair value of the stock purchase warrants, which was estimated to be $526,209, was recorded as a discount to the Notes, which is also being amortized as additional interest expense over the term of the Notes using the effective interest method.

At maturity (or earlier prepayment), we are also required to make a final payment equal to 9.00% of the aggregate principal balances of the funded Term Loans. This fee is being accrued as additional interest expense over the term of the Notes using the effective interest method. In the event that we achieve the requirements to borrow the Tranche 4 Term Loan, and elect not to borrow that tranche, we are obligated to pay the Lenders a non-utilization fee of 2.00% of the undrawn amount.

Cash Flows

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

	Nine Months Ended
	September 30,
	2017		2016
	(in thousands)
Net cash used in operating activities	$	(39,450)	$	(27,797)
Net cash used in investing activities		(15,864)		(9,628)
Net cash provided by financing activities		72,050		49,982
Net increase in cash and cash equivalents	$	16,736	$	12,557

Net cash used in operating activities

Net cash used in operating activities was $39.5 million for the nine months ended September 30, 2017, and consisted primarily of a net loss of $42.8 million and a net decrease in operating assets and liabilities of $0.1 million (consisting of an increase in accounts payable, accrued expenses and interest of $5.6 million, net of an increase in accounts receivable, inventory, and prepaid expenses and other current assets of $5.5 million), partially offset by stock-based compensation expense of $2.7 million, and depreciation, non-cash interest expense, and write-down of the carrying value of our inventory to net realizable value of an aggregate amount of $0.7 million.

Net cash used in operating activities was $27.8 million for the nine months ended September 30, 2016, and consisted primarily of a net loss of $34.0 million, partially offset by stock-based compensation expense of $1.8 million, depreciation and non-cash interest expense of $0.2 million, a change in fair value of derivatives of $0.3 million, and a net change in assets and liabilities of $3.9 million (consisting of an increase in accounts payable, accrued expenses and interest, and deferred rent of $3.7 million, and an increase in prepaid expenses, inventory, deposits and other assets of $0.2 million).

Net cash used in investing activities

Net cash used in investing activities was $15.9 million for the nine months ended September 30, 2017,  and consisted of purchases of marketable securities of $25.9 million and capital expenditures of $0.3 million, partially offset by sales and maturities of marketable securities of $10.3 million.

Net cash used in investing activities was $9.6 million for the nine months ended September 30, 2016, and consisted of capital expenditures of $9.2 million used for the purchase of marketable securities and $0.4 million used for laboratory equipment and leasehold improvements.

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Net cash provided by financing activities

Net cash provided by financing activities was $72.1 million for the nine months ended September 30, 2017,  and consisted primarily of the net proceeds received from the May 2017 Offering and August 2017 Offering of $66.9 million, notes payable and warrants of $5.0 million, and the exercise of stock options of $0.2 million.

Net cash provided by financing activities was $50.0 million for the nine months ended September 30, 2016, and consisted primarily of the net proceeds received from the March 2016 Offering of $45.8 million and notes payable of $4.2 million.

Contractual Obligations

The following summarizes our contractual obligations as of September 30, 2017.

	Payment due by period
			Remainder of						After
Contractual Obligations	Total		2017		2018-2019		2020-2021		2021
	(in thousands)
Operating lease obligations	$	3,600	$	154	$	1,218	$	1,278	$	950
Payments under corporate development agreement(1)		1,550		261		381		908		—
Principal payments under Notes(2)		25,000		—		20,000		5,000		—
Interest payments under Notes(2)		5,132		471		2,302		2,359		—
Total contractual obligations	$	35,282	$	886	$	23,901	$	9,545	$	950

(1) Represents minimum payment obligations under a corporate development agreement to purchase current application-specific integrated circuits, which are subcomponents of the sensors used in Eversense.

(2) Represents the principal and interest payment schedule for the $25 million principal amount of the Notes that were outstanding as of September 30, 2017.

Off‑Balance Sheet Arrangements

During three and nine months ended September 30, 2017 we did not have, and we do not currently have, any off‑balance sheet arrangements, as defined under SEC rules.

JOBS Act

In April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) not being required to provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes‑Oxley Act and (ii) not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (b) the last day of our fiscal year ending December 31, 2019; (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous six years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

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Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of revenue and expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the date of the change in estimate.

Management considers an accounting policy to be critical if it is important to our financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. The development and selection of these critical accounting policies have been determined by our management. Due to the significant judgment involved in selecting certain of the assumptions used in these areas, it is possible that different parties could choose different assumptions and reach different conclusions.

We believe there have been no material changes to our critical accounting policies and use of estimates as disclosed in the footnotes to our audited financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2017.

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of September 30, 2017, we had cash, cash equivalents, and marketable securities of $52.7 million. We generally hold our cash in interest-bearing money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents. Additionally, the interest rate on our Notes is fixed. We do not currently engage in hedging transactions to manage our exposure to interest rate risk.

Foreign Currency Risk

We expect that our international sales through distributors and the costs we incur in connection with our international operations will be denominated in U.S. dollars. Therefore, we do not expect that our results of operations will be materially affected by foreign exchange rate risks. However, our distributors' sales of our products in international markets to their customers will be denominated in local currencies. Therefore, it is possible that, when the U.S. dollar appreciates, products sales could be adversely impacted, as our products will become more expensive to the customers of our distributors. We do not currently engage in any hedging transactions to manage our exposure to foreign currency exchange rate risk.

ITEM 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision of and with the participation of our management, including our chief executive officer, who is our principal executive officer, and our chief financial officer, who is our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2017, the end

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of the period covered by this Quarterly Report. The term “disclosure controls and procedures,” as set forth in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected. Based on the evaluation of our disclosure controls and procedures as of September 30, 2017, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1: Legal Proceedings

From time to time, we are subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results or financial condition.

ITEM 1A: Risk Factors

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. Except for the risk factors described below, our risk factors as of the date of this Quarterly Report on Form 10-Q have not changed materially from those described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on February 23, 2017. 

Risks Related to our Financial Results and Need for Financing

We will need to raise substantial additional funds in the future, and these funds may not be available on acceptable terms or at all. A failure to obtain this necessary capital when needed could force us to delay, limit, scale back or cease some or all operations.

At the time that the unaudited consolidated financial statements for the quarter ended September  30, 2017 included in this report were completed, we did not have sufficient cash to fund our operations as currently and planned to

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be conducted through the third quarter of 2018 without additional financing and, therefore, we concluded there was substantial doubt about our ability to continue as a going concern. At September  30, 2017, we had approximately $52.7 million in aggregate cash, cash equivalents and marketable securities, and we have insufficient committed sources of additional capital to fund our operations as described in this Quarterly Report for more than a limited period of time. We believe our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations into the third quarter of 2018 without substantially curtailing our current and planned operations or obtaining additional financing. The continued growth of our business, including the establishment of our sales and marketing infrastructure, and research and development activities will significantly increase our expenses. In addition, the amount of our future product sales is difficult to predict and actual sales may not be in line with our expectations. As a result, we may be required to seek substantial additional funds in the future. Our future capital requirements will depend on many factors, including:

· the cost of obtaining and maintaining regulatory clearance or approval for Eversense or future generations of Eversense;

· the costs associated with developing and commercializing our products;

· any change in our development priorities regarding our future generations of Eversense;

· the revenue generated by sales of Eversense or future generations of Eversense;

· the costs associated with expanding our sales and marketing infrastructure;

· any change in our plans regarding the manner in which we choose to commercialize our products in the United States;

· the cost of ongoing compliance with regulatory requirements;

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

· anticipated or unanticipated capital expenditures; and

· unanticipated general and administrative expenses.

As a result of these and other factors, we do not know the extent to which we may be required to raise additional capital. We may in the future seek additional capital from public or private offerings of our capital stock, which may include additional follow-on offerings or through an at-the-market facility, borrowings under credit lines or other sources. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies, or grant licenses on terms that are not favorable to us.

We may not be able to generate sufficient cash to service our indebtedness, which currently consists of our term loan with the Lenders. In addition, although we potentially have the ability to borrow additional funds under the Amended and Restated Loan and Security Agreement, we may be unable to borrow those additional funds or we may be unable to generate sufficient cash to service any additional indebtedness that we do incur.

In June 2016, we issued secured Notes to Oxford and SVB, or the Lenders, in a private placement for aggregate gross proceeds of $15.0 million, pursuant to a Term Loan under our Amended and Restated Loan and Security Agreement that matures on June 1, 2020.  We used approximately $11.0 million from the proceeds from the Notes to repay the outstanding balance under our previously existing Loan and Security Agreement with Oxford, dated as of July 31, 2014, including the applicable final payment fee due thereunder of $1 million. In November 2016, we borrowed an additional $5 million upon the achievement of certain milestones, and in March 2017, we borrowed another $5 million upon the achievement of certain milestones. Our obligations under the Amended and Restated Loan and Security Agreement are secured by a first priority security interest in substantially all of our assets, other than our intellectual property. Our Amended and Restated Loan and Security Agreement with the Lenders also contains certain restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions, as well as financial reporting requirements. We were in compliance with the affirmative and restrictive covenants as of September 30, 2017. We may also enter into other debt agreements in the future which may contain similar or more restrictive terms.

30

In addition, pursuant to the Amended and Restated Loan and Security Agreement, we may also have the ability to borrow up to an aggregate of an additional $5 million upon the achievement of specified milestones, and the funding of specific tranches under the agreement, through the end of 2017. We will not be able to borrow the additional $5 million under the Amended and Restated Loan and Security Agreement if we do not achieve the specified milestones.

Our ability to make scheduled monthly payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash reserves and our actual and projected financial and operating performance. These amounts and our performance are subject to certain financial and business factors, as well as prevailing economic and competitive conditions, some of which may be beyond our control. We cannot assure you that we will maintain a level of cash reserves or cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our existing or future indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to curtail our operations, reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, or that these actions would permit us to meet our scheduled debt service obligations. Failure to comply with the conditions of the Amended and Restated Loan and Security Agreement could result in an event of default, which could result in an acceleration of amounts due under the Amended and Restated Loan and Security Agreement. We may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and the Lenders could seek to enforce security interests in the collateral securing such indebtedness, which would have a material adverse effect on our business.

Risks Related to our Intellectual Property

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

In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances, partnerships or other arrangements to develop products and to pursue new markets. Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products.

Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with any future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. For example, one of our vendors who provides a component to the Eversense sensor has communicated to us its belief that one of its employees should be named as a co-inventor on a related patent application. We have communicated to the third party that its employee should not be named as a co-inventor and its employee has not been named as a co-inventor to date. In addition, we may have limited control over the amount and timing of resources that any future collaborators devote to our or their future products. Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

31

If we enter into in-bound intellectual property license agreements, we may not be able to fully protect the licensed intellectual property rights or maintain those licenses. Future licensors could retain the right to prosecute and defend the intellectual property rights licensed to us, in which case we would depend on the ability of our licensors to obtain, maintain and enforce intellectual property protection for the licensed intellectual property. These licensors may determine not to pursue litigation against other companies or may pursue such litigation less aggressively than we would. Further, entering into such license agreements could impose various diligence, commercialization, royalty or other obligations on us. Future licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.

The medical device industry is characterized by patent litigation, and we could become subject to litigation that could be costly, result in the diversion of management's time and efforts, stop our development and commercialization measures, harm our reputation or require us to pay damages.

Our success will depend in part on not infringing the patents or violating the other proprietary rights of third-parties. Significant litigation regarding patent rights exists in our industry. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make and sell our products. The large number of patents, the rapid rate of new patent issuances, and the complexities of the technology involved increase the risk of patent litigation.

The medical device industry in general, and the glucose testing sector of this industry in particular, are characterized by the existence of a large number of patents and frequent litigation based on assertions of patent infringement. We are aware of numerous patents issued to third parties that may relate to the technology used in our business, including the design and manufacture of CGM sensors and CGM systems, as well as methods for continuous glucose monitoring. Each of these patents contains multiple claims, any one of which may be independently asserted against us. The owners of these patents may assert that the manufacture, use, sale or offer for sale of our CGM sensors or CGM systems infringes one or more claims of their patents. Furthermore, there may be additional patents issued to third parties of which we are presently unaware that may relate to aspects of our technology that such third parties could assert against us and materially and adversely affect our business. In addition, because patent applications can take many years to issue, there may be patent applications that are currently pending and unknown to us, which may later result in issued patents that third parties could assert against us and harm our business.

In preparation for commercializing our Eversense products, we are performing an analysis, the purpose of which is to review and assess publicly available information to determine whether third parties hold any valid patent rights that a well-informed court would more likely than not find that we would infringe by commercializing our products, understanding that there are risks and uncertainties associated with any litigation and no predictions or assurances can be made regarding the outcome of any such litigation. Although our review and analysis are not complete and subject to the express limitations in the preceding sentence, we are not aware of any such valid patent rights. Moreover, we have not previously performed an exhaustive review of this type, and we cannot be certain that it will not result in our locating patent rights relating to our products of which we were not previously aware.

In the future, we could receive communications from various industry participants alleging our infringement of their intellectual property rights. Any potential intellectual property litigation could force us to do one or more of the following:

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

· incur significant legal expenses;

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

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

· attempt to obtain a license to the relevant intellectual property from third-parties, which may not be available on reasonable terms or at all, and if available, may be non-exclusive, thereby giving our competitors access to the same technology.

32

Patent litigation can involve complex factual and legal questions, and its outcome is uncertain. Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business, stop our development and commercialization measures and harm our reputation. Further, as the number of participants in the diabetes market increases, the possibility of intellectual property infringement claims against us increases.

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

None.

ITEM 3: Defaults Upon Senior Securities

Not applicable.

ITEM 4: Mine Safety Disclosures

Not applicable.

ITEM 5: Other Information

None.

33

ITEM 6: Exhibits

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

Exhibit No.	Document
3.1	Amended and Restated Certificate of Incorporation of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on March 23, 2016).
3.2	Amended and Restated Bylaws of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on March 23, 2016).
10.1*	Second Amendment to Amended and Restated Loan and Security Agreement, by and among Senseonics Holdings, Inc., Senseonics, Incorporated, Oxford Finance LLC and Silicon Valley Bank, dated as of July 13, 2017.
31.1*	Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.
31.2*	Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act.
32.1**	Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act.
101.INS*	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

*            Filed herewith.

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

34

SIGNATURES

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

	SENSEONICS HOLDINGS, INC.
Date: October 31, 2017	By:	/s/ R. Don Elsey
		R. Don Elsey
		Chief Financial Officer
		(Principal Financial Officer)

35

EX-10.1

Exhibit 10.1

SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDMENT to the Amended and Restated Loan and Security Agreement (this “Amendment”) is entered into as of July 13, 2017 (the “Amendment Date”), by and among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (in its individual capacity, “Oxford”; and in its capacity as Collateral Agent, “Collateral Agent”), the Lenders listed on Schedule 1.1 thereof or otherwise a party thereto from time to time including Oxford in its capacity as a Lender and SILICON VALLEY BANK, a California corporation with an office located at 3003 Tasman Drive, Santa Clara, CA 95054 (each a “Lender” and collectively, the “Lenders”), and SENSEONICS, INCORPORATED with an office located at 20451 Seneca Meadows Parkway, Germantown, Maryland 20876 and SENSEONICS HOLDINGS, INC., a Delaware corporation (formerly ASN TECHNOLOGIES, INC., a Nevada corporation) with offices located at 20451 Seneca Meadows Parkway, Germantown, Maryland 20876 (individually and collectively, jointly and severally, “Borrower”).

WHEREAS, Collateral Agent, Borrower and the Lenders have entered into that certain Amended and Restated Loan and Security Agreement, dated as of June 30, 2016 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”) pursuant to which the Lenders have provided to Borrower certain loans in accordance with the terms and conditions thereof; and

WHEREAS, Borrower, Lenders and Collateral Agent desire to amend certain provisions of the Loan Agreement as provided herein and subject to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the promises, covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, Lenders and Collateral Agent hereby agree as follows:

1. Definitions. Capitalized terms used herein but not otherwise defined shall have the respective meanings given to them in the Loan Agreement.

2. Section 13.1 of the Loan Agreement is hereby amended by amending and restating clause (g) of the definition of “Permitted Indebtedness” therein as follows:

(g) business credit card Indebtedness for credit cards issued by Silicon Valley Bank, in an aggregate principal amount not in excess of $400,000 at any time outstanding;

3. Limitation of Amendment.

a. The amendment set forth in Section 2 above is effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right, remedy or obligation which Lenders or Borrower may now have or may have in the future under or in connection with any Loan Document, as amended hereby.

b. This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. For the avoidance of doubt, this Amendment shall be considered part of the Loan Documents.

4. To induce Collateral Agent and Lenders to enter into this Amendment, Borrower hereby represents and warrants to Collateral Agent and Lenders as follows:

a. Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

b. Borrower has the power and due authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

c. The organizational documents of Borrower delivered to Collateral Agent on the Effective Date, and updated pursuant to subsequent deliveries by the Borrower to the Collateral Agent, remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

d. The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

e. The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (i) any law or regulation binding on or affecting Borrower, (ii) any contractual restriction with a Person binding on Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (iv) the organizational documents of Borrower;

f. The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and

g. This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5. Except as expressly set forth herein, the Loan Agreement shall continue in full force and effect without alteration or amendment. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.

6. This Amendment shall be deemed effective as of the Amendment Date upon (a) the due execution and delivery to Collateral Agent of this Amendment by each party hereto, and (b) Borrower’s payment of all Lenders’ Expenses incurred through the date hereof, which may be debited (or ACH’d) from any of Borrower’s accounts.

7. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument.

8. This Amendment and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of New York.

[Balance of Page Intentionally Left Blank]

2

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to the Amended and Restated Loan and Security Agreement to be executed as of the Amendment Date.

BORROWER:
SENSEONICS, INCORPORATED
By	/s/ R. Don Elsey
Name:	R. Don Elsey
Title:	Chief Financial Officer
BORROWER:
SENSEONICS HOLDINGS, INC.
By	/s/ R. Don Elsey
Name:	R. Don Elsey
Title:	Chief Financial Officer
COLLATERAL AGENT AND LENDER:
OXFORD FINANCE LLC
By	/s/ Colette H. Featherly
Name:	Colette H. Featherly
Title:	Senior Vice President
LENDER:
SILICON VALLEY BANK
By	/s/ L. James Caccavaro
Name:	L. James Caccavaro
Title:	Vice President

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

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

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

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

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

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

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

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

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

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

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

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

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

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

Date: October 31, 2017

/s/ Timothy T. Goodnow, Ph.D. 

Timothy T. Goodnow, Ph.D.

President & Chief Executive Officer

(principal executive officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

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

I, R. Don Elsey, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: October 31, 2017 

/s/ R. Don Elsey

R. Don Elsey

Chief Financial Officer

(principal financial officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF

PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

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

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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

1.The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and

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

In Witness Whereof, the undersigned have set their hands hereto as of the 31st day of October, 2017.  

/s/ Timothy T. Goodnow, Ph.D.	/s/ R. Don Elsey
Timothy T. Goodnow, Ph.D.	R. Don Elsey
President & Chief Executive Officer	Chief Financial Officer
(principal executive officer)	(principal financial officer)

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

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 30, 2017
Document and Entity Information
Entity Registrant Name	Senseonics Holdings, Inc.
Entity Central Index Key	0001616543
Entity Current Reporting Status	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Entity Common Stock, Shares Outstanding		136,754,458

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 29,783	$ 13,047
Marketable securities	22,917	7,291
Accounts receivable	2,063	251
Prepaid expenses and other current assets	1,899	365
Inventory, net	2,413	477
Total current assets	59,075	21,431
Deposits and other assets	176	105
Property and equipment, net	887	735
Total assets	60,138	22,271
Current liabilities:
Accounts payable	5,125	3,070
Accrued expenses and other current liabilities	7,554	4,666
Note payable, current portion	7,500	3,889
Total current liabilities	20,179	11,625
Notes payable, net of discount	16,801	15,177
Accrued interest	842	273
Other liabilities	66	73
Total liabilities	37,888	27,148
Commitments and contingencies (Note 7)
Stockholders' equity (deficit):
Common stock, $0.001 par value per share; 250,000,000 shares authorized, 136,691,128 and 93,569,642 shares issued and outstanding as of September 30, 2017 and December 31, 2016	136	94
Additional paid-in capital	269,662	199,751
Accumulated deficit	(247,548)	(204,722)
Total stockholders' equity (deficit)	22,250	(4,877)
Total liabilities and stockholders' equity (deficit)	$ 60,138	$ 22,271

XML

Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Class of stock information
Common stock, par value per share (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	136,691,128	93,569,642
Common stock, shares outstanding	136,691,128	93,569,642

XML

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
Revenue	$ 2,097	$ 37	$ 3,464	$ 56
Cost of sales	2,957	114	5,716	148
Gross profit	(860)	(77)	(2,252)	(92)
Expenses:
Sales and marketing expenses	2,089	733	4,478	2,001
Research and development expenses	9,765	6,883	22,368	20,838
General and administrative expenses	3,891	2,819	11,545	10,060
Operating loss	(16,605)	(10,512)	(40,643)	(32,991)
Other income (expense), net:
Interest income	129	35	187	69
Interest expense	(915)	(502)	(2,365)	(1,045)
Other income (expense)	12	92	(5)	3
Net loss	(17,379)	(10,887)	(42,826)	(33,964)
Total comprehensive loss	$ (17,379)	$ (10,887)	$ (42,826)	$ (33,964)
Basic and diluted net loss per common share	$ (0.13)	$ (0.12)	$ (0.39)	$ (0.39)
Basic and diluted weighted-average shares outstanding (in shares)	128,898,682	93,386,139	108,959,779	87,838,031

XML

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities
Net loss	$ (42,826)	$ (33,964)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	145	107
Non-cash interest expense (debt discount and deferred costs)	339	87
Change in fair value of derivatives		304
Stock-based compensation expense	2,740	1,780
Provision for lower of cost or net realizable value	208
Net realized gain on marketable securities	(59)
Changes in assets and liabilities:
Accounts receivable	(1,812)
Prepaid expenses and other current assets	(1,534)	432
Inventory	(2,144)	(329)
Deposits and other assets	(71)	68
Accounts payable	2,055	4,095
Accrued expenses and other current liabilities	2,927	(195)
Accrued interest	569	(200)
Deferred rent	13	18
Net cash used in operating activities	(39,450)	(27,797)
Cash flows from investing activities
Capital expenditures	(297)	(452)
Purchase of marketable securities	(25,867)	(9,176)
Sales and maturities of marketable securities	10,300
Net cash used in investing activities	(15,864)	(9,628)
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs	66,870	45,737
Proceeds from exercise of stock options	239	65
Proceeds from notes payable, net of costs	4,896	17,500
Proceeds from issuance of warrants	104
Repayments of notes payable		(12,500)
Principal payments under capital lease obligations	(59)	(820)
Net cash provided by financing activities	72,050	49,982
Net increase in cash and cash equivalents	16,736	12,557
Cash and cash equivalents, at beginning of period	13,047	3,939
Cash and cash equivalents, at end of period	29,783	16,496
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$ 1,304	$ 529

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Organization

9 Months Ended

Sep. 30, 2017

Organization

Organization

1.Organization

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

ASN Technologies, Inc. (“ASN”) was incorporated in Nevada on June 26, 2014. On December 4, 2015, ASN reincorporated in Delaware and changed its name to Senseonics Holdings, Inc. On December 7, 2015, Senseonics Holdings, Inc. acquired 100% of the outstanding capital stock of Senseonics, Incorporated (the "Acquisition"). Senseonics, Incorporated was originally incorporated on October 30, 1996 and commenced operations on January 15, 1997. Senseonics Holdings and its wholly-owned subsidiary Senseonics, Incorporated are hereinafter referred to as the “Company” unless the context requires otherwise.

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Liquidity

9 Months Ended

Sep. 30, 2017

Liquidity

Liquidity

2.Liquidity

The Company’s operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, lack of operating history and uncertainty of future profitability. Since inception, the Company has incurred substantial operating losses, principally from expenses associated with the Company’s research and development programs. The Company has not generated significant revenues from the sale of products and its ability to generate revenue and achieve profitability largely depends on the Company’s ability, alone or with others, to complete the development of its products or product candidates, and to obtain necessary regulatory approvals for the manufacture, marketing and sales of those products. These activities, including planned significant research and development efforts, will require significant uses of working capital through the remainder of 2017 and beyond.

On March 23, 2016, the Company effected the initial closing of its public offering of 15,800,000 shares of its common stock at a price to the public of $2.85 per share (the “March 2016 Offering”). Additionally, the Company closed on the partial exercise of the underwriters’ option to purchase additional shares on April 5, 2016. The Company received aggregate net proceeds from the March 2016 Offering of $44.8 million. On June 30, 2016, the Company entered into Amended and Restated Loan and Security Agreement with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) to potentially borrow up to an aggregate principal amount of $30.0 million. On June 1, 2017, the Company effected the closing of its offering of 29,078,014 shares of its common stock at a price of $1.41 per share (the “May 2017 Offering”). The Company received aggregate net proceeds from the May 2017 Offering of $40.4 million. On August 23, 2017, the Company effected the closing of its offering of 13,383,125 shares of its common stock at a price of $2.15 per share (the “August 2017 Offering”). The Company received aggregate net proceeds from the August 2017 Offering of $26.5 million. Management has concluded that, based on the Company’s current operating plans, its existing cash, cash equivalents, and marketable securities available for sale will be sufficient to meet the Company’s anticipated operating needs into the third quarter of 2018.  Accordingly, since management has concluded that the Company does not have sufficient funds to support operations through October 2018, the Company believes that doubt about the Company’s ability to continue as a going concern exists.

Historically, the Company has financed its operating activities through the sale of equity and equity linked securities and the issuance of debt. Although the Company began generating revenue from product sales of Eversense, its continuous glucose monitoring system, in June 2016, the Company does not expect product revenues to be sufficient to satisfy its operating needs for several years, if ever. Accordingly, the Company plans to continue financing its operations with external capital for the foreseeable future. However, the Company may not be able to raise additional funds on acceptable terms, or at all. If the Company is unable to secure sufficient capital to fund its research and development and other operating activities, the Company may be required to delay or suspend operations, enter into collaboration agreements with partners that could require the Company to share commercial rights to its products to a greater extent or at earlier stages in the product development process than is currently intended, merge or consolidate with other entities, or liquidate.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

3.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the Company’s opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly its financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2016, has been derived from audited financial statements as of that date. The interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, recoverability of long-lived assets, deferred taxes and valuation allowances, depreciable lives of property and equipment, and estimated accruals for clinical and preclinical study costs, which are accrued based on estimates of work performed under contracts. Actual results could differ from those estimates; however management does not believe that such differences would be material.

Segment Information

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

Comprehensive Loss

Comprehensive loss comprises net loss and other changes in equity that are excluded from net loss. For the three and nine months ended September 30, 2017 and 2016, the Company’s net loss equaled its comprehensive loss and, accordingly, no additional disclosure is presented.

Cash Equivalents

The Company considers highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value.

Marketable Securities

Marketable securities consist of government and agency securities and corporate debt securities. The Company’s investments are classified as available for sale. Such securities are carried at fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in consolidated results of operations. A decline in the market value of any available for sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value, which is charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income is recognized when earned. The cost of securities sold is calculated using the specific identification method. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date as non-current assets.

Inventory

Inventory is valued at the lower of cost or market (net realizable value). Cost is determined using the standard cost method that approximates first in, first out. The Company periodically reviews inventory to determine if a write down is necessary for inventory that has become obsolete, inventory that has a cost basis less than net realizable value, and inventory in excess of future demand taking into consideration the product shelf life.

Accounts Receivable

The Company grants credit to various customers in the normal course of business. Accounts receivable consist of amounts due from distributors. The Company records an allowance for doubtful accounts at the time potential collection risk is identified. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

Property and Equipment

Property and equipment are stated at historical cost and depreciated on a straight-line basis over the estimated useful lives, generally five years. Equipment under capital leases is depreciated on a straight-line basis over the lesser of its estimated useful life or the lease term. Leasehold improvements are depreciated over the shorter of the remaining lease term or useful lives of the assets. Upon disposition of the assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statements of operations and comprehensive loss.

Management reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If the undiscounted cash flows are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Management did not identify any indicators of impairment through September 30, 2017.

Warranty Reserve

The Company may replace Eversense system components that do not function in accordance with the product specifications. Estimated replacement costs associated with a product are recorded at the time of shipment. The Company estimates future replacement costs by analyzing historical replacement experience for the timing and amount of returned product, and the Company evaluates the reserve quarterly and makes adjustments when appropriate.

Revenue Recognition

Revenue is generated from sales of sensor kits, transmitter kits, and related supplies under agreements for third-party distributors that resell the product to customers. The Company is paid for its sales directly by third-party distributors, regardless of whether or not the distributors resell the products to their customers.

The Company recognizes product sales revenue when all of the following criteria are met:

· persuasive evidence of an arrangement exists;

· delivery has occurred;

· the price is fixed or determinable; and

· collectability is reasonably assured.

The Company offers no rights of return and has no significant post-delivery obligations and therefore, the above criteria are generally met as products are shipped to, or received by, third-party distributors.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses include costs related to employee compensation, preclinical studies and clinical trials, supplies, outsource testing, consulting and depreciation and other facilities‑related expenses.

Stock‑Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options, based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant is amortized on a straight‑line basis over the requisite service period for each separately vesting portion of the award for those awards with service conditions only. For awards that also contain performance conditions, expense is recognized beginning at the time the performance condition is considered probable of being met over the remaining vesting period.

The Company uses the Black‑Scholes option pricing model to determine the fair value of stock‑option awards. Valuation of stock awards requires management to make assumptions and to apply judgment to determine the fair value of the awards. These assumptions and judgments include estimating the fair value of the Company’s common stock, future volatility of the Company’s stock price, dividend yields, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can affect the fair value estimate.

Under Accounting Standards Codification (“ASC”) 718, the cumulative amount of compensation cost recognized for instruments classified as equity that ordinarily would result in a future tax deduction under existing tax law shall be considered to be a deductible difference in applying ASC 740, Income Taxes. The deductible temporary difference is based on the compensation cost recognized for financial reporting purposes; however, these provisions currently do not impact the Company, as all the deferred tax assets have a full valuation allowance.

Since the Company had net operating loss (“NOL”) carryforwards as of September  30, 2017, no excess tax benefits for the tax deductions related to stock-based awards were recognized in the statements of operations and comprehensive loss.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Management uses a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. Management does not expect the outcome related to accrued uncertain tax provisions to have a material adverse effect on the Company’s financial position, results of operations or cash flows.  The Company recognizes interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense. The Company did not have any amounts accrued relating to interest and penalties as of September 30, 2017 and December 31, 2016.

The Company is subject to taxation in various jurisdictions in the United States and remains subject to examination by taxing jurisdictions for the year 1998 and all subsequent periods due to the availability of NOL carryforwards. In addition, all of the NOLs and research and development credit carryforwards that may be used in future years are still subject to adjustment.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses  approximate fair value because of their short maturities. Based on the borrowing rates currently available for loans with similar terms, the Company believes that the fair value of its long-term notes payable approximates its carrying value.

Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

For periods of net loss, diluted net loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti‑dilutive. The total number of anti‑dilutive shares, which have been excluded from the computation of diluted loss per share, was 15,986,298 and 11,484,459 common stock options and 4,570,902 and 5,127,176 stock purchase warrants exercisable for common stock as of September 30, 2017 and 2016, respectively.

For periods of net income, and when the effects are not anti-dilutive, diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options and stock purchase warrants using the treasury stock method.

Recent Accounting Pronouncements

Recently Adopted

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-11, which requires that inventory accounted for under the first-in, first-out or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted the guidance in the first quarter of fiscal year 2017. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue arising from contracts with customers. In August 2015, the FASB issued guidance approving a one-year deferral, making the standard effective for reporting periods beginning after December 15, 2017, with early adoption permitted only for reporting periods beginning after December 15, 2016. In March 2016, the FASB issued guidance to clarify the implementation guidance on principal versus agent considerations for reporting revenue gross rather than net, with the same deferred effective date. In April 2016, the FASB issued guidance to clarify the implementation guidance on identifying performance obligations and the accounting for licenses of intellectual property, with the same deferred effective date. In May 2016, the FASB issued guidance rescinding SEC paragraphs related to revenue recognition, pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting. In May 2016, the FASB also issued guidance to clarify the implementation guidance on assessing collectability, presentation of sales tax, noncash consideration, and contracts and contract modifications at transition, with the same effective date. The Company is currently analyzing the effect of the standard by reviewing the current accounting policy and practices to identify potential differences which would result from applying the requirements of the new standard to its revenue contracts. The Company has identified only one revenue stream, completed the contract reviews and is nearing the completion of its assessment of all potential effects of the standard. The Company plans to adopt the guidance on January 1, 2018 using the full retrospective method. 

In February 2016, the FASB issued ASU 2016-02, guidance for accounting for leases. The guidance requires lessees to recognize assets and liabilities related to long-term leases on the balance sheet and expands disclosure requirements regarding leasing arrangements. The guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The Company is currently evaluating the impact of adopting the guidance will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-015, guidance on the classification of certain cash receipts and cash payments in the statements of cash flows, including those related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, and distributions received from equity method investees. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The guidance must be adopted on a retrospective basis and must be applied to all periods presented, but may be applied prospectively if retrospective application would be impracticable. The Company is currently evaluating the impact of adopting the guidance will have on its consolidated statements of cash flows.

The Company has evaluated all other issued unadopted Accounting Standards Updates and believes the adoption of these standards will not have a material impact on its consolidated statements of earnings, balance sheets, or cash flows.

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Marketable Securities

9 Months Ended

Sep. 30, 2017

Marketable Securities

Marketable Securities

4.  Marketable Securities

Marketable securities available for sale, consisting of government and agency securities and corporate debt securities, were as follows (in thousands):

	September 30, 2017
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Government and agency securities	$	3,982	$		$		$	3,982
Corporate debt securities		18,935						18,935
Total	$	22,917	$	—	$	—	$	22,917

	December 31, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Government and agency securities	$	1,201	$	—	$	—	$	1,201
Corporate debt securities		6,090		—		—		6,090
Total	$	7,291	$	—	$	—	$	7,291

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Inventory, net

9 Months Ended

Sep. 30, 2017

Inventory, net

Inventory, net

5.  Inventory, net

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

	September 30,		December 31,
	2017		2016
Finished goods	$	523	$	477
Work-in-process		1,981		—
Raw materials		117		—
Reserve for lower of cost or net realizable value		(208)		—
Total	$	2,413	$	477

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Accrued Expenses and Other Current Liabilities

9 Months Ended

Sep. 30, 2017

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

6.Accrued Expenses and Other Current Liabilities

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

	September 30,		December 31,
	2017		2016
Clinical and preclinical	$	510	$	500
Contract manufacturing		2,304		1,328
Compensation and benefits		1,754		1,774
Legal		235		314
Audit and tax related		217		320
Other		394		244
Total accrued expenses		5,414		4,480
Accrued purchases		1,541		—
Equipment lease, current portion		40		79
Compensation and benefits		38		29
Product warranty		457		78
Other		64		—
Total accrued expenses and other current liabilities	$	7,554	$	4,666

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies

Commitments and Contingencies

7.Commitments and Contingencies

The Company leases approximately 32,000 square feet of research and office space under a non‑cancelable operating lease expiring in 2023. The Company has an option to renew the lease for one additional five‑year term. Expense recognition is based upon a straight‑line basis and was $155,884 and $149,427 for the three months ended September 30, 2017 and 2016, respectively, and $467,653 and $376,651 for the nine months ended September 30, 2017 and 2016, respectively.

On March 31, 2016, the Company amended a corporate development agreement with a supplier to include a minimum purchase commitment per year. Total research and development expense related to the minimum payment was $242,372 and $291,000 for the three months ended September 30, 2017 and 2016, respectively, and $767,993 and $544,890 for the nine months ended September 30, 2017 and 2016, respectively. There were approximately $1.6 million of future minimum payments under this commitment at September 30, 2017.

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401(k) Plan

9 Months Ended

Sep. 30, 2017

401(k) Plan

401(k) Plan

8.401(k) Plan

The Company has a defined contribution 401(k) plan available to all full-time employees. Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal income tax regulations. Participants are fully vested in their contributions. There have been no employer contributions to this plan. Administrative expenses for the plan, which are paid by the Company, were not material in the three and nine months ended September 30, 2017.

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Notes Payable

9 Months Ended

Sep. 30, 2017

Notes Payable and Stock Purchase Warrants

Notes Payable

9.Notes Payable

Term Notes Payable

On June 30, 2016, the Company entered into an Amended and Restated Loan and Security Agreement with Oxford and SVB (the “Lenders”). Pursuant to the Amended and Restated Loan and Security Agreement, the Company may potentially borrow up to an aggregate principal amount of $30.0 million in the following four tranches: $15.0 million (“Tranche 1 Term Loan”); $5.0 million (“Tranche 2 Term Loan”); $5.0 million (“Tranche 3 Term Loan”); and $5.0 million (“Tranche 4 Term Loan”) (each, a “Term Loan,” and collectively, the “Term Loans”). The funding conditions for the Tranche 1 Term Loan were satisfied as of June 30, 2016. Therefore, the Company issued secured notes to the Lenders for aggregate gross proceeds of $15.0 million (the “Notes”) on June 30, 2016. The Company used approximately $11.0 million from the proceeds from the Notes to repay the outstanding balance under the Company’s previously existing Loan and Security Agreement with Oxford, dated as of July 31, 2014, including the applicable final payment fee due thereunder of $1 million. The Company borrowed the Tranche 2 Term Loan in November 2016 upon the Lenders’ confirmation that the Company received positive data in its U.S. pivotal trial of Eversense, and the Company submitted a pre-market approval (“PMA”) application for Eversense in the United States with the FDA. The Company borrowed the Tranche 3 Term Loan in March 2017 upon completion of the first commercial sale of its second-generation transmitter in the European Union. The Company may borrow the Tranche 4 Term Loan on or before December 31, 2017 if it receives PMA approval from the FDA for Eversense, and achieves trailing six-month revenue for the applicable period of measurement of at least $4.0 million. The maturity date for all Term Loans is June 1, 2020 (the “Maturity Date”).

The Term Loans bear interest at a floating annual rate of 6.31% plus the greater of (i) 90-day U.S. Dollar LIBOR reported in the Wall Street Journal or (ii) 0.64%, provided that the minimum floor interest rate is 6.95%, and require monthly payments. The monthly payments initially consist of interest-only.  After 18 months, the monthly payments will convert to payments of principal and monthly accrued interest, with the principal amount being amortized over the ensuing 30 months.

The Company may elect to prepay all Term Loans prior to the Maturity Date subject to a prepayment fee equal to 3.00% if the prepayment occurs within one year of the funding date of any Term Loan, 2.00% if the prepayment occurs during the second year following the funding date of any Term Loan, and 1.00% if the prepayment occurs more than two years after the funding date of any Term Loan and prior to the Maturity Date. 

The Amended and Restated Loan and Security Agreement contains customary events of default, including bankruptcy, the failure to make payments when due, the occurrence of a material impairment on the Lenders’ security interest over the collateral, a material adverse change, the occurrence of a default under certain other agreements entered into by the Company, the rendering of certain types of judgments against the Company, the revocation of certain government approvals of the Company, violation of covenants, and incorrectness of representations and warranties in any material respect.  Upon the occurrence of an event of default, subject to specified cure periods, all amounts owed by the Company would begin to bear interest at a rate that is 5.00% above the rate effective immediately before the event of default, and may be declared immediately due and payable by Lenders.

Pursuant to the Amended and Restated Loan and Security Agreement, the Company also issued 10-year stock purchase warrants to purchase an aggregate of 116,581,  63,025 and 80,645 shares of common stock at an exercise price of $3.86,  $2.38 and $1.86 per share, respectively (see Note 10).

The Notes are collateralized by all of the Company’s consolidated assets other than its intellectual property. The Notes also contain certain restrictive covenants that limit the Company’s ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions, as well as financial reporting requirements. The Company incurred issuance costs related to the Notes of approximately $568,648 that are being amortized as additional interest expense over the term of the Notes using the effective interest method. The fair value of the stock purchase warrants, which was estimated to be $526,209, was recorded as a discount to the Notes, which is also being amortized as additional interest expense over the term of the Notes using the effective interest method.

At maturity (or earlier prepayment), the Company is also required to make a final payment equal to 9.00% of the aggregate principal balances of the funded Term Loans. This fee is being accrued as additional interest expense over the term of the Notes using the effective interest method. In the event that the Company achieves the requirements to borrow the Tranche 4 Term Loan, and elects not to borrow the Tranche 4 Term Loan, the Company is obligated to pay the Lenders a non-utilization fee of 2.00% of the undrawn amounts.

The following are the scheduled maturities of the Term Loans as of September 30, 2017 (in thousands):

2017 (remaining three months)	$	—
2018		10,000
2019		10,000
2020		5,000
Total	$	25,000

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Stockholders' Equity (Deficit)

9 Months Ended

Sep. 30, 2017

Stockholders' Equity (Deficit)

Stockholders' Equity (Deficit)

10.Stockholders’ Equity (Deficit)

Preferred Stock

As of September 30, 2017 and December 31, 2016, the Company’s authorized capital stock included 5,000,000 shares of undesignated preferred stock, par value $0.001 per share.  No shares of preferred stock were outstanding as of September 30, 2017 or December 31, 2016.

Common Stock

As of September 30, 2017 and December 31, 2016, the Company’s authorized capital stock included 250,000,000 shares of common stock, par value $0.001 per share. The Company had 136,691,128 and 93,569,642 shares of common stock issued and outstanding at September 30, 2017 and December 31, 2016, respectively.

Stock Purchase Warrants

In connection with the issuance of the Notes, the Company also issued to the Lenders 10-year stock purchase warrants to purchase an aggregate of 116,581,  63,025 and 80,645 shares of common stock at an exercise price of $3.86,  $2.38 and $1.86 per share, respectively. The fair value of the warrants, which the Company estimated to be $526,209, was recorded as a discount to the Notes. These warrants expire on June 30, 2026, November 22, 2026, and March 29, 2027, respectively, and are classified in equity. In connection with the Company’s original Loan and Security Agreement with Oxford in 2014, the Company issued to Oxford 10-year stock purchase warrants to purchase an aggregate of 167,570 shares of common stock at an exercise price of $1.79 per share. The fair value of the warrants, which the Company estimated to be $205,150, was recorded as a discount to the promissory notes issued to Oxford in connection with the original Loan and Security Agreement. These warrants expire on November 2, 2020, July 14, 2021 and August 19, 2021, and are classified in equity. The unamortized deferred financing fees and debt discount related to the notes rollover amount will be amortized along with the deferred financing costs and the discount created by the new issuance of the warrants over the term of the loan using the effective interest method. For the three months ended September 30, 2017 and 2016, the Company recorded amortization of discount of debt of $59,061 and $38,825, respectively, and for the nine months ended September 30, 2017 and 2016, the Company recorded amortization of discount of debt of $170,859 and $65,835, respectively, within interest expense in the accompanying statements of operations and comprehensive loss.

Restricted Stock Awards

The Company issued 398,525 shares of restricted stock to the chairman of the Company’s board of directors (the “Chairman”) in December 2015, half of which were vested upon grant and half of which vested upon the completion of the March 2016 Offering, pursuant to an agreement between the Company and the Chairman, as described in greater detail in Note 11. In June 2016, the Company issued a fully vested restricted stock award for 300,000 shares of common stock to the Chairman to settle the outstanding obligations under the agreement. The Company recognized stock-based compensation expense of $0 and $1.2 million in the three and nine months ended September 30, 2016, respectively, related to the grant and vesting of this restricted stock. No compensation expense was recognized related to the grant or vesting of this restricted stock in 2017.

Stock‑Based Compensation

In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”) under which incentive stock options and non-qualified stock options may be granted to the Company’s employees and certain other persons in accordance with the 2015 Plan provisions. In connection with the March 2016 Offering, the Company’s board of directors adopted and the Company’s stockholders approved an Amended and Restated 2015 Equity Incentive Plan (the “amended and restated 2015 Plan”). The amended and restated 2015 Plan became effective as of the date of the pricing of the March 2016 Offering. The Company’s board of directors may terminate the amended and restated 2015 Plan at any time. Options granted under the amended and restated 2015 Plan expire ten years after the date of grant.

Pursuant to the amended and restated 2015 Plan, the number of shares initially reserved for issuance pursuant to equity awards was 17,251,115 shares, representing 8,000,000 shares plus up to an additional 9,251,115 shares in the event that options that were outstanding under the Company’s equity incentive plans as of February 16, 2016 expire or otherwise terminate without having been exercised (in such case, the shares not acquired will revert to and become available for issuance under the amended and restated 2015 Plan). The number of shares of the Company’s common stock reserved for issuance under the amended and restated 2015 Plan will automatically increase on January 1 of each year, beginning on January 1, 2017 and ending on January 1, 2026, by 3.5% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. As of September 30, 2017,  3,124,950 shares remained available for grant under the amended and restated 2015 Plan.

On May 8, 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”), under which incentive stock options and non‑qualified stock options may be granted to the Company’s employees and certain other persons in accordance with the 1997 Plan provisions. Approximately 8,393,136  shares of the Company’s common stock underlying options have vested or are expected to vest under the 1997 Plan. Upon the effectiveness of the 2015 Plan, the Company no longer grants any awards under the 1997 Plan.

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options, based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award for those awards with service conditions only. For awards that also contain performance conditions, expense is recognized beginning at the time the performance condition is considered probable of being met over the remaining vesting period.

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Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions

Related Party Transactions

11.Related Party Transactions

In December 2015, the Chairman received a restricted stock award of 398,525 shares of common stock pursuant to an agreement entered into with the Company (the “December Agreement”) that superseded a pre-existing agreement. One half of the shares covered by this restricted stock award were fully vested on grant. The remainder vested in full upon the completion of the Company’s March 2016 Offering, which was the specific performance condition of the award. Additionally, as a result of the completion of the March 2016 Offering, pursuant to the December Agreement, the Chairman was entitled to receive estimated compensation in the amount of $785,000.  In June 2016, the Chairman received a restricted stock award of 300,000 shares of common stock pursuant to an agreement entered into with the Company that superseded the December Agreement and satisfied the outstanding compensation obligation under the December Agreement. All of the shares covered by this restricted stock award were fully vested on date of grant.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Measurements

Fair Value Measurements

12.Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date. Fair value has a three level hierarchy from highest priority (Level 1) to lowest priority (Level 3). The fair value hierarchy reflects whether the inputs are observable from independent sources or rely on unobservable inputs based on the Company’s market assumptions. The three levels of the fair value hierarchy are described below:

· Level 1—Quoted prices for identical assets or liabilities (unadjusted) in active markets.

· Level 2—Observable inputs other than quoted prices that are either directly or indirectly observable for the assets or liability.

· Level 3—Unobservable inputs that are supported by little or no market activity.

The levels are not necessarily an indication of the risk of liquidity associated with the financial assets or liabilities disclosed.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has segregated its financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. The inputs used in measuring the fair value of the Company’s money market funds included in cash equivalents are considered to be Level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the funds.

The following table represents the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands):

	September 30, 2017
	Total		Level 1		Level 2		Level 3
Money market funds	$	20,349	$	20,349	$	—	$	—
Government and agency securities		3,982		—		3,982		—
Corporate debt securities		18,935		—		18,935		—

	December 31, 2016
	Total		Level 1		Level 2		Level 3
Money market funds	$	10,601	$	10,601	$	—	$	—
Government and agency securities		1,201		—		1,201		—
Corporate debt securities		6,589		—		6,589		—

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company has no financial assets and liabilities that are measured at fair value on a non-recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has no non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non‑Financial Assets and Liabilities Measured at Fair Value on a Non‑Recurring Basis

The Company measures its long‑lived assets, including property and equipment, at fair value on a non‑recurring basis. These assets are recognized at fair value when they are deemed to be impaired. No such fair value impairment was recognized in the three and nine months ended September 30, 2017 and 2016.

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Income Taxes

9 Months Ended

Sep. 30, 2017

Income Taxes

Income Taxes

13.Income Taxes

The Company has not recorded any tax provision or benefit for the three and nine months ended September 30, 2017 or September 30, 2016. The Company has provided a valuation allowance for the full amount of its net deferred tax assets since realization of any future benefit from deductible temporary differences, NOL carryforwards and research and development credits is not more-likely-than-not to be realized at September 30, 2017 and December 31, 2016.

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Litigation

9 Months Ended

Sep. 30, 2017

Litigation

Litigation

14.Litigation

From time to time, the Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company has evaluated claims in accordance with the accounting guidance for contingencies that it deems both probable and reasonably estimable and, accordingly, has recorded aggregate liabilities for all claims of approximately $40,000 as of December 31, 2016. These amounts are reported on the consolidated balance sheets within accrued and other liabilities and other noncurrent liabilities. This liability was settled for $43,237 on April 4, 2017. As of September 30, 2017, there were no recorded liabilities related to pending litigation, claims arising from the ordinary course of business, or other legal matters.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the Company’s opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly its financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2016, has been derived from audited financial statements as of that date. The interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, recoverability of long-lived assets, deferred taxes and valuation allowances, depreciable lives of property and equipment, and estimated accruals for clinical and preclinical study costs, which are accrued based on estimates of work performed under contracts. Actual results could differ from those estimates; however management does not believe that such differences would be material.

Segment Information

Segment Information

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

Comprehensive Loss

Comprehensive Loss

Comprehensive loss comprises net loss and other changes in equity that are excluded from net loss. For the three and nine months ended September 30, 2017 and 2016, the Company’s net loss equaled its comprehensive loss and, accordingly, no additional disclosure is presented.

Cash Equivalents

Cash Equivalents

The Company considers highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value.

Marketable Securities

Marketable Securities

Marketable securities consist of government and agency securities and corporate debt securities. The Company’s investments are classified as available for sale. Such securities are carried at fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in consolidated results of operations. A decline in the market value of any available for sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value, which is charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income is recognized when earned. The cost of securities sold is calculated using the specific identification method. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date as non-current assets.

Inventory

Inventory

Inventory is valued at the lower of cost or market (net realizable value). Cost is determined using the standard cost method that approximates first in, first out. The Company periodically reviews inventory to determine if a write down is necessary for inventory that has become obsolete, inventory that has a cost basis less than net realizable value, and inventory in excess of future demand taking into consideration the product shelf life.

Accounts Receivable

Accounts Receivable

The Company grants credit to various customers in the normal course of business. Accounts receivable consist of amounts due from distributors. The Company records an allowance for doubtful accounts at the time potential collection risk is identified. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

Property and Equipment

Property and Equipment

Property and equipment are stated at historical cost and depreciated on a straight-line basis over the estimated useful lives, generally five years. Equipment under capital leases is depreciated on a straight-line basis over the lesser of its estimated useful life or the lease term. Leasehold improvements are depreciated over the shorter of the remaining lease term or useful lives of the assets. Upon disposition of the assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statements of operations and comprehensive loss.

Management reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If the undiscounted cash flows are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Management did not identify any indicators of impairment through September 30, 2017.

Warranty Reserve

Warranty Reserve

The Company may replace Eversense system components that do not function in accordance with the product specifications. Estimated replacement costs associated with a product are recorded at the time of shipment. The Company estimates future replacement costs by analyzing historical replacement experience for the timing and amount of returned product, and the Company evaluates the reserve quarterly and makes adjustments when appropriate.

Revenue Recognition

Revenue Recognition

Revenue is generated from sales of sensor kits, transmitter kits, and related supplies under agreements for third-party distributors that resell the product to customers. The Company is paid for its sales directly by third-party distributors, regardless of whether or not the distributors resell the products to their customers.

The Company recognizes product sales revenue when all of the following criteria are met:

· persuasive evidence of an arrangement exists;

· delivery has occurred;

· the price is fixed or determinable; and

· collectability is reasonably assured.

The Company offers no rights of return and has no significant post-delivery obligations and therefore, the above criteria are generally met as products are shipped to, or received by, third-party distributors.

Research and Development Costs

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses include costs related to employee compensation, preclinical studies and clinical trials, supplies, outsource testing, consulting and depreciation and other facilities‑related expenses.

Stock-Based Compensation

Stock‑Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options, based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant is amortized on a straight‑line basis over the requisite service period for each separately vesting portion of the award for those awards with service conditions only. For awards that also contain performance conditions, expense is recognized beginning at the time the performance condition is considered probable of being met over the remaining vesting period.

The Company uses the Black‑Scholes option pricing model to determine the fair value of stock‑option awards. Valuation of stock awards requires management to make assumptions and to apply judgment to determine the fair value of the awards. These assumptions and judgments include estimating the fair value of the Company’s common stock, future volatility of the Company’s stock price, dividend yields, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can affect the fair value estimate.

Under Accounting Standards Codification (“ASC”) 718, the cumulative amount of compensation cost recognized for instruments classified as equity that ordinarily would result in a future tax deduction under existing tax law shall be considered to be a deductible difference in applying ASC 740, Income Taxes. The deductible temporary difference is based on the compensation cost recognized for financial reporting purposes; however, these provisions currently do not impact the Company, as all the deferred tax assets have a full valuation allowance.

Since the Company had net operating loss (“NOL”) carryforwards as of September  30, 2017, no excess tax benefits for the tax deductions related to stock-based awards were recognized in the statements of operations and comprehensive loss.

Income Taxes

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Management uses a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. Management does not expect the outcome related to accrued uncertain tax provisions to have a material adverse effect on the Company’s financial position, results of operations or cash flows.  The Company recognizes interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense. The Company did not have any amounts accrued relating to interest and penalties as of September 30, 2017 and December 31, 2016.

The Company is subject to taxation in various jurisdictions in the United States and remains subject to examination by taxing jurisdictions for the year 1998 and all subsequent periods due to the availability of NOL carryforwards. In addition, all of the NOLs and research and development credit carryforwards that may be used in future years are still subject to adjustment.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses  approximate fair value because of their short maturities. Based on the borrowing rates currently available for loans with similar terms, the Company believes that the fair value of its long-term notes payable approximates its carrying value.

Net Loss per Share

Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

For periods of net loss, diluted net loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti‑dilutive. The total number of anti‑dilutive shares, which have been excluded from the computation of diluted loss per share, was 15,986,298 and 11,484,459 common stock options and 4,570,902 and 5,127,176 stock purchase warrants exercisable for common stock as of September 30, 2017 and 2016, respectively.

For periods of net income, and when the effects are not anti-dilutive, diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options and stock purchase warrants using the treasury stock method.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Adopted

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-11, which requires that inventory accounted for under the first-in, first-out or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted the guidance in the first quarter of fiscal year 2017. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue arising from contracts with customers. In August 2015, the FASB issued guidance approving a one-year deferral, making the standard effective for reporting periods beginning after December 15, 2017, with early adoption permitted only for reporting periods beginning after December 15, 2016. In March 2016, the FASB issued guidance to clarify the implementation guidance on principal versus agent considerations for reporting revenue gross rather than net, with the same deferred effective date. In April 2016, the FASB issued guidance to clarify the implementation guidance on identifying performance obligations and the accounting for licenses of intellectual property, with the same deferred effective date. In May 2016, the FASB issued guidance rescinding SEC paragraphs related to revenue recognition, pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting. In May 2016, the FASB also issued guidance to clarify the implementation guidance on assessing collectability, presentation of sales tax, noncash consideration, and contracts and contract modifications at transition, with the same effective date. The Company is currently analyzing the effect of the standard by reviewing the current accounting policy and practices to identify potential differences which would result from applying the requirements of the new standard to its revenue contracts. The Company has identified only one revenue stream, completed the contract reviews and is nearing the completion of its assessment of all potential effects of the standard. The Company plans to adopt the guidance on January 1, 2018 using the full retrospective method. 

In February 2016, the FASB issued ASU 2016-02, guidance for accounting for leases. The guidance requires lessees to recognize assets and liabilities related to long-term leases on the balance sheet and expands disclosure requirements regarding leasing arrangements. The guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The Company is currently evaluating the impact of adopting the guidance will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-015, guidance on the classification of certain cash receipts and cash payments in the statements of cash flows, including those related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, and distributions received from equity method investees. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The guidance must be adopted on a retrospective basis and must be applied to all periods presented, but may be applied prospectively if retrospective application would be impracticable. The Company is currently evaluating the impact of adopting the guidance will have on its consolidated statements of cash flows.

The Company has evaluated all other issued unadopted Accounting Standards Updates and believes the adoption of these standards will not have a material impact on its consolidated statements of earnings, balance sheets, or cash flows.

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Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2017

Marketable Securities

Schedule of available-for-sale debt securities

Marketable securities available for sale, consisting of government and agency securities and corporate debt securities, were as follows (in thousands):

	September 30, 2017
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Government and agency securities	$	3,982	$		$		$	3,982
Corporate debt securities		18,935						18,935
Total	$	22,917	$	—	$	—	$	22,917

	December 31, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Government and agency securities	$	1,201	$	—	$	—	$	1,201
Corporate debt securities		6,090		—		—		6,090
Total	$	7,291	$	—	$	—	$	7,291

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Inventory, net (Tables)

9 Months Ended

Sep. 30, 2017

Inventory, net

Schedule of Inventory, net

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

	September 30,		December 31,
	2017		2016
Finished goods	$	523	$	477
Work-in-process		1,981		—
Raw materials		117		—
Reserve for lower of cost or net realizable value		(208)		—
Total	$	2,413	$	477

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Accrued Expenses and Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2017

Accrued Expenses and Other Current Liabilities

Schedule of Accrued expenses and other current liabilities

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

	September 30,		December 31,
	2017		2016
Clinical and preclinical	$	510	$	500
Contract manufacturing		2,304		1,328
Compensation and benefits		1,754		1,774
Legal		235		314
Audit and tax related		217		320
Other		394		244
Total accrued expenses		5,414		4,480
Accrued purchases		1,541		—
Equipment lease, current portion		40		79
Compensation and benefits		38		29
Product warranty		457		78
Other		64		—
Total accrued expenses and other current liabilities	$	7,554	$	4,666

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2017

Notes Payable and Stock Purchase Warrants

Schedule of future maturities of the Oxford notes

The following are the scheduled maturities of the Term Loans as of September 30, 2017 (in thousands):

2017 (remaining three months)	$	—
2018		10,000
2019		10,000
2020		5,000
Total	$	25,000

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Measurements

Schedule of financial assets and liabilities measured at fair value on a recurring basis

The following table represents the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands):

	September 30, 2017
	Total		Level 1		Level 2		Level 3
Money market funds	$	20,349	$	20,349	$	—	$	—
Government and agency securities		3,982		—		3,982		—
Corporate debt securities		18,935		—		18,935		—

	December 31, 2016
	Total		Level 1		Level 2		Level 3
Money market funds	$	10,601	$	10,601	$	—	$	—
Government and agency securities		1,201		—		1,201		—
Corporate debt securities		6,589		—		6,589		—

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Organization - Acquisition (Details)	Dec. 07, 2015
ASN Technologies, Inc. | Senseonics Reverse Merger Agreement | Capital Stock, Senseonics, Inc.
Significant Transaction
Interest in capital stock acquired (as a percent)	100.00%

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Liquidity - Offering (Details) - USD ($)				9 Months Ended
	Aug. 23, 2017	Jun. 01, 2017	Mar. 23, 2016	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2016
Recent Significant Transaction
Proceeds from issuance of common stock, net of issuance costs				$ 66,870,000	$ 45,737,000
March 2016 Offering
Recent Significant Transaction
Shares issued			15,800,000
Price per share (in dollars per share)			$ 2.85
May 2017 Offering
Recent Significant Transaction
Shares issued		29,078,014
Price per share (in dollars per share)		$ 1.41
Proceeds from issuance of common stock, net of issuance costs		$ 40,400,000
August 2017 Offering
Recent Significant Transaction
Shares issued	13,383,125
Price per share (in dollars per share)	$ 2.15
Proceeds from issuance of common stock, net of issuance costs	$ 26,500,000
March 2016 IPO and Underwriters' Option
Recent Significant Transaction
Proceeds from issuance of common stock, net of issuance costs			$ 44,800,000
Term Notes Payable | Amended and Restated Loan and Security Agreement
Recent Significant Transaction
Maximum amount available under facility						$ 30,000,000

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Summary of Significant Accounting Policies - Policies (Details)	9 Months Ended
	Sep. 30, 2017 USD ($) segment	Dec. 31, 2016 USD ($)
Segment Information
Number of operating segments | segment	1
Property and Equipment
Useful lives	5 years
Stock-Based Compensation
Excess tax benefits recognized in statements of operations	$ 0
Income Taxes
Accrued for income tax penalties and interest	$ 0	$ 0

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Summary of Significant Accounting Policies - Earnings per Share (Details) - shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Common Stock options
Net Income (Loss) per Share
Securities excluded from computation of diluted loss per share	15,986,298	11,484,459
Stock purchase warrants
Net Income (Loss) per Share
Securities excluded from computation of diluted loss per share	4,570,902	5,127,176

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Marketable Securities - AFS Debt Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Marketable securities available for sale, consisting of debt securities:
Amortized Cost	$ 22,917	$ 7,291
Estimated Market Value	22,917	7,291
Government and agency securities
Marketable securities available for sale, consisting of debt securities:
Amortized Cost	3,982	1,201
Estimated Market Value	3,982	1,201
Corporate debt securities
Marketable securities available for sale, consisting of debt securities:
Amortized Cost	18,935	6,090
Estimated Market Value	$ 18,935	$ 6,090

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Inventory, net (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventory, net
Finished goods	$ 523	$ 477
Work-in-process	1,981
Raw materials	117
Reserve for lower of cost or net realizable value	(208)
Total	$ 2,413	$ 477

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Accrued Expenses and Other Current Liabilities - Components (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Accrued Expenses and Other Current Liabilities
Clinical and preclinical	$ 510	$ 500
Contract manufacturing	2,304	1,328
Compensation and benefits	1,754	1,774
Legal	235	314
Audit and tax related	217	320
Other	394	244
Total accrued expenses	5,414	4,480
Accrued purchases	1,541
Equipment lease, current portion	40	79
Compensation and benefits	38	29
Product warranty	457	78
Other	64
Total accrued expenses and other current liabilities	$ 7,554	$ 4,666

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Commitments and Contingencies - Operating Lease (Details) - Research and office space	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) ft²	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) ft² item	Sep. 30, 2016 USD ($)
Operating Leases
Leased space, in square feet | ft²	32,000		32,000
Number of renewal terms | item			1
Renewal term of lease			5 years
Operating lease expense | $	$ 155,884	$ 149,427	$ 467,653	$ 376,651

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Commitments and Contingencies - Minimum Payments (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Commitments and contingencies
Research and development expense	$ 9,765,000	$ 6,883,000	$ 22,368,000	$ 20,838,000
Corporate development agreement
Commitments and contingencies
Research and development expense	242,372	$ 291,000	767,993	$ 544,890
Future maturities
Future minimum payments	$ 1,600,000		$ 1,600,000

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401(k) Plan (Details)	9 Months Ended
	Sep. 30, 2017 USD ($)
401(k) Plan
Employer contributions to the 401(k) plan	$ 0

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Notes Payable and Stock Purchase Warrants - Amended Agreement (Details)	Jun. 30, 2016 USD ($) installment
Oxford Notes
Notes payable
Amount used to retire existing loans	$ 11,000,000
Final payment fee, notes	1,000,000
Term Notes Payable | Amended and Restated Loan and Security Agreement
Notes payable
Maximum amount available under facility	$ 30,000,000
Number of tranches under facility | installment	4
Prepayment fee percentage within one year of funding	3.00%
Prepayment fee percentage second year after funding date	2.00%
Prepayment fee percentage after second anniversary of funding	1.00%
Debt default, interest rate (as a percent)	5.00%
Term Notes Payable | Amended and Restated Loan and Security Agreement | LIBOR
Notes payable
Floating annual rate, spread (as a percent)	6.31%
90-day U.S. Dollar LIBOR	90-day U.S. Dollar LIBOR
Term Notes Payable | Amended and Restated Loan and Security Agreement | Floor interest rate
Notes payable
Floating annual rate, spread (as a percent)	0.64%
Term Notes Payable | Amended and Restated Loan and Security Agreement | Floor interest rate | Minimum
Notes payable
Interest rate (as a percent)	6.95%
Term Notes Payable | Amended and Restated Loan and Security Agreement | Interest only period
Notes payable
Frequency of payment	monthly
Repayment period	18 months
Type of payment required	interest-only
Term Notes Payable | Amended and Restated Loan and Security Agreement | Amortization period
Notes payable
Frequency of payment	monthly
Repayment period	30 months
Type of payment required	principal and interest
Tranche 1 Term Loan | Amended and Restated Loan and Security Agreement
Notes payable
Maximum amount available under facility	$ 15,000,000
Proceeds from notes payable	15,000,000
Tranche 2 Term Loan | Amended and Restated Loan and Security Agreement
Notes payable
Maximum amount available under facility	5,000,000
Tranche 3 Term Loan | Amended and Restated Loan and Security Agreement
Notes payable
Maximum amount available under facility	5,000,000
Tranche 4 Term Loan | Amended and Restated Loan and Security Agreement
Notes payable
Maximum amount available under facility	$ 5,000,000
Trailing revenue period	6 months
Tranche 4 Term Loan | Amended and Restated Loan and Security Agreement | Minimum
Notes payable
Trailing six month revenue requirement	$ 4,000,000

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Notes Payable and Stock Purchase Warrants - Term Notes Payable (Details) - Amended and Restated Loan and Security Agreement	Jun. 30, 2016 USD ($) $ / shares shares
Term Notes Payable
Long term debt
Issuance costs | $	$ 568,648
Final prepayment fee (as a percent)	9.00%
Term Notes Payable | Warrant liability | Stock Purchase Warrants
Long term debt
Warrant liability | $	$ 526,209
Term Notes Payable | Warrant liability | Common Stock | Stock Purchase Warrants, $3.86 Exercise Price
Long term debt
Term of stock purchase warrants	10 years
Number of shares called by warrants | shares	116,581
Exercise price of warrant (in dollars per share) | $ / shares	$ 3.86
Term Notes Payable | Warrant liability | Common Stock | Stock Purchase Warrants, $2.38 Exercise Price
Long term debt
Term of stock purchase warrants	10 years
Number of shares called by warrants | shares	63,025
Exercise price of warrant (in dollars per share) | $ / shares	$ 2.38
Term Notes Payable | Warrant liability | Common Stock | Stock Purchase Warrants, $1.86 Exercise Price
Long term debt
Term of stock purchase warrants	10 years
Number of shares called by warrants | shares	80,645
Exercise price of warrant (in dollars per share) | $ / shares	$ 1.86
Tranche 4 Term Loan
Long term debt
Non-utilization fee (as a percent)	2.00%

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Notes Payable and Stock Purchase Warrants - Scheduled Maturities Oxford Notes (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Scheduled maturities of Oxford notes
2018	$ 10,000
2019	10,000
2020	5,000
Total	$ 25,000

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Stockholders' Equity (Deficit) - Class of Stock Disclosures (Details) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Class of stock information
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, par value per share (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares outstanding	0	0
Authorized common stock	250,000,000	250,000,000
Common stock, par value per share (in dollars per share)	$ 0.001	$ 0.001
Common stock issued	136,691,128	93,569,642
Common stock, shares outstanding	136,691,128	93,569,642

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Stockholders' Equity (Deficit) - Stock Purchase Warrants (Details) - USD ($)		3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2014
Stock Purchase Warrants | Interest Expense
Stock Purchase Warrants
Accretion of debt discount		$ 59,061	$ 38,825	$ 170,859	$ 65,835
Amended and Restated Loan and Security Agreement | Term Notes Payable | Stock Purchase Warrants | Warrant liability
Stock Purchase Warrants
Warrant liability	$ 526,209
Amended and Restated Loan and Security Agreement | Term Notes Payable | Stock Purchase Warrants, $3.86 Exercise Price | Warrant liability | Common Stock
Stock Purchase Warrants
Term of stock purchase warrants	10 years
Number of shares called by warrants	116,581
Exercise price of warrant (in dollars per share)	$ 3.86
Amended and Restated Loan and Security Agreement | Term Notes Payable | Stock Purchase Warrants, $2.38 Exercise Price | Warrant liability | Common Stock
Stock Purchase Warrants
Term of stock purchase warrants	10 years
Number of shares called by warrants	63,025
Exercise price of warrant (in dollars per share)	$ 2.38
Amended and Restated Loan and Security Agreement | Term Notes Payable | Stock Purchase Warrants, $1.86 Exercise Price | Warrant liability | Common Stock
Stock Purchase Warrants
Term of stock purchase warrants	10 years
Number of shares called by warrants	80,645
Exercise price of warrant (in dollars per share)	$ 1.86
Oxford Notes | Stock Purchase Warrants | Common Stock
Stock Purchase Warrants
Term of stock purchase warrants						10 years
Number of shares called by warrants						167,570
Exercise price of warrant (in dollars per share)						$ 1.79
Oxford Notes | Stock Purchase Warrants | Warrant liability
Stock Purchase Warrants
Warrant liability						$ 205,150

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Stockholders' Equity (Deficit) - Restricted Stock Awards (Details) - USD ($)	1 Months Ended		3 Months Ended		9 Months Ended
	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2017	Mar. 31, 2016	Sep. 30, 2017
Stock-based compensation
Total stock-based compensation			$ 0		$ 0
Chairman | Restricted Stock Award
Stock-based compensation
Shares issued		398,525
Total stock-based compensation			$ 0		$ 1,200,000
Vesting on grant date | Chairman | Restricted Stock Award
Stock-based compensation
Shares issued	300,000
Vesting percentage		50.00%
Performance-based vesting conditions | Chairman | Restricted Stock Award
Stock-based compensation
Vesting percentage				50.00%

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Stockholders' Equity (Deficit) - Stock-Based Compensation (Details) - shares		1 Months Ended	9 Months Ended
	Feb. 16, 2016	Dec. 31, 2015	Sep. 30, 2017
2015 Equity Incentive Plan
Stock-based compensation
Expiration period		10 years
Total shares that may be issued	17,251,115
Shares available for grant	8,000,000		3,124,950
Automatic annual increase in shares authorized, percent of common stock outstanding			3.50%
2015 Equity Incentive Plan | Maximum
Stock-based compensation
Additional shares authorized	9,251,115
1997 Stock Option Plan
Stock-based compensation
Options vested and expected to vest			8,393,136

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Related Party Transactions - (Details) - Chairman - USD ($) $ in Thousands	1 Months Ended		3 Months Ended
	Jun. 30, 2016	Dec. 31, 2015	Mar. 31, 2016
Related party transactions
Share-based compensation, amount earned			$ 785
Restricted Stock Award
Related party transactions
Restricted stock awarded to board member		398,525
Vesting on grant date | Restricted Stock Award
Related party transactions
Restricted stock awarded to board member	300,000
Vesting percentage		50.00%

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Fair Value Measurements - Recurring (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Government and agency securities
Fair Value Measurements
Assets, fair value	$ 3,982
Level 2 | Government and agency securities
Fair Value Measurements
Assets, fair value	3,982
Recurring | Money market funds
Fair Value Measurements
Assets, fair value	20,349	$ 10,601
Recurring | Government and agency securities
Fair Value Measurements
Assets, fair value		1,201
Recurring | Corporate debt securities
Fair Value Measurements
Assets, fair value	18,935	6,589
Recurring | Level 1 | Money market funds
Fair Value Measurements
Assets, fair value	20,349	10,601
Recurring | Level 2 | Government and agency securities
Fair Value Measurements
Assets, fair value		1,201
Recurring | Level 2 | Corporate debt securities
Fair Value Measurements
Assets, fair value	$ 18,935	$ 6,589

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Fair Value Measurements - Nonrecurring (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Recurring
Fair Value Measurements
Fair value of non-financial assets	$ 0		$ 0		$ 0
Fair value of non-financial liabilities	0		0		0
Nonrecurring
Fair Value Measurements
Fair value of non-financial assets	0		0		0
Fair value of non-financial liabilities	0		0		$ 0
Fair value impairment recognized on long-lived assets	$ 0	$ 0	$ 0	$ 0

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Income Taxes - Tax Provision (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Taxes
Income tax provision	$ 0	$ 0	$ 0	$ 0

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Litigation (Details) - Claims - Accrued and other liabilities and Other noncurrent liabilities - USD ($)	Apr. 04, 2017	Sep. 30, 2017	Dec. 31, 2016
Litigation
Accrual for claims liability		$ 0	$ 40,000
Settlement	$ 43,237