What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-03-23 compared with 2022-03-08 · 336 added, 393 removed, 1115 unchanged (40% of the section changed)

1 unchanged sentence

Investing in our common stock involves a high degree of risk.

You should carefully consider the risks and uncertainties described below and the other information in this Annual Report, including our consolidated financial statements and the related notes, as well as our other public filings with the SEC, before making an investment in our common stock.

Our business, financial condition, results of operations and prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment.

This Annual Report also contains forward-looking statements that involve risks and uncertainties.

See “Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.

You should carefully consider the risks and uncertainties described below and the other information contained in this Annual Report, including our consolidated financial statements and the related notes, as well as our other public filings with the SEC, before making an investment in our common stock.

Our business, financial condition, results of operations and prospects could be materially and adversely affected if any of these risks occur, and as a result, the market price of our common stock could decline and you could lose all or part of your investment.

This Annual Report also contains forward-looking statements that involve risks and uncertainties, and our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.

See “Forward-Looking Statements.”

Risks Related to Our Business

We have incurred operating losses and may continue to do so for the near-term future, and we cannot assure you that we will be able to generate sufficient revenue to achieve or sustain profitability.

For the years ended December 31, 2022 and 2021, we had net loss of $32.9 million and $24.8 million, respectively.

We expect our losses to continue for the foreseeable future, and these losses will continue to have an adverse effect on our financial position.

Because of the numerous risks and uncertainties associated with our commercialization and development efforts, including our ability to obtain FDA clearance for the next generation of our flagship CanGaroo product, CanGaroo RM and successfully commercialize this product, we are unable to predict when we will become profitable.

We cannot make assurances that we will ever generate sufficient revenue from our operations to achieve profitability and, even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time.

Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations and cash flows, negatively affect the value of our securities and our ability to raise capital and continue operations .

Adverse changes in general domestic and global economic conditions and instability and disruption of credit markets could adversely affect our business, financial condition, results of operations and liquidity.

We are subject to risks arising from adverse changes in general domestic and global economic conditions, including any recession, economic slowdown or disruption of credit markets.

During the year ended December 31, 2022, global markets continued to experience significant volatility, driven by concerns over persistent inflation, rising interest rates, slowing economic growth and geopolitical uncertainty.

These events, and any financial crisis that may occur in the future, could make it more difficult and more expensive for hospitals and health systems to obtain credit, which may contribute to pressures on their operating margins.

As a result, hospitals and healthcare systems may curtail and reduce capital and overall spending, which may have a significant adverse effect on our business.

In addition, the current economic downturn related to the COVID-19 pandemic has resulted and may continue to result in, and any economic downturn that may occur in the future may also result in, higher unemployment and a reduction in the number of individuals covered by private insurance, which may result in an increase in the cost of uncompensated care for hospitals.

Higher unemployment may also result in a shift in reimbursement patterns as unemployed individuals switch from private plans to public plans such as U.S.

Medicaid or Medicare.

As economic conditions deteriorate, any significant shift in coverage for the unemployed may have an unfavorable impact on our business.

In addition, we maintain our cash and cash equivalents in accounts with financial institutions that exceed insured limits.

Market conditions can impact the viability of these institutions.

In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, we could lose our deposits in excess of the federally insured or protected amounts and there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

In addition, the current volatility in the capital and credit markets could impede our access to capital.

Should we have limited access to additional financing sources, we may need to defer capital expenditures or seek other sources of liquidity, which may not be available to us on acceptable terms or at all.

All of these factors related to global economic conditions, which are beyond our control, could adversely impact our business, financial condition, results of operations and liquidity.

We have identified conditions and events that raise substantial doubt regarding our ability to continue as a going concern.

We have incurred net losses since our inception in 2015.

For the year ended December 31, 2022, we had net losses of $32.9 million and as of December 31, 2022, we had an accumulated deficit of $138.0 million.

To date, we have financed our operations primarily through private placements of our convertible preferred stock, amounts borrowed under our credit facilities and sales of our products and, more recently, with proceeds from offerings and sales of our Class A common stock.

We have devoted the majority of our resources to acquisition and integration, manufacturing costs, research

and development, clinical activity and investing in our commercial infrastructure through our direct sales force and commercial partners in order to expand our presence and to promote awareness and adoption of our products.

We expect that our operating expenses will continue to increase as we expand our product development and clinical and research activities, and incur additional costs associated with being a public company.

Our ability to achieve profitability will depend on our ability to generate sales from existing or new products sufficient to exceed our ongoing operating expenses and capital requirements.

Because of the numerous risks and uncertainties affecting product sales and our ongoing commercialization and product development efforts, we are unable to predict with any certainty whether we will be able to increase sales of our products or the timing or amount of ongoing expenditures we will be required to incur.

Sales of our products, as well as meaningful reductions, suspensions or discontinuations of such sales (such as that involving FiberCel), may not offset our operating expenses.

As a result, we expect to continue to incur operating losses in the future and may never achieve profitability.

Furthermore, even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis.

As a result, we anticipate that we will need additional funding to support our continuing operations and pursue our growth strategy.

In order to mitigate the current and potential future liquidity issues, we may seek to raise capital through the issuance of common stock, restructure our Revenue Interest Obligation (as defined below) or pursue asset sale or licensing transactions.

However, such transactions may not be successful and we may not be able to raise additional equity, refinance our Revenue Interest Obligation, or sell or license assets on acceptable terms, or at all.

As such, there can be no assurance that we will be able to continue as a going concern.

Our long-term growth depends on our ability to enhance our products, expand our product indications and develop, acquire and commercialize additional product offerings.

19 unchanged sentences

In addition, our research and development efforts may require a substantial investment of time and resources before we are adequately able to determine the commercial viability of a new product, technology or other innovation.

On March 16, 2023, we received a NSE determination from the FDA for CanGaroo RM, requiring us to address additional items relating to drug testing in furtherance of potential market clearance.

If we are not able to obtain FDA regulatory clearance for this product candidate within our planned timeline, if at all, our ability to commercialize this product and generate sales therefrom will be adversely impacted.

Even if we are successful in obtaining the required regulatory clearance, there can be no assurances that we will be able to achieve market acceptance or that we will able to realize the intended benefits from commercializing this product candidate.

In addition, we will be required to invest additional time and resources to address the outstanding items and provide the additional data requested to FDA, which could divert management’s attention from core business and result in additional research and development expenses.

Even if we are able to successfully develop and commercialize new product offerings or enhancements, they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features and/or otherwise not produce sales in excess of the costs of development, any of which could also materially and adversely affect our business, financial condition and results of operations.

2 unchanged sentences

These transactions entail significant risks .”

Our success depends on our ability to maintain the value and reputation of the Aziyo name.

We believe that the “Aziyo” name is important to attracting and retaining customers, and enhancing our name depends largely on our ability to provide high-quality and safe products.

Our name could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by events yielding negative perceptions and publicity.

For example, in June 2021, we issued a voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix (“FiberCel”), a bone repair product made from human tissue that is used in various orthopedic and spinal procedures.

Notice of the voluntary recall was issued to hospitals that received products from this specific lot, following our learning of post-surgical infections in patients treated with FiberCel, including some patients who tested positive for tuberculosis, including eight cases that resulted in fatalities (the “FiberCel Recall”).

Following the public announcement of our voluntary recall, there has been various media coverage surrounding the recall and patients impacted, as well as lawsuits filed against us, which are described in Part I, Item 3, “Legal Proceedings” and Note 16 to the consolidated financial statements included elsewhere in this Annual Report.

Such negative publicity related to the perceived quality and safety of our products could affect our brand image, decrease confidence in our products or have an adverse effect on our ability to retain existing and attract new customers, suppliers and distribution partners, any one of which could result in decreased revenue, having an adverse effect on our business, financial condition and operating results.

A substantial portion of our net sales is generated through our commercial partners and independent sales agents, which subjects us to various risks.

We currently rely on the efforts of our commercial partners and independent sales agents to generate a substantial portion of our net sales, and we expect to continue to rely on these third parties to generate a substantial portion of our net

sales in the future while we work to grow our direct sales force.

For example, we have commercial agreements with major medical device companies, including Boston Scientific, Biotronik and beginning in March 2023, Sientra.

As a result, the impairment or termination of these relationships for any reason, or the failure of these parties to diligently sell our products and comply with applicable laws and regulations, has and could in the future materially and adversely affect our ability to generate revenue and profits.

5 unchanged sentences

In addition, we do not have staff in many of the areas covered by our commercial partners and independent sales agents, which makes it particularly difficult for us to monitor their performance.

While we may take steps to mitigate the risks associated with noncompliance by our commercial partners and independent sales agents, there remains a risk that they will not comply with regulatory requirements or our requirements and policies.

Actions by the sales representatives and other employees of our commercial partners and independent sales agents that are beyond our control could result in flat or declining sales in that territory, harm to the reputation of the Company or our products or legal liability, any of which could have a material adverse effect on our business, financial condition and results of operations.

In addition to the risk of losing customers, the operation of local laws and our agreements with our commercial partners and independent sales agents would make it difficult for us to replace a commercial partner or independent sales agent we feel is underperforming.

In order to increase our sales, particularly with respect to our Core Products, we intend to develop relationships and arrangements with additional commercial partners and/or independent sales agents, which we may not be able to do on commercially reasonable terms or at all.

If we are unable to establish new commercial partner and independent sales agent relationships and maintain our relationships with our existing commercial partners and independent sales agents, in each case, on commercially reasonable terms, we will be unable to increase sales of our products and our business, financial condition and results of operations could be materially and adversely affected.

While we may take steps to mitigate the risks associated with noncompliance by our commercial partners

and independent sales agents, there remains a risk that they will not comply with regulatory requirements or our requirements and policies.

Actions by the sales representatives and other employees of our commercial partners and independent sales agents that are beyond our control could adversely impact sales in that territory or result in harm to the reputation of the Company or our products or legal liability, any of which could have a material adverse effect on our business, financial condition and results of operations.

In order to increase our sales, we intend to develop relationships and arrangements with additional commercial partners and/or independent sales agents, which we may not be able to do on commercially reasonable terms or at all.

If we are unable to establish new commercial partner and independent sales agent relationships and maintain our relationships with our existing commercial partners and independent sales agents, in each case, on commercially reasonable terms, we will be unable to increase sales of our products, which, in turn, could materially and adversely affect our business, financial condition and results of operations.

In addition, certain of our commercial partners may, from time to time, account for a significant portion of our net sales and/or accounts receivable.

Sales to Surgalign Spine Technologies, one of our commercial partners, accounted for 10% of our net sales during the year ended December 31, 2021 and represented 12% of our accounts receivable as of December 31, 2021.

Sales to Medtronic accounted for 11% of our net sales during the twelve months ended December 31, 2021 and represented none of our accounts receivable as of December 31, 2021.

As more fully described elsewhere in this Annual Report, we issued a voluntary recall in June 2021 pertaining to a single donor lot of our FiberCel product after learning of post-surgical infections in several patients treated with the product, including some of whom tested positive for tuberculosis, and eight of whom suffered a fatal outcome.

FiberCel was distributed by Medtronic and, in June 2021, Medtronic notified us that sales of FiberCel as well as all such other Non-Core products supplied to Medtronic would be suspended until further notice.

In October 2021, we were informed by Medtronic that they would no longer be distributing cellular bone products such as FiberCel and, in December 2021, the two companies mutually terminated the associated FiberCel distribution agreement.

Sales to one of our commercial partners accounted for 11% of our net sales during the year ended December 31, 2022 and represented 12% of our accounts receivable as of December 31, 2022.

As previously disclosed, in December 2021, we terminated our distribution agreement with Medtronic, which accounted for 11% of our net sales during the year ended December 31, 2021, as a result of our voluntary recall of our FiberCel product.

The loss of one or more significant commercial partners, a material reduction in their purchases of our products, such as what we have experienced with Medtronic, or their inability to perform their contractual obligations, including, for example, committed purchase requirements, has affected and could continue to adversely affect our business, financial condition and results of operations.

We are also subject to the risk that any such commercial partner will experience financial difficulties that prevent them from making payments to us on a timely basis or at all.

Our revenue and profitability could be materially and adversely affected if we fail to maintain our relationships with our existing contract manufacturing customers and enter into agreements with new contract manufacturing customers, or if existing contract manufacturing customers reduce purchases of our products.

Our revenue and profitability could be materially and adversely affected if we fail to maintain our relationships with our existing contract manufacturing customers or enter into agreements with new contract manufacturing customers, or if existing contract manufacturing customers reduce purchases of our products.

Our relationships with these customers also subject us to certain risks.

Our contract manufacturing operations are an important component of our business, enabling us to utilize as much as possible of the human biological material from which we produce our core orthopedic/spinal repair and soft tissue reconstruction products, leverage our existing overhead and improve our cash flow.

In addition, we have historically generated a significant portion of our total net sales from sales of our Non-Core Products, which is composed primarily of purchases from our contract manufacturing customers.

Sales of our Non-Core Products represented approximately 20.7% and 15.1% of our total net sales for the years ended December 31, 2021 and 2020, respectively.

In addition, we have historically generated a significant portion of our total net sales from these sales, with such sales representing approximately 26.1% and 20.7% of our total net sales for the years ended December 31, 2022 and 2021, respectively.

If we are unable to maintain our relationships and contracts with our existing contract manufacturing customers and establish relationships with new contract manufacturing customers on terms that are favorable to us, or if our existing contract manufacturing customers materially reduce their purchases of our products, our sales and profitability may be adversely affected.

7 unchanged sentences

A significant increase in these costs could adversely affect our business, financial condition and results of operations.

There is also a risk that we may be unable to supply products in the quantities and of the quality required by these customers within their required timeframes, which would also jeopardize our relationships with them.

There is also a

risk that we may be unable to supply products in the quantities and of the quality required by these customers within their required timeframes, which would also jeopardize our relationships with them.

Disagreements or disputes may also arise from time to time.

4 unchanged sentences

Any of these events could cause our operating results to fluctuate from period to period, make it more difficult for us to manage our inventory and production schedules and otherwise adversely affect our business, financial condition and results of operations.

We plan to expand our direct sales force coinciding with new product launches, and if we are unable to successfully expand, manage and maintain our direct sales force, we may not be able to generate greater market share and revenue growth.

Prior to the CorMatrix Acquisition, we had a very small direct sales force and sold our Core Products primarily through independent sales agents or to other companies for resale or incorporation into their products.

Though our orthopedic/spinal repair products are now primarily sold through our commercial partners, we currently utilize our direct sales force to sell CanGaroo and our cardiovascular products.

As of December 31, 2021, our direct sales organization consisted of 31 sales representatives, who are focused on increasing market access and market penetration by selling our products, managing our commercial partners, and providing technical assistance.

Our operating results are directly

dependent upon the efforts of these employees.

If our direct sales force fails to adequately promote, market and sell our products and effectively manage and assist our commercial partners, our net sales may be adversely affected.

In addition, in order to launch new products, expand our network of hospital and physician customers, drive deeper penetration in our current accounts and provide additional technical assistance to our commercial partners, we plan to expand the size and geographic scope of our direct sales force.

This growth may require us to split or adjust existing sales territories, which may adversely affect our ability to retain customers in those territories.

Additionally, our future success will depend largely on our ability to continue to hire, train, retain and motivate skilled sales and marketing personnel with significant industry experience and technical knowledge of regenerative medicine and related products.

Because the competition for their services is high, we cannot assure you we will be able to hire and retain additional personnel on favorable or commercially reasonable terms, if at all.

Failure to hire or retain qualified sales personnel would prevent us from expanding our business and generating additional revenue.

In addition, it typically takes a substantial period of time before newly hired sales personnel are effective.

Though we currently utilize commercial partners and independent sales agents to sell certain of our products, there is no guarantee that we will be able to establish relationships with additional parties, or that our existing commercial partners and independent sales agents will purchase or otherwise commercialize any products we may seek to introduce in the future.

If we are unable to expand our sales and marketing capabilities, we may not be able to effectively commercialize our new and current products, which could have a material adverse effect on our business, financial condition and results of operations.

We are working to grow our direct sales force, which may result in higher fixed costs and may slow our ability to reduce costs in the face of a sudden decline in demand for our products.

A key component of our growth involves continuing to expand the size and geographic scope of our direct sales force.

Our direct sales force may subject us to higher fixed costs than those of other companies that market competing products primarily through third parties due to the costs that we will bear associated with employee benefits, training and managing sales personnel.

As a result, we could be at a competitive disadvantage relative to competitors who rely more heavily on third parties to market and sell their products.

Additionally, these fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our products, which could have a material adverse effect on our business, financial condition and results of operations.

We have incurred operating losses since our inception, expect to continue to incur significant expenses and operating losses in the future, and may not be able to achieve or sustain profitability.

We have incurred net losses since our inception in 2015.

For the year ended December 31, 2021, we had net losses of $24.8 million and as of December 31, 2021, we had an accumulated deficit of $105.1 million.

We have devoted the majority of our resources to acquisition and integration, manufacturing costs, research and development, clinical activity and investing in our commercial infrastructure through our direct sales force and commercial partners in order to expand our presence and to promote awareness and adoption of our products.

We expect that our operating expenses will continue to increase as we grow our sales organization, expand our product development and clinical and research activities, and incur additional costs associated with being a public company.

Our ability to achieve profitability will depend on our ability to generate sales from existing or new products sufficient to exceed our ongoing operating expenses and capital requirements.

Sales of our products, as well as meaningful reductions, suspensions or discontinuations of such sales (such as that involving FiberCel), may not offset our operating expenses.

As a result, we expect to continue to incur operating losses in the future and may never achieve profitability.

Furthermore, even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis.

As a result, we anticipate that we will need additional funding to support our continuing operations and pursue our growth strategy.

Until such time as we are able to generate sufficient sales from our products, we expect to finance our operations through equity offerings, debt financings or other capital sources, which may include collaborations or license agreements with other companies or

other strategic transactions such as an asset sale.

We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms or at all.

If we fail to raise capital or enter into such agreements in the short-term, we will be unable to fund our operations and capital expenditure requirements at that time which may result in there being substantial doubt about our ability to continue as a going concern.

If we do not achieve or sustain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which would have a material adverse effect on our business, financial condition and results of operations and cause the market price of our Class A common stock to decline.

In addition, failure of our products to significantly penetrate existing or new markets would negatively affect our business, financial condition and results of operations.

Our business has been, and may continue to be, adversely affected by the outbreak of the novel strain of coronavirus disease, COVID-19, and may be adversely affected by any future pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide.

If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected.

In December 2019, a novel strain of coronavirus, SARS-CoV-2, was identified in Wuhan, China.

Since then, SARS-CoV-2, and the resulting disease, COVID-19, has spread to most countries and all 50 states within the United States.

The COVID-19 pandemic has negatively impacted our business, financial condition and results of operations by significantly decreasing and delaying the number of procedures performed using our products, and we expect the pandemic to continue to negatively impact our business, financial condition and results of operations.

Similar to the general trend in elective and other surgical procedures, the number of procedures performed using our products has decreased significantly as healthcare organizations in the United States have prioritized the treatment of patients with COVID-19 or have otherwise altered their operations to prepare for and respond to the pandemic.

For example, in the United States, governmental authorities have recommended, and in certain cases required, that elective, specialty and other non-emergency procedures and appointments be suspended or canceled in order to avoid patient exposure to medical environments and the risk of potential infection with the novel coronavirus, and to focus limited resources and personnel capacity on the treatment of COVID-19 patients.

Beginning in March 2020, a significant number of procedures using our products have been postponed or cancelled, which has negatively impacted sales of our products.

Decreases in procedures have been most prevalent in regions experiencing significant outbreaks, while healthcare organizations in other regions have continued to undertake procedures using our products at reduced levels as compared to before the pandemic.

The COVID-19 pandemic could also adversely impact the initiation, continuation and completion of our clinical studies by, for example, delaying procedures using our products or reducing the number of patients, healthcare providers or clinical facilities available or willing to participate in the clinical studies.

These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical studies altogether.

These measures and challenges will likely continue for the duration of the pandemic, which is uncertain, and may continue to reduce our net sales and negatively impact our business, financial condition and results of operations while the pandemic continues.

Further, even after the pandemic ultimately subsides, we anticipate there will be a substantial backlog of patients seeking procedures and appointments for a variety of medical conditions and, as a result, patients seeking procedures performed using our products will have to navigate limited provider capacity.

We believe this limited capacity of providers, hospitals and other healthcare facilities could have a significant adverse effect on our business, financial condition and results of operations during and following the COVID-19 pandemic.

Numerous state and local jurisdictions, including those where our facilities are located, have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19.

Such orders or restrictions have resulted in reduced operations at our manufacturing facilities, travel restrictions and cancellation of events and have restricted the ability of our sales representatives and those of our commercial partners and independent sales agents to attend procedures in which our products are used, among other effects, thereby significantly and negatively impacting our operations.

Other disruptions or potential disruptions include restrictions on the ability of our sales representatives and other personnel, and those of our commercial partners and independent sales agents, to travel and access customers for training and case support;

inability of our suppliers to manufacture and deliver to us on a timely basis or at all;

delays in our ability to obtain medical records for tissue donors, which we need in order to release our products;

disruptions in our production schedule and ability to manufacture and assemble products;

inventory shortages or obsolescence;

delays in actions of regulatory bodies;

in clinical studies;

diversion of or limitations on employee resources that would otherwise be focused on the operations of our business, including because of sickness of employees or their families or the desire of employees to avoid contact with groups of people;

delays in growing or reductions in our direct sales force, including through delays in hiring, lay-offs, furloughs or other losses of sales representatives;

restrictions in our ability to ship our products to customers;

business adjustments or disruptions of certain third parties, including suppliers, medical institutions and clinical investigators with whom we conduct business;

negative impact on our customers’ credit profiles, which may adversely impact our future collection experience;

and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’ capacity to manufacture our products.

The extent to which the COVID-19 pandemic or any future pandemic, epidemic or outbreak of an infectious disease impacts our business, will depend on future events and developments, which are highly uncertain and cannot be predicted, including the severity and spread of the disease and the effectiveness of actions to contain the disease or treat its impact and the emergence of new variants, among others developments.

As new information regarding COVID-19 continues to emerge, it is difficult to predict what impact this disease will ultimately have on our business.

Adverse changes in general domestic and global economic conditions and instability and disruption of credit markets, including as a result of the current COVID-19 pandemic or any other outbreak of an infectious disease, could adversely affect our business, financial condition, results of operations and liquidity.

We are subject to risks arising from adverse changes in general domestic and global economic conditions, including any recession, economic slowdown or disruption of credit markets.

While the potential economic impact brought by, and the duration of, any pandemic, epidemic or outbreak of an infectious disease, including COVID-19, may be difficult to assess or predict, the current COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets.

As a result, hospitals and health systems may curtail and reduce capital and overall spending, which may have a significant adverse effect on our business.

Higher unemployment may also result in a shift in reimbursement patterns as unemployed individuals switch from private plans to public plans such as U.S.

Medicaid or Medicare.

As economic conditions deteriorate, any significant shift in coverage for the unemployed may have an unfavorable impact on our business.

In addition, the current COVID-19 pandemic and any other disruption in the capital and credit markets could impede our access to capital, which could be further adversely affected if we are unable to maintain our current credit ratings.

Similarly, if our suppliers face challenges in obtaining credit or other financial difficulties, they may be unable to provide the materials required to manufacture our products.

All of these factors related to global economic conditions, which are beyond our control, could adversely impact our business, financial condition, results of operations and liquidity.

Our business has been, and may continue to be, adversely affected by the COVID-19 pandemic, and we may be adversely affected by any future pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide.

The COVID-19 pandemic continues to evolve, with pockets of resurgence and the emergence of variant strains contributing to continued uncertainty about its scope, duration, severity, trajectory, and lasting impact.

The COVID-19 pandemic negatively impacted our business, financial condition and results of operations by intermittently decreasing and delaying the number of procedures performed using our products, as healthcare organizations in the United States prioritized the treatment of patients with COVID-19 or otherwise altered their operations to prepare for and respond to the pandemic.

The COVID-19 pandemic has also adversely impacted the initiation, continuation and completion of our clinical studies by, for example, intermittently delaying procedures using our products or reducing the number of patients, healthcare providers or clinical facilities available or willing to participate in the clinical studies.

These delays have resulted in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical studies altogether.

We have experienced and may in the future experience these or other disruptions from the COVID-19 pandemic or other pandemic, epidemic or outbreak of an infectious disease that could reduce our net sales in the future and negatively impact our business, financial condition and results of operations.

Our future growth depends on physician awareness of the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness of our products.

3 unchanged sentences

We also produce and distribute marketing and educational materials, including materials outlining our products, for our sales teams using printed, video and multimedia formats.

However, our efforts to educate physicians, surgeons and other healthcare professionals regarding our products may not be successful, particularly with respect to our Bone Repair products in light of the recent events involving the FiberCel Recall, and in markets where we rely exclusively on the efforts of our commercial partners and independent sales agents.

If we do not adequately educate physicians, surgeons and other healthcare professionals about our products, as well as any

adverse events involving these products, our products may not gain or maintain market acceptance, which may adversely affect our business, financial condition and results of operations.

However, our efforts to educate physicians, surgeons and other healthcare professionals regarding our products may not be successful, particularly with respect to our orthobiologics products in light of the recent events involving the FiberCel Recall, and in markets where we rely exclusively on the efforts of our commercial partners and independent sales agents.

If we do not adequately educate physicians, surgeons and other healthcare professionals about our products, as well as any adverse events involving these products, our products may not gain or maintain market acceptance, which may adversely affect our business, financial condition and results of operations.

Our success depends on the continued and future acceptance of our products by the medical community.

35 unchanged sentences

Any of these events could have a negative impact on market acceptance of procedures using our products and their profitability, which could have a material adverse effect on our business, financial condition and results of operations.

We will need to continue to expand our organization and managing growth may be more difficult than we expect.

We may need to continue to expand our organization and managing growth may be more difficult than we expect.

Managing our growth may be more difficult than we expect.

9 unchanged sentences

Accordingly, although we have no current commitments with respect to any acquisition or investment, we regularly review potential acquisitions of, investments in, and licenses or other commercial arrangements involving, complementary businesses, products or technologies instead of developing them ourselves.

In addition, in regularly evaluating our financial and operating

performance, we may decide to sell one or more of our product lines or another portion of our business.

Opportunities to engage in these transactions may not be readily available to us at commercially reasonable prices, on other terms acceptable to us or at all.

In addition, in regularly evaluating our financial and operating performance, we may decide to sell one or more of our product lines or another portion of our business.

Opportunities to engage in these transactions may not be readily available to us at commercially reasonable prices, on other terms acceptable

to us or at all.

Even if such opportunities are available, these transactions involve significant risks.

22 unchanged sentences

External factors, such as regulatory compliance obligations, competitive alternatives, lack of market acceptance and shifting market preferences, may also affect the successful implementation of a new line of business or a new product or service.

Failure to successfully plan for and

manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations.

Failure to successfully plan for and manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations.

We face significant and continuing competition from other companies, some of which have longer operating histories, more established products and/or greater resources than we do, which could adversely affect our business, financial condition and results of operations.

20 unchanged sentences

● more effective pricing and revenue strategies.

Our ability to achieve and maintain profitability will depend, in part, on our ability to develop or acquire proprietary products that reach the market in a timely manner, receive adequate coverage and reimbursement for procedures using our products, and are safer and more effective than their alternatives, as well as our ability to otherwise compete effectively on the factors listed above.

procedures using our products, and are safer and more effective than their alternatives, as well as our ability to otherwise compete effectively on the factors listed above.

If we are unable to do so, our sales and/or margins will decrease, which could have a material adverse effect on our business, financial condition and results of operations.

19 unchanged sentences

If we are forced to lower the price we charge for our products, our margins will decrease, which could impair our ability to grow our business and have a material adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.

Outside the United States, centralized governmental healthcare authorities may exert pricing pressures in an effort to lower healthcare costs.

Outside of the United States, centralized governmental healthcare authorities may exert pricing pressures in an effort to lower healthcare costs.

Implementation of healthcare reforms and competitive bidding contract tenders may limit the price or the level at which reimbursement is provided for our products and adversely affect both our pricing flexibility and the demand for our products.

30 unchanged sentences

We do not have redundant facilities.

We perform most of our research and development activity and manufacture our tissue-based products at our facility in Richmond, California.

We manufacture our human tissue-based products at our facility in Richmond, California.

The SIS ECM biomaterial used in our medical device products are manufactured by Cook Biotech at their facility in West Lafayette, Indiana and converted to a finished product at our facility in Roswell, Georgia.

14 unchanged sentences

Transitioning to a new supplier could be time-consuming and expensive, may result in interruptions in our operations and product delivery, could affect the performance specifications of our products or could require that we modify the design of those systems.

A reduction or interruption in manufacturing, or an inability to secure alternative sources of raw materials or components, could have a material and adverse effect on our business, financial condition, results of operations and cash flows.

A reduction or interruption in manufacturing, or an inability to secure alternative sources of raw materials or supplies, could have a material and adverse effect on our business, financial condition, results of operations and cash flows.

One or more of our suppliers may refuse to extend us credit with respect to our purchasing or leasing of equipment, supplies, products or components, or may only agree to extend us credit on significantly less favorable terms or subject to more onerous conditions.

2 unchanged sentences

In addition, if a change in manufacturer results in a significant change to any product, a new 510(k) clearance

from the FDA or similar international regulatory authorization may be necessary before we implement the change, which could cause substantial delays.

from the FDA or similar international regulatory authorization, or certification may be necessary before we implement the change, which could cause substantial delays.

Certain of our products are dependent on the availability of tissue from human donors, and any disruption in supply could adversely affect our business, financial condition and results of operations.

The products we manufacture for the orthopedic/spinal repair and soft tissue reconstruction markets, as well as our contract manufacturing products, require that we obtain human tissue.

The products we manufacture for the orthobiologics and soft tissue reconstruction markets require that we obtain human tissue.

The success of our business depends, in part, on the availability of tissue from human donors.

6 unchanged sentences

In addition, unfavorable reports about us or any of our third-party procurement firms may make families of potential donors or donors themselves, from whom we are required to obtain consent before processing tissue, reluctant to agree to donate tissue to for-profit tissue processors.

For the year end December 31, 2022, we received donated tissue from seven third-party procurement firms, including one third-party procurement firm that supplied 52% of the donors received during the year.

Any disruption in the supply of any human tissue component could materially harm our ability to manufacture our products until a new source of supply, if any, could be found.

We may be unable to find a sufficient alternative supply channel within a reasonable period of time, on commercially reasonable terms or at all, which would have a material adverse effect on our business, financial condition and results of operations.

Increased prices for raw materials used in our products could adversely affect our business, financial condition and results of operations.

Our profitability is affected by the prices of the raw materials used in the manufacture of our products.

Increased prices for raw materials or supplies used in our products could adversely affect our business, financial condition and results of operations.

Our profitability is affected by the prices of the raw materials and supplies used in the manufacture of our products.

These prices may fluctuate based on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, delivery costs, competition, import duties, excises and other indirect taxes, currency exchange rates and government regulation.

Due to the highly competitive nature of the healthcare industry and the cost containment efforts of our customers and third-party payors, we may be unable to pass along cost increases for key components or raw materials through higher prices to our customers.

If the cost of key components or raw materials increases, and we are unable to fully recover these increased costs through price increases or offset these increases through other cost reductions, we could experience lower margins and profitability.

Significant increases in the prices of raw materials that cannot be recovered through productivity gains, price increases or other methods could adversely affect our business, financial condition and results of operations.

Due to the highly competitive nature of the healthcare industry and the cost containment efforts of our customers and third-party payors, we may be unable to pass along cost increases for key supplies or raw materials through higher prices to our customers.

If the cost of key supplies or raw materials increases, and we are unable to fully recover these increased costs through price increases or offset these increases through other cost reductions, we could experience lower margins and profitability.

Significant increases in the prices of raw materials and supplies that cannot be recovered through productivity gains, price increases or other methods could adversely affect our business, financial condition and results of operations.

If we are not able to accurately forecast demand for our products and manage our inventory, our margins could decrease and we could lose sales, either of which could have a material adverse effect on our business, financial condition and results of operations.

2 unchanged sentences

Demand for our products can change, and has changed, rapidly and unexpectedly, including during the time between when raw materials are ordered from our suppliers and the finished product is offered for sale.

Our ability to accurately forecast demand for our products could be negatively affected by a number of factors, many of which are beyond our control, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our products or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions, reimbursement or regulatory matters and weakening of economic conditions.

Inventory levels that exceed the demand for

our products may result in inventory write-downs or write-offs, which would adversely affect our gross margins.

For example, since our launch of SimpliDerm 2019, evolving demand for different dimensions of the product has resulted in excess inventory write-downs.

to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions, reimbursement or regulatory matters and weakening of economic conditions.

Inventory levels that exceed the demand for our products may result in inventory write-downs or write-offs, which would adversely affect our gross margins.

For example, since our launch of SimpliDerm 2019, evolving demand for different dimensions of the product have periodically resulted in excess inventory write-downs.

Conversely, if we underestimate demand for our products, additional supplies of raw materials or additional manufacturing capacity may not be available when required on terms that are acceptable to us or at all, and suppliers or our third-party manufacturer may not be able to allocate sufficient capacity in order to meet our increased requirements.

18 unchanged sentences

State and federal healthcare programs, such as Medicare and Medicaid, closely regulate provider payment levels and have sought to contain, and sometimes reduce, payment levels.

Private payors frequently follow government payment policies and are likewise interested in controlling increases in the cost of medical care.

In addition, some payors are adopting pay-for-performance programs that differentiate payments to healthcare providers

based on the achievement of documented quality-of-care metrics, cost efficiencies or patient outcomes.

Private payors frequently

follow government payment policies and are likewise interested in controlling increases in the cost of medical care.

In addition, some payors are adopting pay-for-performance programs that differentiate payments to healthcare providers based on the achievement of documented quality-of-care metrics, cost efficiencies or patient outcomes.

These programs are intended to provide incentives to providers to deliver the same or better results while consuming fewer resources.

7 unchanged sentences

Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing, investigating and marketing of medical devices and human and animal tissue products.

For example, since the voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix was issued, and as of February 17, 2022, we have received notice of 45 separate lawsuits alleging that the plaintiffs contracted tuberculosis and/or suffered substantial symptoms and complications following the implantation of FiberCel during spinal fusion operations.

For example, since the voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix was issued, and as of February 17, 2022, we have received notice of 107 separate lawsuits or claims alleging that the plaintiffs contracted tuberculosis and/or suffered substantial symptoms and complications following the implantation of FiberCel during spinal fusion operations.

We have settled 26 of these lawsuits for a total of approximately $7.3 million as of December 31, 2022 and continue to negotiate and attempt to resolve many of these cases.

Of these settled matters, 11 cases were both settled and paid as of December 31, 2022 for a total cash outlay of $3.6 million.

For the remaining 81 cases for which settlements have not been reached, we estimated a probable loss related to each case and have recorded a liability at an estimated amount of $13.7 million for a total estimated liability at December 31, 2022 of $17.4 million, which is recorded as Contingent Liability for FiberCel Litigation in the accompanying consolidated balance sheets included in this Annual Report.

See Part I, Item 3, “Legal Proceedings” and Note 17 to the consolidated financial statements included elsewhere in this Annual Report.

We are, and may in the future be, subject to product liability claims and lawsuits, including potential class actions or mass tort claims, alleging that our products have resulted or could result in an unsafe condition or injury.

1 unchanged sentence

Product liability claims may include, among other things, allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties.

For example, we and certain Medtronic entities have been named in complaints alleging that plaintiffs contracted tuberculosis following the implantation of FiberCel during spinal fusion operations and seeking unspecified compensatory and punitive damages and medical monitoring.

See Part I, Item 3, “Legal Proceedings” and Note 16 to the consolidated financial statements included elsewhere in this Annual Report.

Additionally, we may be subject to product liability claims, proceedings and lawsuits, even if the apparent injury is due to the actions of others or the pre-existing health of the patient.

14 unchanged sentences

Our product liability insurance is subject to deductibles and coverage limitations, and we may not be able to maintain this insurance.

It is also possible that claims could exceed the limits of, or be excluded from, coverage under our policy, and claims against us could also increase the cost of maintaining our coverage.

Our excess insurance carrier has recently asserted that claims related to the FiberCel litigation are not covered under our policy.

As of December 31, 2022, we have recorded insurance receivables of $13.8 million on our balance sheet in respect of our insurance coverage for the FiberCel Litigation product liability losses.

However, it is possible that future claims related to the FiberCel Litigation or other product liability claims could exceed the limits of, or be excluded from, coverage under our policy, and claims against us could also increase the cost of maintaining our coverage.

If these or other claims are excluded from our coverages, or if we are unable to maintain product liability insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect ourselves against potential product liability claims, or if we underestimate the amount of insurance we need, we could be exposed to significant liabilities, which may harm our business.

11 unchanged sentences

The development, manufacture and control of our products are subject to extensive and rigorous regulation by numerous government agencies, including the FDA, the competent authorities of the EU member states and similar foreign agencies.

Compliance with these regulatory requirements, including but not limited to the QSR, current Good Manufacturing Practices (“GMPs”) and adverse events/recall reporting requirements in the United States and other applicable regulations worldwide, is subject to continual review and is monitored rigorously through periodic inspections by the FDA and foreign regulatory authorities.

If we fail to comply with our reporting obligations, the FDA, the competent authorities of the EU member states or other regulatory authority could take action, including issuance of warning letters and/or untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products or delay in the clearance of future products.

Compliance with these regulatory requirements, including but not limited to the FDA’s Quality System Regulation (“QSR”), current Good Manufacturing Practices (“GMPs”) and adverse events/recall reporting requirements in the United States and other applicable regulations worldwide, is subject to continual review and is monitored rigorously through periodic inspections by the FDA and foreign regulatory authorities.

If we fail to comply with our reporting obligations, the FDA, the competent authorities of the EU member states or other regulatory authority could

take action, including issuance of warning letters and/or untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products or delay in the clearance of future products.

The FDA and foreign regulatory authorities may also require post-market testing and surveillance to monitor the performance of approved or certified products.

Our facilities and those of our suppliers, commercial partners and

independent sales agents are also subject to periodic regulatory inspections.

Our facilities and those of our suppliers, commercial partners and independent sales agents are also subject to periodic regulatory inspections.

If the FDA or a foreign authority were to conclude that we have failed to comply with any of these requirements, it could institute a wide variety of enforcement actions, ranging from a public warning letter to more severe sanctions, such as product recalls or seizures, withdrawals, monetary penalties, consent decrees, injunctive actions to halt the manufacture or distribution of products, import detentions of products made outside the United States, export restrictions, restrictions on operations or other civil or criminal sanctions.

5 unchanged sentences

Furthermore, in June 2021, we issued a voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix, a bone repair product made from human tissue that is used in various orthopedic and spinal procedures, following our learning of post-surgical infections in patients treated with FiberCel, including some patients that tested positive for tuberculosis.

This recall had a negative effect on our business, financial condition and results of operations.

This recall had a negative effect on our business, financial condition and results of operations and resulted in a number of lawsuits filed against us as discussed below under “— We face significant litigation related to FiberCel.

” Any product recall we or a third-party manufacturer may conduct in the future, whether voluntary or required, may also negatively affect our business, financial condition and results of operations, and this effect may be material.

7 unchanged sentences

See Part I, Item 3, “Legal Proceedings” and Note 17 to the consolidated financial statements included elsewhere in this Annual Report.

We have incurred and will continue to incur costs to defend these lawsuits and are not currently able to estimate damage amounts, if any, that we may be required to pay in connection with these lawsuits.

We have incurred and will continue to incur costs to defend these lawsuits.

Furthermore, these proceedings are still expected to continue for the reasonably foreseeable future, and we cannot predict the course the proceedings will take or their ultimate outcome.

Given the inherent difficulty of predicting the outcome of litigation and costs involved to defend against the claims, we are currently unable to reasonably estimate the possible loss or range of loss with respect to these lawsuits.

Any unfavorable outcome that results in the payment of substantial damages could have a material adverse effect on our business, cash flow, results of operations, financial position and prospects.

As discussed above under “-- We face the risk of product liability claims and may not be able to obtain or maintain adequate product liability insurance”, we have recorded a total estimated contingent liability of $17.4 million related to the resolution of all FiberCel lawsuits and claims and have recorded insurance receivables of $13.8 million in respect of our insurance coverage for the FiberCel Litigation product liability losses, as well as related legal defense costs incurred as of December 31, 2022.

While we believe our estimated liability to be reasonable, the actual loss amounts are highly variable and turn on a case-by-case analysis of the relevant facts.

As such, actual settlement amounts may differ from our estimates and such differences may be material.

In addition, this contingent liability excludes the future costs to defend

against the lawsuits and claims.

To the extent these costs are not recovered through insurance proceeds, such costs could also have a material adverse effect on our business, cash flow, results of operations, financial position and prospects.

Our operating results may fluctuate significantly from quarter to quarter and year to year due to the seasonality of our business, as well as a variety of other factors, many of which are outside of our control.

4 unchanged sentences

We have experienced and may in the future experience higher sales in the fourth quarter as hospitals in the United States increase their purchases of our products to coincide with the end of their budget cycles.

Satisfaction of patient deductibles through the course of

the year also results in increased sales later in the year.

Satisfaction of patient deductibles through the course of the year also results in increased sales later in the year.

In general, our first quarter usually has lower sales than the preceding fourth quarter as patient deductibles are re-established with the new year, thereby increasing their out-of-pocket costs.

18 unchanged sentences

● sanctions imposed by federal or state governments due to non-compliance with laws or regulations;

● general economic conditions as well as economic conditions specific to the healthcare industry.

● general global economic conditions and political instability, such as the conflict between Russia and Ukraine;

● economic conditions specific to the healthcare industry.

We have based our current and future expense levels largely on our investment plans and estimates of future events, although certain of our expense levels are, to a large extent, fixed.

4 unchanged sentences

Our indebtedness and our Revenue Interest Obligation to Ligand Pharmaceuticals Incorporated may limit our flexibility in operating our business and adversely affect our financial health and competitive position.

As of December 31, 2021, we had $23.3 million of indebtedness outstanding, consisting of $17.1 million outstanding under our Term Loan Facility (as defined under Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facilities”) (net of $0.1 million of unamortized deferred financing costs), $4.8 million outstanding under our Revolving Credit Facility (as defined under Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facilities”) (with $2.1 million of additional borrowings available thereunder), and a $1.4 million promissory note payable to one of our suppliers.

As of December 31, 2022, we had $24.3 million of indebtedness outstanding, consisting of $25.3 million outstanding under our SWK Loan Facility (as defined under Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facilities”), net of $1.0 million of unamortized discount and deferred financing costs, .

In addition, we are party to a royalty agreement with Ligand Pharmaceuticals Incorporated (“Ligand”) pursuant to which we assumed a restructured, long-term obligation to Ligand (the “Revenue Interest Obligation”), that requires us to pay Ligand 5.0% of future sales of the products we acquired from CorMatrix (as well as products substantially similar to those products), subject to annual minimum payments of $2.75 million and certain milestone payments if sales of the acquired products exceed certain thresholds.

6 unchanged sentences

This will place us at a competitive disadvantage compared to our competitors that have less indebtedness.

In addition, the agreements governing our Term Loan Facility and Revolving Credit Facility contain, and any agreements evidencing or governing other future indebtedness may also contain, certain covenants that limit our ability to engage in certain transactions that may be in our long-term best interests.

In addition, the agreements governing our SWK Loan Facility contains, and any agreements evidencing or governing other future indebtedness may also contain, certain covenants that limit our ability to engage in certain transactions that may be in our long-term best interests.

Subject to certain limited exceptions, these covenants limit our ability to, among other things:

11 unchanged sentences

● enter into sale and leaseback transactions.

In addition to these covenants, the agreements governing our Term Loan Facility and Revolving Credit Facility also contain a financial covenant, which is tested on a monthly basis, and requires us to achieve a specified minimum net product revenue (as defined therein) for the preceding 12-month period.

While we were in compliance with all covenants under these agreements as of December 31, 2021, we have had past breaches requiring waivers and there can be no guarantee that we will not breach these covenants in the future.

To this end, the mutual termination of our Supply Agreement for FiberCel with Medtronic referred to in Note 15 to the consolidated financial statements included elsewhere in this Annual Report would have triggered an event of default;

however, such event of default was waived by our lenders.

Furthermore, the Supply Agreement’s termination may negatively affect future revenues and as such, our ability to comply with the revenue covenants in the future is uncertain.

In addition to these covenants, the agreement governing our SWK Loan Facility also contains two financial covenants, the first of which is measured quarterly, and requires us to achieve a specified minimum aggregate revenue (as defined therein) for the preceding 12-month period, and the second of which requires us to maintain a minimum liquidity (as defined therein) of the greater of $5.0 million and the sum of the operating burn (as defined therein) for the two prior consecutive fiscal quarters then ended.

While we were in compliance with all covenants under the agreement as of December 31, 2022, there can be no guarantee that we will not breach these covenants in the future.

Our ability to comply with these covenants may be affected by events and factors beyond our control.

1 unchanged sentence

The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

In addition, we may be able to incur significant additional indebtedness in the future.

Although the agreements governing our Term Loan Facility and Revolving Credit Facility contain restrictions on the incurrence of additional indebtedness by us, such restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.

In addition, we may incur significant additional indebtedness in the future.

Although the agreement governing our SWK Loan Facility contains restrictions on the incurrence of additional indebtedness by us, such restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.

Also, these restrictions do not prohibit us from incurring obligations that do not constitute indebtedness as defined therein.

To the extent that we incur additional indebtedness or such other obligations, the risks associated with our substantial indebtedness described above will increase.

Various events permit the lender under the Term Loan Facility and Revolving Credit Facility to terminate the agreement, following a cure period.

Such events include, without limitation, legal proceedings which could be implicated based on the facts involving the FiberCel Recall and the related litigation.

If the lender were to terminate either the Term Loan Facility or the Revolving Credit Facility, the lender may declare all or any portion of these obligations to become immediately due and payable.

Various events permit the lender under the SWK Loan Facility to terminate the agreement, following a cure period.

Such events include, without limitation, a failure to timely pay interest or principal, insolvency, or an action by the FDA or such other material adverse event impacting the operations of Aziyo.

If the lender were to terminate either the SWK Loan Facility, the lender may declare all or any portion of these obligations to become immediately due and payable.

Our future capital needs are uncertain and we may need to raise funds in the future, and such funds may not be available on acceptable terms or at all.

Our future capital needs are uncertain and, as such, we may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements.

Our future capital needs are uncertain and, as such, we may seek to raise additional capital through equity offerings, debt financings, collaborations or other arrangements.

Any future funding requirements will depend on many factors, including, among other things:

18 unchanged sentences

If we raise additional funds by selling additional shares of our common stock or other securities convertible (directly or indirectly) into or exercisable or exchangeable for shares of our common stock, the issuance of such securities will result in dilution to our stockholders.

The price per share at which we sell additional shares of our common stock, or securities convertible into or exercisable or exchangeable for shares of our common stock, in future transactions may be higher or lower than the price per share paid by you.

the price per share paid by you.

Furthermore, investors purchasing any securities we may issue in the future may have rights superior to your rights as a holder of our common stock.

In addition, any future debt financing into which we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.

If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us.

If we raise additional funds through collaboration and other arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us.

Furthermore, we cannot be certain that additional funding will be available to us on acceptable terms, if at all.

If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products or license to third parties the rights to commercialize products or technologies that we would otherwise seek to

commercialize.

We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations.

Any of these factors could harm our business, financial condition and results of operations.

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

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

In the ordinary course of our business, we may become exposed to, or collect and store, sensitive data, including procedure-based information and legally protected health information, credit card, and other financial information, insurance information and other potentially personally identifiable information.

We also store sensitive intellectual property and other proprietary business information.

Regardless of any precautions we may take, our information technology (“IT”) and infrastructure, and that of our technology partners and providers, may be vulnerable to cyberattacks by hackers or viruses or breaches due to employee error, malfeasance or other disruptions.

We rely extensively on IT systems, networks and services, including internet sites, data hosting and processing facilities and tools, physical security systems and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third parties or their vendors, to assist in conducting our business.

A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact operations.

The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in our or our third-party providers’ systems, portable media or storage devices.

We could also experience a business interruption, theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers.

Unauthorized disclosure of sensitive or confidential patient or employee data, including personally identifiable information, whether through breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or otherwise, or unauthorized access to or through our information systems and networks, whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation.

Regardless of any precautions we may take, our information technology (“IT”) and infrastructure, and that of our technology partners and providers, may be vulnerable to attack, damage and interruption from computer viruses and malware (e.g.

ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

Attacks upon IT systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.

In addition to unauthorized access to or acquisition of personal information, confidential information, intellectual property or other sensitive information, such attacks could include the deployment of harmful malware and ransomware, and may use a variety of methods, including denial-of-service attacks, social engineering and other means, to attain such unauthorized access or acquisition or otherwise affect service reliability and threaten the confidentiality, integrity and availability of information.

As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not foreseeable or recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

We may also experience security breaches that may remain undetected for an extended period.

Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

Any breakdowns or breaches of our systems, or resulting access, disclosure, or other loss of information, could significantly disrupt our business and result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation, any of which could have a material and adverse effect on our business, financial condition and results of operations.

We and certain of our service providers are from time to time subject to cyberattacks and security incidents.

While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an event were to occur and result in the unauthorized disclosure of sensitive or confidential patient or employee data, it could result in negative publicity, legal liability and damage to our reputation.

Unauthorized disclosure of personally identifiable information could also expose us to sanctions for violations of data privacy laws and regulations around the world.

Although we have general liability and cybersecurity insurance coverage, our insurance may not cover all claims, continue to be available to us on reasonable terms or be sufficient in amount to cover one or more large claims;

Despite our security measures, there can be no assurance that our efforts will prevent breakdowns or breaches to our or our third-party providers’ databases or systems, or any resulting unauthorized access to, or disclosure and use of, non-public or other legally protected information.

Our general liability and cybersecurity insurance coverage may not cover all claims, continue to be available to us on reasonable terms or be sufficient in amount to cover one or more large claims.

Additionally, the insurer may disclaim coverage as to any claim.

The successful assertion of one or more large claims against us that exceed or are not covered by our insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, prospects, operating results and financial condition.

Phishing, social engineering and other attacks upon IT systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.

Any such breakdowns or breaches, or resulting access, disclosure, or other loss of information, could significantly disrupt our business and result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation, any of which could have a material and adverse effect on our business, financial condition and results of operations.

Our success depends on our ability to retain and motivate key management personnel and other employees and consultants, to attract, retain and motivate additional qualified personnel and to effectively navigate changes in our senior management team.

7 unchanged sentences

Furthermore, in order to offer attractive compensation, we may need to increase the level of cash compensation that we pay to them, which will reduce funds available for research and development and support of our commercialization and sales growth objectives.

In addition, any headcount reductions taken as part of cost saving initiatives and as our business strategy evolves may negatively impact our ability to attract qualified personnel in the future.

There can be no assurance that we will have sufficient cash available to offer our employees and consultants attractive compensation or that we will realize any corresponding benefits from the payment of such compensation.

4 unchanged sentences

The inability to recruit or a loss of the services of any executive, key employee or consultant may impede the progress of our research, development, commercialization and sales growth objectives, which could have a material adverse effect on our business, financial condition, results of operations and our ability to grow our business.

In addition, we have recently added a new General Counsel.

This change, and any other changes to our senior management team we experience in the future, subject us to a number of additional risks, including risks pertaining to the coordination of responsibilities and tasks, the creation of new management systems and processes, differences in management style, effects on corporate culture and the need for transfer of historical knowledge.

In addition, we have recently had changes within our senior management team.

These changes, and any other changes to our senior management team we experience in the future, subject us to a number of additional risks, including risks pertaining to the coordination of responsibilities and tasks, the creation of new management systems and processes, differences in management style, effects on corporate culture and the need for transfer of historical knowledge.

If our management team does not work together harmoniously, efficiently allocate responsibilities between themselves and implement and abide by effective controls, our operations will be adversely affected.

Our sales into foreign markets expose us to risks associated with international sales and operations.

Though we have historically focused our market development and commercial activities primarily in the United States, we have obtained marketing registrations, developed commercial and distribution capabilities and are currently selling CanGaroo and our cardiovascular products in several countries outside the United States primarily through independent sales agents.

Our international sales subject us to additional risks as compared to those we face in the United States.

The sale and shipment of our products across international borders subject us to extensive U.S.

and foreign governmental trade, import and export and customs regulations and laws, including but not limited to, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the Department of the Treasury (“OFAC”) as well as the laws and regulations administered by the Department of Commerce.

These regulations limit our ability to market, sell, distribute or otherwise transfer our products or technology to prohibited countries or persons.

and foreign governmental trade, import and export and customs regulations and laws, including but not limited to, the Export

Administration Regulations, which are administered by the Bureau of Industry and Security (“BIS”) within the Department of Commerce, and economic and trade sanctions, which are administered by the Office of Foreign Assets Control (“OFAC”) within the U.S.

Department of the Treasury.

These regulations limit our ability to market, sell, distribute or otherwise transfer our products or technology to prohibited countries, territories, or persons.

Compliance with these regulations and laws is costly, and failure to comply with applicable legal and regulatory obligations could adversely affect us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, monetary fines, denial of export privileges, seizure of shipments and restrictions on certain business activities.

5 unchanged sentences

If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, any of which would adversely affect our business, financial condition and results of operations.

We currently are and, as we increase our international presence and global sales, will increasingly be, exposed to trade and economic sanctions and other restrictions imposed by the United States, the EU and other governments and organizations.

Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the FCPA, and other federal statutes and regulations, including those established by OFAC.

In addition, the U.K.

Bribery Act of 2010 (the “Bribery Act”) prohibits both domestic and international bribery, as well as bribery across both private and public sectors.

An organization that “fails to prevent bribery” by anyone associated with the organization can be charged under the Bribery Act unless the organization can establish the defense of having implemented “adequate procedures” to prevent bribery.

Under these laws and regulations, as well as other anti-corruption laws, anti-money laundering laws, export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions.

A violation of these laws or regulations would negatively affect our business, financial condition and results of operations.

As our international operations increase, we expect to implement policies and procedures designed to ensure compliance by us and our directors, officers, employees, representatives, consultants and agents with the FCPA, OFAC restrictions, the Bribery Act and other export control, anti-corruption, anti-money-laundering and anti-terrorism laws and regulations.

We are subject to anti-corruption, anti-bribery, and other similar laws and regulations in various jurisdictions in which we operate, including the U.S.

Foreign Corrupt Practices Act (“FCPA”), the U.K.

Bribery Act 2010 (“Bribery Act”), and other anti-corruption laws and regulations.

These laws generally prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to obtain or retain business or otherwise obtain favorable treatment and require companies to maintain accurate books and records and a system of internal controls or adequate procedures to prevent bribery.

We are also subject to economic sanctions laws, export control laws and regulations, as well as customs regulations, in the various jurisdictions in which we operate, including those administered and enforced by OFAC, the U.S.

Department of State, BIS, His Majesty’s Treasury of the United Kingdom, the United Nations Security Council, the European Union (and its member states) and other relevant sanctions authorities .

Such laws and regulations prohibit or restrict certain operations, investment decisions, and sales activities, including dealings with certain countries or territories, and with certain governments and designated persons.

Investigations of alleged sanctions and export controls violations can be expensive and disruptive.

As our international operations increase, we expect to implement policies and procedures designed to promote compliance by us and our directors, officers, employees, representatives, consultants and agents with the FCPA, the Bribery Act and other anti-corruption laws, as well as economic sanctions and export controls.

We cannot assure you, however, that any such policies and procedures will be sufficient or that directors, officers, employees, representatives, consultants and agents have not engaged, and will not engage, in conduct for which we may be held responsible, nor can we assure you that our business partners have not engaged, and will not engage, in conduct that could materially affect their ability to perform their contractual obligations to us or result in our being held liable for such conduct.

Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition and results of operations.

Violations of the FCPA, Bribery Act, other anti-corruption laws, economic sanctions, export control laws and/or anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition and results of operations.

Our officers, employees, independent contractors, principal investigators, consultants, commercial partners and independent sales agents may engage in misconduct or activities that are improper under other laws and regulations, which would create liability for us.

We are exposed to the risk that our officers, employees, independent contractors (including contract research organizations (“CROs”)), principal investigators, consultants, commercial partners and independent sales agents may engage in fraudulent conduct or other illegal activity and/or may fail to disclose unauthorized activities to us.

Misconduct by these parties could include, but is not limited to, intentional, reckless and/or negligent failures to comply with the laws and regulations of the FDA and its foreign counterparts, including, but not limited to, those relating to the manufacture, processing, packing, holding, investigating or distributing in commerce of medical devices, biological products and/or HCT/Ps, requiring the reporting of true, complete and accurate information to such regulatory bodies (including any safety problems associated with the use of our products), and relating to the conduct of clinical studies and the protection of human research subject.

not adulterated or contaminated, that they are properly labeled, and have the identity, strength, quality and purity that which they are represented to possess.

by these parties could include, but is not limited to, intentional, reckless and/or negligent failures to comply with the laws and regulations of the FDA and its foreign counterparts, including, but not limited to, those relating to the manufacture, processing, packing, holding, investigating or distributing in commerce of medical devices, biological products and/or HCT/Ps, requiring the reporting of true, complete and accurate information to such regulatory bodies (including any safety problems associated with the use of our products), and relating to the conduct of clinical studies and the protection of human research subject.

In particular, companies involved in the manufacture of medical products are subject to laws and regulations intended to ensure that medical products that will be used in patients are safe and effective, and specifically that they are not adulterated or contaminated, that they are properly labeled, and have the identity, strength, quality and purity that they are represented to possess.

Further, companies involved in the research and development of medical products are subject to extensive laws and regulations intended to protect research subjects and ensure the integrity of data generated from clinical studies and of the regulatory review process.

17 unchanged sentences

In addition, other tax attributes, such as interest carryforwards, are also subject to various limits on their use under the Code.

We have established valuation allowances for our interest carry forwards to reflect these limitations and their anticipated impact on our ability to utilize these tax attributes following the adoption of the December 2017 tax reform legislation known as H.R.

1, commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”) in the United States.

We have established valuation allowances for our interest carry forwards to reflect these limitations and their anticipated impact on our ability to utilize these tax attributes.

Changes in tax laws, unfavorable resolution of tax contingencies or exposure to additional income tax liabilities could have a material impact on our results of operations or financial condition.

2 unchanged sentences

Tax authorities may disagree with certain positions we have taken and assess additional taxes.

We regularly assess the likely outcomes of any tax audits to which we are subject in order to determine the appropriateness of our tax provision and have established contingency reserves for material, known tax exposures.

We regularly assess the likely outcomes of any tax audits to which we are subject in order to

determine the appropriateness of our tax provision and have established contingency reserves for material, known tax exposures.

However, the calculation of such tax exposures involves the application of complex tax laws and regulations in many jurisdictions, as well as interpretations as to the legality under state aid rules of the EU of tax advantages granted in certain jurisdictions.

1 unchanged sentence

Changes in tax laws and regulations, or their interpretation and application, in the jurisdictions where we are subject to tax, could materially impact our effective tax rate.

For example, changes in tax law implemented by the TCJA became effective in 2018 and 2019, and we expect the U.S.

For example, changes in tax law implemented by the tax reform legislation known as H.R.

1, commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”) in the United States became effective in 2018 and 2019, and we expect the U.S.

Treasury to continue to issue future notices and regulations under the TCJA.

14 unchanged sentences

Also, we may not choose or be able to generate the comparative data that some of our competitors have or are generating and we may be subject to greater regulatory and product liability risks.

If we are unable to or determined not to collect sufficient long-term clinical data supporting the quality, safety and effectiveness of our existing products, our business, financial condition and results of operations could be adversely affected.

If we are unable to or determine not to collect sufficient long-term clinical data supporting the quality, safety and effectiveness of our existing products, our business, financial condition and results of operations could be adversely affected.

Our estimates of market opportunity and forecasts of market and sales growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, if at all.

1 unchanged sentence

Our estimates of the annual total addressable markets for our products are based on a number of internal and third-party estimates and assumptions, including, without limitation, the number of implantable electronic device procedures and orthopedic/spinal repair procedures, as well as the number of procedures using biologic products annually in the United States.

While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.

accuracy of these underlying factors.

As a result, our estimates of the annual total addressable market for any of our products may prove to be incorrect.

If the actual number of procedures, the price at which we are able to sell any of our products, or the annual total addressable market is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business, financial condition and results of operations.

We may face additional issues associated with the voluntary recall of the single donor lot of FiberCel if we are unable to show that we initiated a timely recall and recalled all deficient lots.

In June 2021, we issued a voluntary recall pertaining to a single donor lot of FiberCel Fiber Viable Bone Matrix, a bone repair product made from human tissue that is used in various orthopedic and spinal procedures.

Notice of the voluntary recall was issued to hospitals that received product from this specific lot following our learning of post-surgical infections in patients treated with FiberCel, including some patients who tested positive for tuberculosis.

We investigated the source of the infections in coordination with our distributor of the product, the FDA and the CDC.

The FDA has since inspected our Richmond, California production facility and this did not result in any Form-483 observations.

We have identified the 154 units comprising the single product lot in question.

Based on information from the CDC, 136 units within this product lot were implanted into 113 patients and the remaining 18 units were returned to either us or the CDC.

Of these 113 patients, CDC has identified at least 75 patients who have exhibited clinical or diagnostic findings consistent with tuberculosis infection.

The CDC has advised us that the CDC, working with state health agencies, has contacted all patients treated with the recalled lot of FiberCel to help ensure they are directed to appropriate medical treatment and has informed us that all patients were started on standard four-drug treatment for tuberculosis.

If it is determined that there are other lots that are similarly affected or we experience the same or similar circumstances in the future, this could adversely affect our ability to generate revenue and have an adverse effect on our financial condition and results of operations.

Moreover, we may face additional issues associated with our voluntary recall if we are unable to show that we initiated a timely recall.

Risks Related to Government Regulation

1 unchanged sentence

The medical device and biologics industries are regulated extensively by governmental authorities, principally the FDA, the EU legislative bodies, and corresponding state and foreign regulatory agencies and authorities.

The time required to obtain approval, clearance, certification of conformity or other marketing authorizations from the FDA, notified bodies in the EU/UK, and comparable foreign authorities is unpredictable but can often take many years following the commencement of clinical studies and depends upon numerous factors, including the substantial discretion of the regulatory authorities.

The time required to obtain approval, clearance, certification of conformity or other marketing authorizations from the FDA, notified bodies in the EU, approved bodies in the UK, and comparable foreign authorities is unpredictable but can often take many years following the commencement of clinical studies and depends upon numerous factors, including the substantial discretion of the regulatory authorities.

In addition, policies, regulations, or the type and amount of clinical data necessary to gain clearance, certification or approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions.

8 unchanged sentences

Manufacturers of these devices may request that FDA review such devices in accordance with the de novo classification procedure, which allows a manufacturer whose novel device would otherwise require the submission and approval of a PMA prior to marketing to request down-classification of the device on the basis that the device presents low or moderate risk.

If the FDA agrees with

the down classification based on a de novo submission, the FDA will authorize the device for marketing.

If the FDA agrees with the down classification based on a de novo submission, the FDA will authorize the device for marketing.

This device type can then be used as a predicate device for future 510(k) submissions.

2 unchanged sentences

Further, even where a PMA is not required, we cannot assure you that we will be able to obtain 510(k) clearances with respect to such product candidates or modifications to previously cleared products.

To the extent we sell medical devices in EU member states, our products must comply with the general safety and performance requirements of the Medical Devices Regulation (Regulation (EU) No 2017/745).

Compliance with these requirements is a prerequisite to be able to affix the European Conformity, or CE, mark to our products, without which they cannot be sold or marketed in the EU.

All medical devices placed on the market in the EU must meet the general safety and performance requirements laid down in Annex I to the Medical Devices Regulation including the requirement that a medical device must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose.

Subject to the transitional provisions and to the extent we sell medical devices in EU member states, our products must comply with the general safety and performance requirements of the EU Medical Devices Regulation (Regulation (EU) No 2017/745).

Compliance with these requirements is a prerequisite to be able to affix the European Conformity (“CE”) mark to our products, without which they cannot be sold or marketed in the EU.

All medical devices placed on the market in the EU must meet the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation including the requirement that a medical device must be designed and manufactured in such a way

that, during normal conditions of use, it is suitable for its intended purpose.

Medical devices must be safe and effective and must not compromise the clinical condition or safety of patients, or the safety and health of users and – where applicable – other persons, provided that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a high level of protection of health and safety, taking into account the generally acknowledged state of the art.

5 unchanged sentences

If we fail to comply with applicable laws and regulations, we would be unable to affix the CE mark to our products, which would prevent us from selling them within the EU.

The aforementioned EU rules are generally applicable in the European Economic Area, or EEA (which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland).

The aforementioned EU rules are generally applicable in the European Economic Area (“ EEA”) (which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland).

Non-compliance with the above requirements would also prevent us from selling our products in these three countries.

The EU-UK Trade and Cooperation Agreement, or TCA, came into effect on January 1, 2021.

The TCA does not specifically refer to medical devices.

However, as a result of Brexit, the EU Medical Devices Regulation will not be implemented in the UK, and previous legislation that mirrored the EU Medical Devices Regulation in the UK law has been revoked.

The regulatory regime for medical devices in Great Britain (England, Scotland and Wales) will continue to be based on the requirements derived from current EU legislation, and the UK may choose to retain regulatory flexibility or align with the EU Medical Devices Regulation going forward.

CE markings will continue to be recognized in the UK, and certificates issued by EU-recognized notified bodies will be valid in the UK, until June 30, 2023.

For medical devices placed on the market in Great Britain after this period, the UKCA, marking will be mandatory.

In contrast, UKCA marking and certificates issued by UK notified bodies will not be recognized on the EU market.

The TCA does provide for cooperation and exchange of information in the area of product safety and compliance, including market surveillance, enforcement activities and measures, standardization related activities, exchanges of officials, and coordinated product recalls (or other similar actions).

Since the end of the Brexit transition period on January 1, 2021, Great Britain (England, Scotland and Wales) has not been subject to EU laws, however under the terms of the Ireland/Northern Ireland Protocol, Northern Ireland continues to follow EU law.

The EU laws that have been transposed into United Kingdom (“UK”) law through secondary legislation remain applicable in Great Britain.

However, under the Retained EU Law (Revocation and Reform) Bill 2022, which is currently before the UK parliament, any retained EU law not expressly preserved and “assimilated” into domestic law or extended by ministerial regulations (to no later than June 23, 2026) will automatically expire and be revoked by December 31, 2023.

In addition, new legislation such as the EU Medical Devices Regulation (Regulation (EU) No 2017/745) will not be applicable.

The UK government has passed a new Medicines and Medical Devices Act 2021, which introduces delegated powers in favor of the Secretary of State or an ‘appropriate authority’ to amend or supplement existing regulations in the area of medicinal products and medical devices.

This allows new rules to be introduced in the future by way of secondary legislation, which aims to allow flexibility in addressing regulatory gaps and future changes in the fields of human medicines, clinical trials and medical devices.

Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) has become the sovereign regulatory authority responsible for Great Britain.

Following the end of the Brexit transition period, new regulations require all medical devices to be registered with the MHRA.

From January 1, 2022, manufacturers based outside the UK need to appoint a UK responsible person that has a registered place of business in the UK to register devices with the MHRA.

On June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory framework for medical devices and diagnostics.

MHRA seeks to amend the UK Medical Devices Regulations 2002 (which are based on EU legislation, primarily the EU Medical Devices Directive and the EU In Vitro Diagnostic Medical Devices Directive), in particular to create a new access pathway to support innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform IVD regulation and foster sustainability through the reuse and remanufacture of medical devices.

Regulations implementing the new regime were originally scheduled to come into force in July 2023, but have recently been postponed to July 2024.

Devices bearing CE marks issued by EU notified bodies under the EU Medical Devices Regulation or EU Medical Devices Directive are now subject to transitional arrangements.

In its consultation response, the MHRA indicated that the future UK regulations will allow devices certified under the EU Medical Devices Regulation to be placed on the market in Great Britain under the CE mark until either the certificate expires or for five years after the new regulations take effect, whichever is sooner.

Devices certified under the EU Medical Devices Directive could continue to be placed on the market until either the certificate expires or for three years after the new regulations take effect, whichever is sooner.

Following these transitional periods, it is expected that all medical devices will require a UK Conformity Assessed (“UKCA”) mark.

Manufacturers may choose to use the UKCA mark on a voluntary basis until June 30, 2023.

However, UKCA marking will not be recognized in the EU.

The rules for

placing medical devices on the market in Northern Ireland, which is part of the UK, differ from those in the rest of the UK.

Compliance with this legislation is a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed in Great Britain.

Under the terms of the Ireland/Northern Ireland Protocol, Northern Ireland follows EU rules on medical devices and devices marketed in Northern Ireland require assessment according to the EU regulatory regime.

Such assessment may be conducted by an EU notified body, in which case a CE mark is required before placing the device on the market in the EU or Northern Ireland.

Alternatively, if a UK approved body conducts such assessment, a 'UKNI' mark is applied and the device may only be placed on the market in Northern Ireland and not the EU.

The EU-UK Trade and Cooperation Agreement (“TCA”), came into effect on January 1, 2021.

The TCA does not specifically refer to medical devices, but does provide for cooperation and exchange of information in the area of product safety and compliance, including market surveillance, enforcement activities and measures, standardization related activities, exchanges of officials, and coordinated product recalls (or other similar actions).

For medical devices that are locally manufactured but use components from other countries, the “rules of origin” criteria will need to be reviewed.

2 unchanged sentences

These modifications may have an effect on the way we intend to conduct our business in these countries.

The FDA or any foreign regulatory bodies or notified body can delay, limit or deny approval, certification or clearance of our product candidates or require us to conduct additional nonclinical or clinical testing or abandon a program for many reasons, including:

The FDA or any foreign regulatory agency or notified body can delay, limit or deny approval, certification or clearance of our product candidates or require us to conduct additional nonclinical or clinical testing or abandon a program for many reasons, including:

● the FDA or the applicable foreign regulatory agency or notified body’s disagreement with the design or implementation of our clinical studies;

1 unchanged sentence

● serious and unexpected drug or device-related side effects experienced by participants in our clinical studies or by individuals using devices similar to our products or natural product candidates;

● our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body or notified body that our product candidates are safe and effective for their intended uses, or in the case of the 510(k) clearance process, that our product candidate is substantially equivalent to a predicate device;

● our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory agency or notified body that our product candidates are safe and effective for their intended uses, or in the case of the 510(k) clearance process, that our product candidate is substantially equivalent to a predicate device;

● the FDA’s or the applicable foreign regulatory agency or notified body’s disagreement with the interpretation of data from pre-clinical or clinical studies;

11 unchanged sentences

The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.

Some of our marketed products are subject to Medical Device Reporting (“MDR”) obligations, which require that we report to the FDA or the Competent Authorities of the European Union member states, any incident in which our products may have caused or contributed to a death or serious injury, or in which our products malfunctioned and, if the malfunction were to recur, it could likely cause or contribute to a death or serious injury.

Some of our marketed products are subject to Medical Device Reporting (“MDR”) obligations, which require that we report to the FDA, the competent authorities of the EU member states or any other foreign regulatory authorities, any incident in which our products may have caused or contributed to a death or serious injury, or in which our products malfunctioned and, if the malfunction were to recur, it could likely cause or contribute to a death or serious injury.

The timing of our obligation to report under the MDR regulations is triggered by the date we become aware of the adverse event as well as the nature of the event.

1 unchanged sentence

We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our product.

If we fail to comply with our reporting obligations, the FDA, or the Competent Authorities of the European Union member states, could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance or approval, seizure of our products or delay in clearance, certification or approval of future products.

The FDA, the Competent Authorities of the European Union member states, and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.

If we fail to comply with our reporting obligations, the FDA, or the competent authorities of the EU member states, could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance or approval, seizure of our products or delay in clearance, certification or approval of future products.

The FDA, the competent authorities of the EU member states, and foreign regulatory authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.

The FDA’s authority to require a recall for a medical device must be based on a finding that there is reasonable probability that the device could cause serious injury or death.

3 unchanged sentences

Product defects or other errors may occur in the future.

In the EEA, we must comply with the EU medical device vigilance system.

Under this system, serious incidents and Field Safety Corrective Actions, or FSCAs must be reported to the relevant authorities of the EEA countries.

In the EU, we must comply with the EU medical device vigilance system.

Under this system, serious incidents and Field Safety Corrective Actions (“FSCAs”) must be reported to the relevant authorities of the EU member states.

These reports will have to be submitted through Eudamed – once functional – and aim to ensure that, in addition to reporting to the relevant authorities of the EU member states, other actors such as the economic operators in the supply chain will also be informed.

Until Eudamed is fully functional, the corresponding provisions of the Medical Devices Directive continue to apply.

FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices, or FSNs.

Until Eudamed is fully functional, the corresponding provisions of the EU Medical Devices Directive continue to apply.

FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices (“FSNs”).

For similar serious incidents that occur with the same device or device type and for which the root cause has been identified or a FSCA implemented or where the incidents are common and well documented, manufacturers may provide periodic summary reports instead of individual serious incident reports.

Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new clearances, certifications or approvals for the device before we may market or distribute the corrected device.

The aforementioned EU rules are generally applicable in the EEA.

Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA or foreign regulatory authorities may require, or we may decide, that we will need to obtain new clearances, certifications or approvals for the device before we may market or distribute the corrected device.

Seeking such clearances, certification or approvals may delay our ability to replace the recalled devices in a timely manner.

4 unchanged sentences

A future recall announcement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales.

Any corrective action, whether voluntary or involuntary, as well

as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

Modifications to our medical device products may require new 510(k) clearances or other marketing authorizations or certifications, and if we make modifications to such products without obtaining requisite marketing authorization, we may be required to cease marketing or recall the modified products until clearances or other marketing authorizations or certifications are obtained.

7 unchanged sentences

Any of these actions would harm our operating results.

In the EU, we must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the Medical Devices Regulation or cause a substantial change to the intended use for which the device has been CE marked.

The notified body will then assess the planned changes and verify whether they affect the products’ ongoing conformity with the Medical Devices Regulation.

If the assessment is favorable, the notified body will issue a new certificate of conformity or an addendum to the existing certificate attesting compliance with the general safety and performance requirements and quality system requirements laid down in the Annexes to the Medical Devices Regulation.

In the EU, devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until at least the end of 2027, provided that the requirements of the transitional provisions are fulfilled.

In particular, the certificate in question must still be valid and no substantial change must be made to the device as such a modification would trigger the obligation to obtain a new certification under the EU Medical Devices Regulation and therefore to have a notified body conducting a new conformity assessment of the devices.

Once our devices will be certified under the EU Medical Devices Regulation, we must inform the notified body that carried out the conformity assessment of the medical devices that we market or sell in the EU and EEA of any planned substantial changes to our quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements laid down in Annex I to the EU Medical Devices

Regulation or cause a substantial change to the intended use for which the device has been CE marked.

The notified body will then assess the planned changes and verify whether they affect the products’ ongoing conformity with the EU Medical Devices Regulation.

The notified body may disagree with our proposed changes and product introductions or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.

The misuse or off-label use of our products may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

5 unchanged sentences

If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties.

penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.

It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.

In addition, physicians may misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability.

10 unchanged sentences

Even after we have obtained the proper regulatory clearance to market a device, we have ongoing responsibilities under FDA regulations and applicable foreign laws and regulations.

The FDA, state and foreign regulatory authorities have broad enforcement powers.

The FDA, state and foreign

regulatory authorities have broad enforcement powers.

Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities, which may include any of the following sanctions:

5 unchanged sentences

● delays in or refusal to grant our requests for future clearances or approvals or foreign marketing authorizations or certification of new products, new intended uses or modifications to existing products;

● withdrawals or suspensions of our current 510(k) clearances, resulting in prohibitions on sales of our products;

● withdrawals or suspensions of our current 510(k) clearances, or certifications resulting in prohibitions on sales of our products;

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

3 unchanged sentences

Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new clearances or approvals, increase the costs of compliance or restrict our ability to maintain our clearances of our current products.

Over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products.

For example, in November 2018, FDA officials announced steps that the FDA intended to take to modernize the premarket notification pathway under Section 510(k) of the FDCA.

Among other things, the FDA announced that it planned to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates.

These proposals included plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.

These proposals have not yet been finalized or adopted, and the FDA may work with Congress to implement such proposals through legislation.

Accordingly, it is unclear the extent to which any proposals, if adopted, could impose additional regulatory requirements on us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances, or otherwise create competition that may negatively affect our business.

More recently, in September 2019, the FDA finalized guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

For example, on February 23, 2022, the FDA issued a proposed rule to amend the QSR, which establishes current good manufacturing practice requirements for medical device manufacturers, to align more closely with the International Organization for Standardization standards.

This proposal has not yet been finalized or adopted.

Accordingly, it is unclear the extent to which this or any other proposals, if adopted, could impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business.

Additionally, in September 2019, the FDA finalized guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

The FDA is developing a list of device types appropriate for the “safety and performance based” pathway and will continue to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as the testing methods recommended in the guidance documents, where feasible.

The FDA may establish performance criteria for classes of devices for which we or our competitors seek or currently have received clearance, and it is unclear the extent to which such performance standards, if established, could impact our ability to obtain new 510(k) clearances or otherwise create competition that may negatively affect our business.

In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products.

Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to obtain clearance or approval for, manufacture, market or distribute our products.

We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future.

Such changes could, among other things, require:

additional testing prior to obtaining clearance or approval;

changes to manufacturing methods;

recall, replacement or discontinuance of our products;

or additional record keeping.

The FDA’s and other regulatory authorities’ and notified bodies’ policies may change and additional government regulations may be promulgated that could prevent, limit or delay regulatory clearance or approval of our product candidates.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.

3 unchanged sentences

Certain HCT/Ps are regulated by the FDA solely under Section 361 of the PHSA and are referred to as “Section 361 HCT/Ps,” while other HCT/Ps are subject to FDA’s regulatory requirements applicable to medical devices or biologics.

Section 361 HCT/Ps do not require 510(k) clearance, PMA approval, BLAs,

or other premarket authorization from FDA before marketing.

Section 361 HCT/Ps do not require 510(k) clearance, PMA approval, BLAs, or other premarket authorization from FDA before marketing.

To be regulated as Section 361 HCT/Ps, these products must meet FDA’s criteria to be considered “minimally manipulated” and intended for “homologous use,” among other requirements.

3 unchanged sentences

The FDA could disagree with our determination that our human tissue products are Section 361 HCT/Ps and could determine that these products are biologics requiring a BLA or medical devices requiring 510(k) clearance or PMA approval, and could require that we cease marketing such products and/or recall them pending appropriate clearance, approval or license from the FDA.

For example, in public comments, the FDA has suggested that the use of human-derived acellular dermal matrices, such as SimpliDerm, may not be considered HCT/Ps when utilized in breast reconstruction procedures.

As a result, we may be required to conduct clinical studies and/or seek approval of a PMA or BLA before we are able to market SimpliDerm for use in breast reconstruction.

As a result, we may be required to conduct clinical studies and/or seek approval of a PMA before we are able to market SimpliDerm for use in breast reconstruction.

Even though we believe that our HCT/Ps are not subject to premarket approval or review, HCT/Ps are subject to donor eligibility and screening, Good Tissue Practices, product labeling and post-market reporting requirements.

13 unchanged sentences

We may experience delays in our ongoing clinical studies for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical studies, including related to the following:

● we may be required to submit an investigational device exemption, or IDE, application to the FDA, which must become effective prior to commencing certain human clinical studies of medical devices, and the FDA may reject our IDE application and notify us that we may not begin clinical studies;

● we may be required to submit an investigational device exemption (“IDE”), application to the FDA, which must become effective prior to commencing certain human clinical studies of medical devices, and the FDA may reject our IDE application and notify us that we may not begin clinical studies;

● regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical studies;

11 unchanged sentences

● regulators, IRBs or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical studies may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply;

● approval policies or regulations of the FDA, the European Union or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval;

● approval policies or regulations of the FDA, the EU legislative bodies or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval;

● our current or future products may have undesirable side effects or other unexpected characteristics.

In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical studies.

In addition, disruptions caused by the COVID-19 pandemic has increased and may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical studies.

Any of these occurrences may significantly harm our business, financial condition and prospects.

In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to the denial of regulatory approval of our product candidates.

the potential advantages of the product being studied in relation to other available therapies, including any new treatments that may be approved for the indications we are investigating.

Patient enrollment in clinical studies and completion of patient follow-up depend on many factors, including the size of the patient population, the nature of the study protocol, the proximity of patients to clinical sites, the eligibility criteria for the clinical study, patient compliance, competing clinical studies and clinicians’ and patients’ perceptions as to the potential advantages of the product being studied in relation to other available therapies, including any new treatments that may be approved for the indications we are investigating.

For example, patients may be discouraged from enrolling in our clinical studies if the study protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and efficacy of a product candidate, or they may be persuaded to participate in contemporaneous clinical studies of a competitor’s product candidate.

5 unchanged sentences

Disruptions at the FDA and other government agencies or notified bodies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, cleared, certified or approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA, foreign regulatory authorities and notified bodies to review and clear, certify or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees and other events that may otherwise affect the FDA’s ability to perform routine functions.

Average review times at the FDA have fluctuated in recent years as a result.

The ability of the FDA, foreign regulatory authorities and notified bodies to review and clear, certify or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, the FDA’s, foreign regulatory authorities and notified bodies’ ability to hire and retain key personnel and accept the payment of user fees and other events that may otherwise affect the FDA’s, foreign regulatory authorities and notified bodies’ ability to perform routine functions.

Average review times at the FDA, foreign regulatory authorities and notified bodies’ have fluctuated in recent years as a result.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for medical devices and biologics or modifications to be cleared or for approved medical devices and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

Disruptions at the FDA, other agencies and notified bodies may also slow the time necessary for medical devices and biologics or modifications to be cleared or for approved medical devices and biologics to be reviewed and/or approved or certified by necessary government agencies, or notified bodies which would adversely affect our business.

For example, over the last several years, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Subsequently, in July 2020, the FDA resumed certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

The FDA utilized this risk-based assessment system to assist in determining when and where it was safest to conduct prioritized domestic inspections.

Additionally, on April 15, 2021, the FDA issued a guidance document in which the FDA described its plans to conduct voluntary remote interactive evaluations of certain drug manufacturing facilities and clinical research sites, among other facilities.

According to the guidance, the FDA may request such remote interactive evaluations where the FDA determines that remote evaluation would be appropriate based on mission needs and travel limitations.

In May 2021, the FDA outlined a detailed plan to move toward a more consistent state of inspectional operations, and in July 2021, the FDA resumed standard inspectional operations of domestic facilities and was continuing to maintain this level of operation as of September 2021.

More recently, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic.

Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA, the EMA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, the EMA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

For instance, in the EU, notified bodies must be officially designated to certify products and services in accordance with the Medical Devices Regulation.

Subsequently, in response to the global COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.

Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, and any resurgence of the virus or emergence of new variants may lead to further inspectional delays.

Regulatory authorities outside the United States have adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue

to prevent the FDA, other regulatory authorities or notified bodies from conducting their regular inspections, audits, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, or other regulatory authorities and notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

For instance, in the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.

While several notified bodies have been designated, the COVID-19 pandemic has significantly slowed down their designation process and the current designated notified bodies are facing a large amount of requests for (re)certification under the new regulation as a consequence of which notified body review times have lengthened significantly.

15 unchanged sentences

Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

● the federal Physician Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or CHIP, to report annually to CMS, information related to payments and other transfers of value to physicians, which is defined broadly to include doctors, dentists, optometrists, podiatrists and chiropractors, certain non-physician providers such as physician assistants and nurse practitioners, and teaching hospitals, and applicable manufacturers and GPOs, to report annually ownership and investment interests held by such physicians and their immediate family members.

to include doctors, dentists, optometrists, podiatrists and chiropractors, certain non-physician providers such as physician assistants and nurse practitioners, and teaching hospitals, and applicable manufacturers and GPOs, to report annually ownership and investment interests held by such physicians and their immediate family members.

Manufacturers are required to submit annual reports to CMS and failure to do so may result in civil monetary penalties for all payments, transfers of value or ownership or investment interests not reported in an annual submission, and may result in liability under other federal laws or regulations.

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

state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential

referral sources;

state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures;

20 unchanged sentences

In March 2010, the ACA was enacted in the United States, which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers.

Among other ways in which it may impact our business, the ACA established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research, implemented payment system reforms, including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models, and expanded the eligibility criteria for Medicaid programs.

providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models, and expanded the eligibility criteria for Medicaid programs.

Since its enactment, there have been judicial, U.S.

9 unchanged sentences

In addition, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit reimbursement for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

Failure to comply with data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

In addition, the Medicare Access and CHIP Reauthorization Act of 2015 enacted on April 16, 2015, repealed the formula by which Medicare made annual payment adjustments to physicians and replaced the former formula with fixed annual updates and a new system of incentive payments began in 2019 that are based on various performance measures and physicians’ participation in alternative payment models such as accountable care organizations.

We expect additional state, federal and foreign healthcare reform measures to be adopted in the future, any of which could limit reimbursement for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

Actual or perceived failure to comply with data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

We and our commercial partners, independent sales agents, suppliers and other business partners may be subject to federal, state and foreign data protection laws and regulations (i.e., laws and regulations that address data privacy and security).

In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws and regulations (e.g., Section 5 of the FTC Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our partners.

We may also be subject to U.S.

federal rules, regulations and guidance concerning data security for medical devices, including guidance from the FDA.

In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical study data) that are subject to privacy and security requirements under HIPAA.

Depending on the facts and circumstances, we could be subject to criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

In addition, the California Consumer Privacy Act, or the CCPA, became effective on January 1, 2020.

In the United States, numerous federal and state laws and regulations govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our partners.

For example, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder, or collectively HIPAA, imposes privacy, security and breach notification obligations.

We may obtain health information from third parties (including research institutions from which we obtain clinical study data) that are subject to privacy and security requirements under HIPAA.

While we do not believe that we are currently acting as a covered entity or business associate under HIPAA and thus are not directly regulated under HIPAA, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles.

Consequently, depending on the facts and circumstances, we could be subject to criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

In addition, the California Consumer Privacy Act(“CCPA”), became effective on January 1, 2020.

The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt out of certain sales of personal information.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Although there are limited exemptions for certain health-related information, including certain clinical study data, the CCPA may increase our compliance costs and potential liability.

Further the California Privacy Rights Act, or the CPRA, recently passed in California.

The CPRA significantly amends the CCPA and will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.

Similar laws have passed in Virginia and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that has increased the likelihood of, and risks associated with data breach litigation.

Although there are limited exemptions for certain health-related information, including certain

clinical study data, the CCPA may increase our compliance costs and potential liability.

Further the California Privacy Rights Act, or the CPRA, generally went into effect on January 1, 2023, and significantly amends the CCPA.

The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It also creates a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

Additional compliance investment and potential business process changes may be required.

Similar laws have passed in Virginia, Connecticut, Utah and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

Foreign data protection laws, including the EU General Data Protection Regulation (the “GDPR”), which became effective in May 2018, may also apply to health-related and other personal information obtained outside of the United States.

The GDPR imposes stringent data protection requirements for the processing of personal data in the EEA, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention and secondary use of information (including for research purposes), increased

requirements pertaining to health data and pseudonymised (i.e., key-coded) data and additional obligations when we contract third party processors in connection with the processing of the personal data.

The GDPR also imposes strict rules on the transfer of personal data out of the EEA, to the United States and other third countries that have not been found to provide adequate protection to such personal data.

Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA to the United States, e.g.

on July 16, 2020, the Court of Justice of the European Union (the “CJEU”) invalidated the EU-U.S.

Privacy Shield Framework, or the Privacy Shield, under which personal data could be transferred from the EEA to U.S.

entities who had self-certified under the Privacy Shield scheme.

While the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances.

Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain.

The CJEU went on to state that if a competent supervisory authority believes that the standard contractual clauses cannot be complied with in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer.

The European Commission issued revised standard contractual clauses on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board.

The revised standard contractual clauses must be used for relevant new data transfers from September 27, 2021;

existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.

There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR.

The revised standard contractual clauses apply only to the transfer of personal data outside of the EEA and not the United Kingdom;

the UK’s Information Commissioner’s Office launched a public consultation on its draft revised data transfers mechanisms in August 2021.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

European data protection law provides that EU and EEA member states may make their own further laws and regulations limiting the processing of health-related data, which could limit our ability to use and share personal data or could cause our costs to increase, and harm our business and financial condition.

Furthermore, the Federal Trade Commission (FTC) and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive.

For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

In Europe, the European Union General Data Protection Regulation, or GDPR went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the EEA.

Failure to comply with the requirements of GDPR and the applicable national data protection and marketing laws may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties as well as individual claims for compensation.

1 unchanged sentence

We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm.

From January 1, 2021, we are subject to the GDPR and also the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law.

Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA to the United States, e.g.

on July 16, 2020, the Court of Justice of the European Union, or the “CJEU,” invalidated the EU-U.S.

Privacy Shield Framework, for purposes of international transfers and imposed further restrictions on the use of standard contractual clauses, or SCCs.

In March 2022, the US and EU announced a new regulatory regime intended to replace the invalidated regulations;

however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities.

European court and regulatory decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

From January 1, 2021, we have been subject to the GDPR and also the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, e.g.

fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.

The European Commission has adopted an adequacy decision in favor of the UK, enabling data transfers from EU member states to the UK without additional safeguards.

However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews/ extends that decision and remains under review by the Commission during this period.

In September 2021, the UK government launched a consultation on its proposals for wide-ranging reform of UK data protection laws following Brexit.

There is a risk that any material changes which are made to the UK data protection regime could result in the European Commission reviewing the UK adequacy decision, and the UK losing its adequacy decision if the European Commission deems the UK to no longer provide adequate protection for personal data.

The relationship between the UK and the European Union in relation to certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term, and how data transfers to and from the UK will be regulated in the long term.

These changes will lead to additional costs and increase our overall risk exposure.

As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

Compliance with U.S.

and foreign privacy and security laws, rules and regulations could require us to take on more onerous obligations in our contracts, require us to engage in costly compliance exercises, restrict our ability to collect, use and disclose data, or in some cases, impact our ability, or the ability of our commercial partners, independent sales agents, suppliers or other business partners, to operate in certain jurisdictions.

collect, use and disclose data, or in some cases, impact our ability, or the ability of our commercial partners, independent sales agents, suppliers or other business partners, to operate in certain jurisdictions.

Each of these constantly evolving laws can be subject to varying interpretations.

23 unchanged sentences

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our owned or licensed patents or narrow the scope of our patent protection.

Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its inventorship, scope, validity or enforceability, and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products.

against competitors with similar products.

Competitors could attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe, misappropriate or otherwise violate our intellectual property rights, design around our patents or develop and obtain patent protection for more effective technologies, designs or methods.

164 unchanged sentences

Any failure by us to adequately address the uncertainties and costs surrounding recent patent legislation could have a material and adverse effect on our business, financial condition and results of operations.

Outside of the United States we cannot be certain that any country’s patent or trademark office will not implement new rules that could seriously affect how we draft, file, prosecute and maintain patents, trademarks and patent and trademark applications.

We cannot be certain that the patent or trademark offices of countries outside the United States will not implement new rules that increase costs for drafting, filing, prosecuting and maintaining patents, trademarks and patent and trademark applications or that any such new rules will not restrict our ability to file for patent or trademark protection.

For example, we may elect not to seek patent protection in some jurisdictions or for some drug candidates in order to save costs.

We may be forced to abandon or return the rights to specific patents due to a lack of financial resources.

For example, the impact of the withdrawal of the U.K.

from the EU will not be known for some time, which could lead to a period of uncertainty relating to our ability to obtain and maintain patents and trademarks in the U.K.

In 2012, the European Patent Package, or EU Patent Package, regulations were passed with the goal of providing for a single pan-European Unitary Patent, and a new European Unified Patent Court, or UPC, for litigation of European patents.

It is possible that implementation of the EU Patent Package will occur in the first half of 2023.

If the EU Patent Package is ratified and in effect, all European patents, including those issued prior to ratification, would by default automatically fall under the jurisdiction of the UPC and allow for the possibility of obtaining pan-European injunctions.

Under the EU Patent Package as currently proposed, once the UPC is established, patent holders are permitted to “opt out” of the UPC on a patent-by-patent basis during an initial seven year period after the EU Patent Package is ratified.

Owners of traditional European patent applications who receive notice of grant after the EU Patent Package is ratified could either accept a Unitary Patent or validate the patent nationally and file an opt-out demand.

The EU Patent Package may increase the uncertainties and costs surrounding the enforcement or defense of our issued European patents and pending applications.

The full impact on future European patent filing strategy and the enforcement or defense of our issued European patents in member states and/or the UPC is not known.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

25 unchanged sentences

In the European Union, our product candidates may be eligible for term extensions based on similar legislation.

If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will

be shortened and our competitors may obtain approval to market competing products sooner.

If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner.

As a result, our revenue from applicable products could be reduced, possibly materially.

48 unchanged sentences

In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.

Further, we may in the future enter into agreements with owners of such third party trade names

or trademarks to avoid potential trademark litigation which may limit our ability to use our trade names or trademarks in certain fields of business.

Further, we may in the future enter into agreements with owners of such third party trade names or trademarks to avoid potential trademark litigation which may limit our ability to use our trade names or trademarks in certain fields of business.

In addition, opposition or cancellation proceedings may in the future be filed against our trademark applications and registrations, and our trademarks may not survive such proceedings.

8 unchanged sentences

● the introduction of new products or product enhancements by us or others in our industry;

● developments related to the COVID-19 pandemic;

● disputes or other developments with respect to our or others’ intellectual property rights;

● our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis;

● our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis, including our CanGaroo RM;

● changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business;

5 unchanged sentences

● changes in governmental regulations or in reimbursement;

● changes in earnings estimates or recommendations by securities analysts, or other changes in investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives;

● changes in earnings estimates or recommendations by securities analysts, or other changes in investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives;

● the development and sustainability of an active trading market for our Class A common stock;

2 unchanged sentences

“Risk Factors” of this Annual Report.

In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies, including, as a result of the pandemic related to COVID-19 and variants such as Delta.

Broad market and industry factors may significantly affect the market price of our Class A common stock, regardless of our actual operating performance.

3 unchanged sentences

Our principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.

As of December 31, 2021, our principal stockholders each holding more than 5% of our Class A common stock collectively control approximately 65.3% of our outstanding Class A common stock.

As a result, these stockholders, if they act together, will be able to control the management and affairs of our company and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.

The interests of these stockholders may not be the same as or may even conflict with your interests.

As of December 31, 2022, our principal stockholder, HighCape Partners L.P.

and its affiliates, held approximately 47.3% of our outstanding Class A common stock.

As a result, HighCape Partners L.P.

and its affiliates are able to significantly influence the management and affairs of our company and the outcome of most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.

The interests of these

stockholders may not be the same as or may even conflict with your interests.

For example, these stockholders could attempt to delay or prevent a change in control of the company, even if such change in control would benefit our other stockholders, thereby depriving our other stockholders of an opportunity to receive a premium for their common stock as part of a sale of the company or our assets.

3 unchanged sentences

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our Class A common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell their shares, could reduce the market price of our Class A common stock.

As of December 31, 2021, we had outstanding 13,558,552 shares of Class A and Class B, collectively.

This includes the 2,941,176 shares that we sold in our IPO and the 3,301,881 shares that we sold in our December 2021 private placement, which may be resold in the public market immediately without restriction.

As a holder of our Class B common stock, Deerfield only has the right to convert each share of our Class B common stock into one share of Class A common stock at its election to the extent that as a result of such conversion, it would not beneficially own in excess of 4.9% of any class of our securities registered under the Exchange Act.

As a result, Deerfield may not be deemed an “affiliate” for purposes of Rule 144 and, as a result, any securities it purchases may be freely tradable.

Approximately 7.1 million of the remaining shares are restricted as a result of securities laws or lock-up agreements (which may be waived, with or without

notice, by Piper Sandler & Co.

and Cowen and Company, LLC) but will become eligible to be sold at various times beginning 180 days after the date of the prospectus filed with the SEC on October 8, 2020 (the “Prospectus”), unless held by one of our affiliates, in which case the resale of those securities will be subject to volume limitations under Rule 144 of the Securities Act.

Because Deerfield may not be deemed an “affiliate” for purposes of Rule 144, up to approximately 2.4 million shares of Class B common stock that Deerfield holds may become freely tradable and not subject to volume limitations following the 180-day lock-up period.

Moreover, as of the date of this Annual Report, holders of an aggregate of up to approximately 7.1 million shares of our common stock have rights, subject to certain conditions and limitations, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders, until such rights terminate pursuant to the terms of our Investor Rights Agreement.

We also intend to register all shares of Class A common stock that we may issue under our equity compensation plans.

Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements.

The market price of our common stock may drop significantly when the restrictions on resale by our existing stockholders lapse or when we are required to register the sale of our stockholders’ remaining shares of our common stock.

A decline in the trading price of our common stock might impede our ability to raise capital through the issuance of additional shares of our Class A common stock or other equity securities and may impair your ability to sell shares of our common stock at a price higher than the price you paid for them or at all.

Sales of a substantial number of shares of our outstanding Class A common stock in the public market could occur at any time.

In addition, conversions of a substantial number of shares of our outstanding Class B common stock into Class A common stock and sales of such converted shares of our Class A common stock in the public market could occur at any time.

These sales, or the perception in the market that the holders of a large number of such shares intend to sell shares, could reduce the market price of our Class A common stock.

As of December 31, 2022, we had outstanding approximately 11.8 million shares of Class A common stock, of which 6.2 million shares of our Class A common stock were freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), by persons other than our “affiliates,” as that term is defined under Rule 144 of the Securities Act and approximately 5.6 million shares were held by our affiliates and eligible for resale subject to volume, manner of sale and other limitations under Rule 144.

Additionally, we had outstanding approximately 4.3 million shares of Class B common stock which may be converted on a one to one basis into shares of Class A common stock, of which all were freely tradable and held by persons other than our “affiliates.”

Moreover, as of the date of this Annual Report, several of our affiliates have rights, subject to conditions and limitations, to require us to file registration statements covering up to approximately 4.5 million of their shares or to include such shares in registration statements that we may file for ourselves or other stockholders.

We have also registered shares of our Class A common stock issued and available for issuance under our equity compensation plans, which can be freely sold in the public market, subject to vesting requirements and volume limitations applicable to affiliates.

I f these shares are sold, or if it is perceived that they will be sold, in the public market, or when we are required to register the sale of our stockholders’ remaining shares of our Class A common stock, the trading price of our Class A common stock could decline .

A decline in the trading price of our Class A common stock might impede our ability to raise capital through the issuance of additional shares of our Class A common stock or other equity securities and may impair your ability to sell shares of our Class A common stock at a price higher than the price you paid for them or at all.

The dual class structure of our common stock and the option of the holders of shares of our Class B common stock to convert into shares of our Class A common stock may limit your ability to influence corporate matters.

1 unchanged sentence

Nonetheless, each share of our Class B common stock may be converted at any time into one share of Class A common stock at the option of its holder, subject to the limitations provided for in our certificate of incorporation that prohibit the conversion of our Class B common stock into shares of Class A common stock to the extent that, upon such conversion, such holder would beneficially own in excess of 4.9% of any class of our securities registered under the Exchange Act.

Consequently, if holders of Class B common stock exercise their option to make this conversion, such exercise will have the effect of increasing the relative voting power of those prior holders of our Class B common stock (subject to the ownership limitation described in the previous sentence) and increasing the number of outstanding shares of our voting common stock, and correspondingly decreasing the relative voting power of the current holders of our Class A common stock, which may limit your ability to influence corporate matters.

which may limit your ability to influence corporate matters.

Because our Class B common stock is generally non-voting, stockholders who own more than 10% of our common stock overall but 10% or less of our Class A common stock will not be required to report changes in their ownership from transactions in our Class B common stock pursuant to Section 16(a) of the Exchange Act and would not be subject to the short-swing profit provisions of Section 16(b) of the Exchange Act.

2 unchanged sentences

We are authorized under our certificate of incorporation to issue these shares of common stock and other securities convertible into or exercisable or exchangeable for shares of our common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise.

As of December 31, 2021, we had a total of 1,386,811 shares of our Class A common stock issuable upon the exercise of outstanding options under our 2015 Stock Option/Stock Issuance Plan, as amended (the “2015 Plan”) and our 2020 Incentive Award Plan (the “2020 Plan”) at a weighted average exercise price of $13.28 per share, 394,437 of which were vested as of such date, 235,855 shares of Class A common stock issuable upon the settlement of RSUs granted under our 2020 Plan to several of our executive officers, employees and consultants, 756,554 additional shares of our Class A common stock reserved for future issuance under our 2020 Plan, not including the additional shares of Class A common stock that will be reserved for future issuance under our 2020 Plan pursuant to provisions in the 2020 Plan that automatically increase the number of shares of our Class A common stock reserved for future issuance thereunder, and 186,826 shares of our Class A common stock that will become available for future issuance under our 2020 Employee Stock Purchase Plan (the “2020 ESPP”), not including the

additional shares of Class A common stock that will be reserved for future issuance under our 2020 ESPP pursuant to provisions in the 2020 ESPP that automatically increase the number of shares of our Class A common stock reserved for future issuance thereunder.

Any additional shares of common stock that we issue, including under our 2020 Plan, 2020 ESPP or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership and voting power held by investors who purchase our common stock.

As of December 31, 2022, we had a total of 1,864,739 shares of our Class A common stock issuable upon the exercise of outstanding options under our 2015 Stock Option/Stock Issuance Plan, as amended (the “2015 Plan”) and our 2020 Incentive Award Plan (the “2020 Plan”) at a weighted average exercise price of $9.41 per share, 723,793 of which were vested as of such date, 192,070 shares of Class A common stock issuable upon the settlement of RSUs granted under our 2020 Plan to several of our executive officers, employees and consultants, 656,689 additional shares of our Class A common stock reserved for future issuance under our 2020 Plan, not including the additional shares of Class A common stock that will be reserved for future issuance under our 2020 Plan pursuant to provisions in the 2020 Plan that automatically increase the number of shares of our Class A common stock reserved for future issuance thereunder, and 279,345 shares of our Class A common stock available for future issuance under our 2020 Employee Stock Purchase Plan (the “2020 ESPP”), not including the additional shares of Class A common stock that will be reserved for future issuance under our 2020 ESPP pursuant to provisions in the 2020 ESPP that automatically increase the number of shares of our Class A common stock reserved for future issuance thereunder.

Additionally, as of December 31, 2022, we had a warrant to purchase up to 187,969 shares of our Class A common stock issued to the lender under the SWK Loan Facility that was outstanding.

Any additional shares of common stock that we issue, including under our 2020 Plan, 2020 ESPP or other equity incentive plans that we may adopt in the future, or as a result of any exercise of the warrant, would dilute the percentage ownership and voting power held by investors who purchase our common stock.

In the future, we may also issue additional securities if we need to raise capital, including, but not limited to, in connection with acquisitions, which could constitute a material portion of our then-outstanding shares of our common stock.

18 unchanged sentences

(ii) the last day of 2025;

(iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange

Act, which would occur if the market value of our common equity held by non-affiliates is $700 million or more as of the last business day of our most recently completed second fiscal quarter;

(iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common equity held by non-affiliates is $700 million or more as of the last business day of our most recently completed second fiscal quarter;

or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.

2 unchanged sentences

In addition, even if we cease to be an emerging growth company, we will remain exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act provided we do not qualify as an “accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if our annual revenue was $100 million or more during our most recently completed fiscal year and the market value of our common equity held by non-affiliates is $75 million or more as of the last business day of our most recently completed second fiscal quarter, and only after we have been subject to the reporting requirements of the Exchange Act for a period of at least 12 calendar months.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company.

We will continue to incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an emerging growth company, we incur and will continue to incur significant legal, accounting and other expenses.

The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.

Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives, which will divert their attention away from our core business operations and revenue-producing activities.

Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could require us to incur substantially higher costs to obtain the same or similar coverage or accept reduced policy limits and coverage, which in turn could also make it more difficult for us to attract and retain qualified individuals to serve on our board of directors and as our executive officers.

Our management and other personnel need to devote a substantial amount of time to these compliance initiatives, which has and we expect will continue to divert their attention away from our core business operations and revenue-producing activities.

Moreover, these rules and regulations has and will continue to increase our legal and financial compliance costs and make some activities more time-consuming and costly.

For example, these rules and regulations make it more difficult and more

expensive for us to obtain director and officer liability insurance, which requires us to incur substantially higher costs to obtain the same or similar coverage or accept reduced policy limits and coverage, which in turn could also make it more difficult for us to attract and retain qualified individuals to serve on our board of directors and as our executive officers.

We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

6 unchanged sentences

The process of designing, implementing and maintaining effective internal controls is a continuous effort that will require us to anticipate and react to changes in our business and the economic and regulatory environments.

appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting.

In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting.

If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and adversely affect our operating results.

31 unchanged sentences

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our certificate of incorporation described above.

We believe these provisions benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes and in the application of the Securities Act by federal judges, as applicable, efficient administration of cases on a more expedited schedule relative to other forums and

protection against the burdens of multi-forum litigation.

However, these provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees or agents, which may discourage such lawsuits against us and our directors, officers and other employees and agents.

7 unchanged sentences

If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

We are a “controlled company” within the meaning of the Nasdaq Stock Market LLC (“Nasdaq”) and, as a result, qualify for, and may rely on, exemptions from certain corporate governance requirements.

Affiliates of HighCape Partners control a majority of our outstanding Class A common stock.

As a result, we qualify as a “controlled company” within the meaning of Nasdaq’s corporate governance standards.

A company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a “controlled company” within the meaning of Nasdaq’s rules and may elect not to comply with certain corporate governance requirements of Nasdaq, including, among others:

● the requirement that a majority of our board of directors consist of independent directors;

● the requirement that we have a nominating and corporate governance committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

● the requirement that we have a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

● the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

For so long as we remain a controlled company, we may at any time and from time to time, utilize any or all of these exemptions.

As a result, our board of directors and those committees may have more directors who do not meet Nasdaq’s independence standards than they would if those standards were to apply.

The independence standards are intended to ensure that directors who meet those standards are free of any conflicting interest that could influence their actions as directors.

Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

General Risk Factors

Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021 may adversely affect the market value of our current or future debt obligations.

The London Inter-bank Offered Rate (“LIBOR”) and certain other interest “benchmarks” may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform

differently than in the past or cause other unanticipated consequences.

The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit LIBOR rates after 2021 or, in certain cases, 2023, and it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve.

If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, there may be adverse impacts on the financial markets generally and interest rates on borrowings under our Term Loan Facility and Revolving Credit Facility may be adversely affected.

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our business, financial condition and results of operations.

27 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors